Tata, Singapore Air to launch new airline in India; no conflict with AirAsia

Tata Sons and Singapore Airlines have entered into a pact to set up a new full-service airline in India and have applied for FIPB approval, said Tata Sons in a press release.

The two will jointly invest $100 million to set up the full-service airline.

Tata Sons will own 51% stake and Singapore Airlines will own 49%, the press release said.

Commenting on the joint venture, civil aviation minister Ajit Singh said that the Tatas had informed him this morning that they will be applying for an FIPB approval.

“We have to wait for FIPB’s response on the new JV,” Singh added.

He also clarified that aviation rules do not bar companies from starting two airlines. However, the pact will require approval from market regulator Sebi and the corporate affairs ministry.

Tata Sons has maintained that the new full service carrier will not compete with Air Asia India, which is being established as a low-cost airline.

Sources told_CNBC-TV18_, theTata-SIA deal have been in the works for a few months, but the talks picked up after FIPB cleared the AirAsia deal. The sources also confirmed that there was noconflict of interest with AirAsia in terms of’conceptually’ .

The initial board will comprise of three members, two of which will be nominated by Tata Sons and one by Singapore Airlines.

“Government must all both the joint ventures to be formed. However, the regulatory uncertainty is a reality,” said Kapil Kaul, CEO , South Asia, Centre for Asia Pacific Aviation (Capa), an aviation consultancy firm.

Tata Son’s nominee Prasad Menon will be the chairman of the new airline.

“Subject to FIPB and other regulatory approvals, the airline will be based in New Delhi and will operate under the full-service model,” the company said in a statement .

“It is Tata Sons’ evaluation that civil aviation in India offers sustainable growth potential. We now have the opportunity to launch a world-class full-service airline in India,” said Menon.

Details of the airline’s branding, management team and products and services will be announced in due course.

“With the recent liberalisation, the time is right to jointly bring consumers a fresh new option for full-service air travel. We are confident the joint venture airline will help to stimulate market demand and provide economic benefits to India,” said Singapore Airlines CEO Goh Choon Phong.

Tata Sons has already tied up with Air Asia andArun Bhatia’s Telstra Tradeplace Private Limited to start a low-cost Indian airline and the operations are expected to be launched by the year end.

While AirAsia will hold a 49% stake in the proposed airline, the Tatas and Arun Bhatia will hold 30% and 21%, respectively.