Tata Sons, Singapore Airlines say airline to always remain under Indian control

Written by Press Trust of India | New Delhi | Updated: Sep 25 2013, 03:16am hrs
Air lines
Tatas and Singapore Airlines have assured the government that control of their proposed airline venture would always remain in Indian hands, while seeking approval to offer passenger services on both domestic and international routes.

The new venture, proposed to be called Tata SIA Airlines Ltd, would have Tata Sons as the majority partner with 51 per cent stake, while Singapore Airlines would hold 49 per cent stake with USD 49 million of foreign direct investment (FDI).

The two partners have sought approval from the Foreign Investment Promotion Board (FIPB) for the FDI. The proposed venture would also require approvals from other agencies like the DGFT, DGCA and CBEC, besides other ministeries and state government departments.

According to sources, FIPB has been informed that the new company would eventually have six board members, including four to be nominated by Tatas. The two partners have so far announced three board nominees -- two from the Tatas and one from Singapore Airlines.

The companies had announced last week they have reached a pact to set up a new full-service airline.

According to their FIPB application dated September 20, "the JV company will be engaged in the activity of operating domestic and international full service scheduled airline services in India."

Noting that the substantial ownership and effective control of the JV would be with Tatas with a 51 per cent stake, the application said that Singapore Airlines would have a minority representation on the board and "will not be in a position to have 'de-facto' control over the Board".

"Therefore, the control of the JV company will remain in the hands of an Indian owned and controlled company."

The chairman of the board would always remain a Tata nominee. Besides, the chairman and at least two-third of directors would always be Indian citizens.

The joint venture plans to offer "renting and leasing (except financial leasing) of aircrafts".

It would also provide air transport carriers for both passengers and freights as well as "supporting services to air transport, like operation or airport flying facilities, radio beacons, flying control centres and radar stations etc".

According to the application, Singapore Airline's contribution to the joint venture would include providing access to the Singapore entity's global network, offering necessary technical expertise and know-how in relation to the civil aviation sector.

Besides, Singapore Airlines would make reasonable efforts for the joint venture company to benefit from economies of scale offered by vendors of Singapore Airlines in relation to procurement of aircrafts, engineering services, spares and infrastructure.

With regard to contributions that would be made by Tatas towards the joint venture, the application says the group would work towards creating synergies between the new company and "other affiliates of Tata on a best effort basis".

Among others, Tata would provide for secondment of personnel to the joint venture company.

"The activities of the joint venture company do not fall in sectors reserved for micro, small or medium enterprises," as per the application.

Tata Sons, the holding company of most of the operating firms of the salt-to-software conglomerate Tata group, has signed an MoU with Singapore Airlines under which it would own 51 per cent stake in the proposed carrier. The rest would be with Singapore Airlines.

This is the third attempt by the two partners to enter the Indian civil aviation sector.