Tata’s Singapore Airlines Deal Sends Shockwaves toward Malaysia

 - September 30, 2013, 11:50 AM
Star Alliance member Singapore Airlines has signaled a desire to expand its Indian joint venture’s network to include international destinations eventually. (Photo: Singapore Airlines)

The bid by Malaysia’s AirAsia to launch a low-fare airline in India with the Tata Group has hit some unexpected turbulence as Singapore Airlines prepares to launch a joint venture with the very same investors. Already holding a 30-percent stake in AirAsia India, the Tata Group has now turned its sights toward the full-service market in agreeing to take a 51-percent stake in Tata SIA Airlines, apparently to the dismay of at least one of the principal investors in the AirAsia Indian venture.

Last week Forbes and several Indian media outlets reported that Arun Bhatia, a partner in AirAsia India, expressed shock at the news of the Singapore deal, calling it “unethical.”

“The new development comes as a surprise, creating a conflict [of interest] to some extent,” said Ramesh Vaidyanathan, an Indian aviation lawyer. “The story is unfolding.”

Meanwhile, the Tata Group denies any potential for such a conflict. “With the two startups using different business models, they do not compete in the same space,” a spokesman for Tata Group holding company Tata Sons told AIN. “The trend of increasing urbanization and growth in travel has opened up more opportunities for a differentiated full-service offering. With the right world-class partner, we are confident we can participate in the growth potential of the sector.”

AirAsia India last week received a No Objection Certificate from India’s Directorate General of Civil Aviation, moving it one step closer to gaining final regulatory approval of the joint venture, plans for which Air Asia announced in February. Since then, Tata and Singapore engaged in separate negotiations, marking the third attempt by SIA to enter the civil aviation sector in India.

“We have always been a strong believer in the growth potential of India’s aviation sector…Tata Sons is one of the most established and respected names…the time is right to jointly bring consumers a fresh new option for full-service air travel,” said Singapore Airlines CEO Choon Phong. “We are confident the joint-venture airline will help to stimulate market demand and provide economic benefits to India.”

While details of a network plan remain undisclosed, SIA will expect to derive some advantage on its international routes as a result of the deal, and will no doubt benefit from its membership in the Star Alliance. Currently, no Indian carrier enjoys membership in a global alliance. “We would like the airline to operate international services, but that will depend on obtaining further regulatory approvals,” said an SIA spokesman.