The proposed full-service carrier of Tata Sons and Singapore Airlines (SIA) will increase competition in the West-bound routes from India, according to aviation analysts. Nearly 70 per cent of global traffic from India is West-bound – to Middle East, EU and Americas.
“With this venture, Singapore Airlines will get a play in the growing international travel from India. SIA can also operate direct flights to Far East and Australia from India or route them through Singapore,” Amber Dubey, Partner and Head – Aerospace and Defense, KPMG.
Aviation analysts have welcomed this move and said that the deal affirms India’s reputation as a lucrative aviation market in the long run, despite the short- term problems like excessive taxation.
This new joint venture comes on the heels of the Tata group’s partnership with Malaysian low-cost carrier AirAsia to launch a budget airline by the year-end. However, they are yet to get an NOC. “The biggest challenge before the Tatas will be in the boardroom with the two deals. There is likely to be a conflict of interest. But it is still not clear how the AirAsia-Tata joint venture will unfold,” Dubey added. The new tie-up has triggered speculation about a possible exit of Tata Sons from the deal with Air Asia. But Tata Sons maintains that both tie-ups are very much on.
Asked if aviation regulations allowed the group to pursue two partnerships simultaneously, Mukund Govind Rajan, Director of Tata Sons and Brand Custodian, said that there was nothing that prohibited it.
“AirAsia was aware of the negotiations for the new partnership with Singapore Airlines. There was no objection from them,” he added when asked about the potential for conflict of interest. Besides the AirAsia partnership would be in the low-cost airlines space, while this would be a full-service offering, he added.
Kapil Kaul, Chief Executive Officer, Centre for Asia Pacific Aviation (CAPA), strongly welcomed this announcement. He said India needed strong, well capitalised airlines with proven credentials. However, regulatory and policy uncertainty continues be the key structural issue. We have no clarity on the issue of new airline licences, he added. This announcement could play out negatively on AirAsia’s regulatory approval as Tatas have 30 per cent stake in the venture. More clarity is required from Tatas on their proposed airline investments, he said.