DGCA throws out all objections against Tata-SIA, airline to take off soon

By dismissing every frivolous objection raised by competitors against Tata-Singapore Airlines, aviation regulator DGCA now seems all set to grant it a flying permit. The regulator said in a statement this evening that it has examined each objection against Tata-SIA and has found no merit in a single one. The objections came from the Federation of Indian Airlines (FIA), which is a grouping of competing airlines lead by market leader IndiGo, and certain individuals.

The objections broadly pertained to substantial ownership and effective control by Indians in Tata-SIA, alleged foreign shareholding in Tata Sons, board composition of the proposed airline and whether the FDI policy allowed new airlines to be set up. With DGCA dismissing each objection, the FIA has had to eat crow for the second time in as many months.

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Tata-SIA is a 51:49 joint venture between Tata Sons and Singapore International Airlines. This will be Tatas’ second airline venture; it is a 30 percent stakeholder in AirAsia India which also went through this needless public scrutiny and almost similar objections by the FIA. BJP MP Subramanian Swamy is also opposed to both airline ventures and has moved the courts against both applications.

In a late evening statement, the DGCA has given a point by point rebuttal of each objection and said it will now begin the process of considering Tata-SIA’s application for a flying permit, subject to compliance of Civil Aviation Requirements (CAR) and other applicable rules. There is just one catch: the final decision of the regulator on this airline will be subject to the outcome of a court decision on the matter.

Here are the objections and DGCA’s response to each:

1. Registration and principal place of business in India: Tata-SIA fulfills both criteria.

2. Chairman and at least 2/3rd board members are Indians: Airline already bound by commitment that chairman will always be appointed by Tata Sons and will be an Indian. This holds now when it has three directors and will continue to hold when the board is first expanded to 6 directors and later to 10.

3. Substantial ownership and effective control: Since 51 percent paid up capital of the JV rests with Indians, the first point is valid. As for effective control, since chairman and 2/3rd directors are Indian, this is certainly in Indian hands.

4. FDI policy does not permit foreign airline investment for setting up new airlines: This issue has already been examined by the FIPB when it cleared 49 percent equity investment by Singapore Intermational Airlines. Anyway, it is pending in Delhi High Court.

We have been saying for some time now that the DGCA itself went into a sort of activist mode by opening up applications from AirAsia India and Tata-SIA to public scrutiny, something which was never done before for any other airline flying permit. Why was an archaic law dusted out and used in this case? But now that AirAsia India has been granted flying permission and Tata-SIA should also eventually get it, perhaps the regulator should think about throwing out frivolous and non-serious complaints at the very outset.

Here’s an example of frivolous objections: An individual, a former Tata group employee, sent several letters to the regulator and other stakeholders last month objecting to the Tata-SIA proposal - by quoting false data. He had asserted that there was 18.5 oercent foreign shareholding in Tata Sons and that it effectively diluted Indian shareholding in Tata-SIA. Actually, foreign shareholding in Tata Sons is a mere 0.03 percent.

Now, after much delay, the regulator would do well to grant Tata-SIA a flying permit after the airline fulfills all other procedural requirements.