NEW DELHI - A new Indian airline planned by the giant Tata Group and Singapore Airlines reaffirms the nation's longterm potential as an aviation market, despite the sector's current financial turbulence, analysts say.
Tata Sons, the holding company of tea-to-software conglomerate Tata Group, and SIA said this week they were setting up a full-service airline after two failed joint bids to take to Indian skies.
"This investment affirms India's reputation as a lucrative aviation market in the long-run," Amber Dubey, aerospace head at global consultancy KPMG said.
The $100-billion Tata Group in 1932 pioneered air travel airline in India with Tata Airlines, later taken over by the government and rebranded Air India.
It will hold a majority 51-per cent stake in the full-service carrier while SIA will hold 49 per cent as they seek to exploit one of the fastest-growing aviation markets globally.
"The proposed airline has applied for Foreign Investment Promotion Board approval," a Tata spokesman said.
However, the joint venture needs a slew of other regulatory approvals and it could be another year before it starts flying, analysts say.
Also, while India's air passenger traffic has doubled over the last seven years, plans for the carrier comes as the sector is flying through rough weather.
All but one of the five main airlines is loss-making even though an increasing number of India's population of 1.2 billion are flying.
India's airlines are contending with the region's costliest fuel, a falling currency, cut-throat fare rivalry and rundown infrastructure.
Still, SIA said it was investing in the carrier as "the Indian aviation industry is projected to experience future high growth rates".
KPMG's Dubey said, however, the new airline could prompt more consolidation in the Indian market, without naming carriers which could fall by the wayside.
"With growing competition, only four strong pan-India airlines may survive in two years," he said, adding, "Others may operate in small niche markets and collaborate with the pan-India players."