SIA gets all-clear for stake in new Indian carrier

THE runway has been cleared for Singapore Airlines (SIA) to set up a New Delhi-based carrier with Indian conglomerate Tata.

A proposal for SIA to take a 49 per cent stake, with Tata absorbing the remaining 51 per cent, was approved on Thursday by India's Foreign Investment Promotion Board (FIPB). "It has been cleared," Economic Affairs Secretary Arvind Mayaram told reporters after the board met in India.

SIA spokesman Nicholas Ionides said in Singapore: "We have yet to be informed by FIPB. However, we are very pleased with the reports of approval."

The next step is for SIA and Tata to get the permits needed from India's civil aviation authority.

Aviation analysts expect the new airline to take to the skies by the third quarter of next year.

Mr Kapil Kaul, who heads the India office of the Centre for Asia Pacific Aviation, said: "I do not expect any setbacks for the venture from this point onwards."

Getting the official nod for the US$100 million (S$124 million) start-up is a triumph for SIA and Tata, in what is their third attempt in two decades to gain a foothold in India's air travel market. Earlier bids were quashed by fierce political opposition and local carriers crying foul.

After years of keeping out foreign carriers and investment, India saw a key change in September last year. The government - which had previously barred foreign carriers from taking equity stakes in local airlines - changed the law to allow foreign holdings of up to 49 per cent.

Apart from SIA, Abu Dhabi's Etihad and Malaysian carrier AirAsia have also announced plans to enter the market, lured by prospects of strong growth.

The domestic air travel market is expected to see average growth of 13.1 per cent a year over the period 2012-2016. 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, according to the International Air Transport Association.

High taxes and poor infrastructure have taken their toll on Indian carriers, with all but one in the red.

Still, the wheels of change have started to kick in, aviation analysts said. For example, a long-held rule that prohibits new airlines from operating international routes for the first five years is expected to be abolished in the coming weeks.

The SIA-Tata partnership, which brings together two powerful entities, represents a significant milestone for India's aviation sector, Mr Kaul said.

The Tata group is made up of more than 100 operating companies in various business sectors that include communications and information technology, engineering and hospitality. Its tie-up with SIA and a separate one with AirAsia to launch a new budget carrier in India mark its first major foray into airline ownership.

Mr Kaul said of the SIA-Tata deal: "All is in order for this game-changing venture."

karam@sph.com.sg


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