SINGAPORE - Singapore Airlines and Indian conglomerate Tata have set up a new entity - Tata SIA Airlines Limited - as work progresses to launch a new joint venture carrier.
India's Corporate Affairs Ministry said on its website that it has approved the application for the company to be registered and based in New Delhi.
But the big hurdle for SIA and Tata will come on Thursday when India's Foreign Investment Promotion Board (FIPB) evaluates the proposal.
SIA is asking for permission to take a 49 per cent stake in the US$100 million (S$124 million) start-up which plans to operate both domestic and international routes.
Its partner Tata will own the majority 51 per cent shareholding.
The FIPB had initially indicated it would consider the application last week, but later postponed it without saying why. A "yes" is needed before SIA and Tata can apply for the necessary permits to operate the airline from India's civil aviation authority.
Both parties announced their intention to set up a new airline about a month ago, their third attempt to do so in two decades.
Previous bids failed to take off, mainly because of strong resistance from political factions and other Indian carriers.
But the dismal financial performance of Indian carriers has prompted changes at the very top to bring in foreign investment and expertise.
Last year, India's government - which had previously barred foreign carriers from taking equity stakes in local airlines - changed the law to allow foreign holdings up to a 49 per cent stake.
Apart from SIA, Abu Dhabi's Etihad and Malaysian carrier AirAsia have also announced plans to enter the market.
Despite tough operating conditions in India, which include high civil aviation taxes and poor infrastructure, market prospects are attractive, said Mr Tony Tyler, the head of the International Air Transport Association (Iata), who was in Singapore last week.
Between 2012 and 2016, India's domestic air travel market is expected to grow by an average of 13.1 per cent a year.
International traffic to and from India should increase by 6.8 per cent a year over the same period, outpacing the global average of 5.3 per cent, he said.
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