FIPB to take a call on Tata-SIA deal on Oct 18

Tata Sons has tied up with SIA to launch a full services carrier in India with initial investment of $100 mn

The Foreign Investment Promotion Board (FIPB) will consider Tata Sons’ and-Singapore Airlines (SIA) proposal to start a full-service airline on October 18, the finance ministry said on Tuesday.

Tata Sons had tied up with SIA on September 19 to launch a full-service carrier in India under the proposed aviation venture Tata-SIA Airlines Limited, at an initial investment of $100 million. The Tatas will be the driving force in the joint venture with a 51 per cent stake, SIA would take the rest for $49 million.

Tata Sons’ brand custodian and chief ethics officer Mukund G Rajan had said on Monday the company was hopeful of getting approvals for the proposal. Besides FIPB, the venture will require approvals from the directorate general of civil aviation, the tax department and other ministries.

According to the proposal before FIPB, substantial ownership and effective control of the proposed airline will be with the Tatas, while Singapore Airlines will have a minority representation on the board and “will not be in a position to have ‘de facto’ control over the board”. The board of the proposed Tata-SIA Airlines Ltd will have six directors, Tata Sons and Singapore Airlines said in an application to FIPB last Thursday. While four will be nominated by Tata Sons, the remaining will be Singapore Airlines’ representatives. The chairman of the board will always remain a Tata nominee, the partners said..

The Chairman and at least two-thirds of the directors of the Tata-SIA board will be Indians to conform with the guidelines of the FDI policy.

 

According to the MoU inked between Tata Sons and Singapore Airlines on Sep 19, the board of the proposed joint-venture company is initially scheduled to comprise three directors. While two directors – Prasad Menon and Mukund Rajan – will be nominated by Tata Sons, Mak Swee Wah is the initial director nominated by SIA. The board will be chaired by Menon. Subsequently, the board would be expanded to include six directors.

 

The JV company will be incorporated in New Delhi and its principal place of business shall be India at all times. The airline has made Delhi its operational hub because of the huge capacity constraints in the Mumbai airport and better infrastructure facilities at the Delhi airport.

 

Tata-SIA has said it would like to operate international flights from India depending upon government approvals. At present, Indian government rules do not allow domestic airlines less than five years in operations and with a fleet of less than 20 aircraft to commence international operations. The ministry of civil aviation has been reconsidering the policy but no decision has been taken yet.

 

The Tatas already have a partnership with Malaysian carrier AirAsia for a low-cost airline that's likely to start operating in India later this fiscal.