SIA-Tata venture revives long-dormant carrier plan

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Singapore Airlines’ newly-disclosed joint airline project with Tata Group revives a plan for Indian operations that dates back some two decades.

SIA and Tata Industries had proposed a joint domestic airline in India which the government examined in early 1995, in the wake of deregulation of the market.

They had aimed to take advantage of projected strong growth. But the two sides faced strong political opposition to the plan over concerns that the state-owned domestic operator would suffer if the SIA scheme, and similar foreign-backed ventures, were approved.

At the time the limit on foreign ownership of Indian carriers was 40% but a controversial new policy, backed by the civil aviation ministry, prevented the stake being held by foreign airlines.

Having been mired for two years, the SIA-Tata plan was essentially halted by the policy.

While Tata remained keen on the venture, the economic crisis which swept over south-east Asia in the late 1990s created additional difficulty in securing interest from non-airline investors.

Tata formally abandoned the joint carrier scheme in late 1998, blaming political objections and increasingly-tight restrictions on foreign airline participation in the Indian air transport sector.

Only after Tata’s withdrawal did the Indian government – facing accusations of protectionism from local media – look again at its tough rules, which also prevented local operators from leasing foreign aircraft.

Tata and SIA jointly pursued, as part of a consortium, the government’s sale of a 40% share in Air India, becoming the only bidding party by mid-2001.

But SIA subsequently withdrew – just days before the events of 11 September 2001 – citing slowing economic growth and continuing political opposition to the Air India sale. With Tata unable to find a partner to replace SIA, the privatisation failed.

Although Tata tied up with the operator of Singapore’s Changi Airport to bid for airport management projects, Indian airline investment remained closed to foreign carriers until the government unveiled a new policy last year.

"Removing the existing restriction on investment by foreign airlines would assist in bringing in strategic investors into the civil aviation sector," the civil aviation ministry stated.

"Higher foreign investment inflows are necessary at the present juncture, in order to strengthen the sector.”

This easing of the ownership regulations has spurred Etihad Airways’ decision to invest in Mumbai-based Jet Airways, while AirAsia has been intending to form a joint venture with local partners including Tata Sons, the company with which SIA is planning to reawaken its long-dormant plan for a carrier in the Indian market.