New Tata-SIA airline closer to take-off with NOC application

Bringing their joint venture closer to take-off, Tata Sons and Singapore Airlines (SIA) have applied to the civil aviation ministry for a no-objection certificate (NOC) to start a full-service airline in India. This is the second stage after the JV earlier received approval from the Foreign Investment Promotion Board (FIPB) to set up Tata-SIA Airlines.

Senior aviation ministry officials confirmed the development.

The members on the board are Prasad Menon, also the chairman of the company, and Mukund Rajan, both nominated by Tata Sons. The third, Mak Swee Wah, is the initial director nominated by Singapore Airlines.

Tata Sons will be the majority partner in the airline venture with 51 per cent stake, while SIA will hold 49 per cent. The two companies tied up for the airline in September, with an initial investment of $100 million.

Besides the NOC from the ministry, Tata-SIA will have to apply to the Directorate General of Civil Aviation for an air operator's permit to commence operations. ''The date of commencement of operations would primarily depend on the preparedness of the airline to furnish the relevant documents to the DGCA,'' the official added.

Since the airline has applied for an NOC only now, it may not be able to start operations in the summer schedule of 2014.

Substantial ownership and effective control of the proposed airline will be with the Tatas. Singapore Airlines would have a minority representation on the board and will not be able to control the board – which will eventually have six directors, Tata Sons and Singapore Airlines had said in their application to FIPB.

While four of the directors would be nominated by Tata Sons, the remaining two directors would be representatives of Singapore Airlines. The chairman of the board will always remain a Tata nominee, the partners have said in their application. The chairman and at least two-thirds of the directors of the Tata-SIA board will be Indians to conform to the foreign direct investment (FDI) policy in airlines.

The 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 at 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 is drafting a cabinet note to amend the policy.

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. With this proposal, the aviation sector in India has seen entry of a third foreign carrier and total equity investments of over Rs2,800 crore since the time foreign direct investment rules in the sector were relaxed in September 2012.