Tata SIA Airlines Sees Bright Future
India’s newest domestic startup, full-service Delhi-based Tata SIA Airlines, could have an advantage over newcomer budget-carrier AirAsia India as the latter is forced to wait for its air operators permit (AOP), which has been delayed by the decision of the Indian Directorate General of Civil Aviation (DGCA) to issue a public notice requesting comments. This could put on hiatus AirAsia’s plans of launching before summer. Tata SIA, for its part, received its No Objection Certificate from the DGCA in September last year and “expects to start operations by mid-2014,” a spokesman told AIN.
AirAsia India was due to have started operations by the end of 2013; investment company Tata Sons holds a 30-percent share in the budget carrier, while also holding an interest in Tata SIA–a potential conflict of interests it has refused to comment on. Somewhat surprisingly, India’s Competition Commission seems to have no objection to this, saying one carrier is full service and the other a budget, despite there being very little difference in practice. It is clear, however, that Tata is much more interactive with SIA than with AirAsia.
The new full-service airline–Tata SIA–is a $100 million joint venture between Tata Sons and Singapore International Airlines. Tata’s share is 51 percent, while SIA owns 49 percent. The airline is set to lease 20 A320s from Chinese-owned, Singapore-based lessor BOC Aviation. Tata SIA is clear that it will be full-service airline, effectively filling a niche, given that 75 percent of seats in India currently are budget.
In a report released in the third week of December, the DGCA said that, in the region, 5.58 million passengers traveled by air in December, 3.37 percent more than in the same month in the previous year.
SIA CEO Goh Choon Phong speaking at a recent analyst briefing on half-year results alluded to the fact that he saw the venture facing challenges in the very competitive domestic market, including a rule that mandates it operate for five years and count a fleet of 20 aircraft before it is permitted to fly internationally. “But we believe that we have the right partner. In fact, we believe that we have the best partner we could find, someone we know for a long time: Tata Sons. And we believe that we also have the right environment, with India liberalization taking place, to actually enter this market, and we believe we can make a positive contribution to make it work for India,” added Goh.
SIA, a member of Star Alliance, is expected to reap benefits from Tata SIA in India with the alliance open to a second domestic carrier member, following the announcement of Air India’s re-entry to Star. This could present competition to carriers targeting the Indians traveling to the U.S. via the Middle East. “India is big enough to accommodate a second carrier,” Markus Ruediger, spokesman for Star Alliance, told AIN. He confirmed that “at present there are no negotiations,” but he added that any second carrier “must benefit and the alliance must benefit.”