Tata, Singapore Airlines define roles in JV - Livemint

Singapore Airlines to invest $49 mn from internal accruals, Tata to leverage group companies' strengths

Singapore Airlines will provide expertise, access to its global network in Tata SIA Airlines. Photo: Reuters

New Delhi: Tata Sons Ltd will try to leverage the strength of its group companies and Singapore Airlines Ltd will provide expertise and access to its global network in their new joint venture airline that will be called Tata SIA Airlines Ltd, according to a proposal filed by the partners with the government.

The details are part of the filings made by the companies to the Foreign Investment Promotion Board seeking approval for the venture, which will entail an investment of $100 million, and, in which, Tata Sons will hold 51% and Singapore Airlines (abbreviated as SIA) the rest.

"The principal activity and contribution of SIA according to the agreement reached between Tata and SIA will be to provide access to the global network of SIA, providing the necessary technical expertise and know how, providing access to the tools training and best practices of SIA in the aviation industry in the manner to be naturally agreed between the applicants, provide for secondment of personnel for developing the expertise and making reasonable efforts for the JV (joint venture) company to benefit from the economies of scale offered by vendors to SIA in relation to procurement of aircraft, engineering services, spares and infrastructure," the filings said.

Singapore Airlines also said that it "will not raise any loan in India to capitalize the Indian JV company".

SIA clarified this means only internal funds will be used for the new airline.

"Singapore Airlines' US$49 million investment in the new airline will be funded from internal resources," Nicholas Ionides, vice-president of public affairs at Singapore Airlines, said in an email.

Tata Sons plans to leverage the group's presence.

"Tata's contribution to the company would include providing knowledge of the Indian market (including knowledge of the customers and related market support), providing for secondment of personnel, working towards creating synergies between the Tata SIA Airlines Ltd and other affiliates of Tata on a best effort basis, making reasonable efforts to benefit from economies of scale offered to vendors to Tata in relation to goods and/ or services as may be required by the JV company from time to time," the filings added.

Singapore Airlines said in the filings that it wants to include the "SIA" acronym as part of the venture name Tata SIA Airlines Ltd.

It is not clear whether the brand name SIA will also be part of the name of the new airline.

Tata's first airline was called Tata Airlines, which was renamed Air India and subsequently nationalized.

SIA said in the filings that it is "committed to long-term presence in the Indian market, particularly towards operating domestic and international full-service scheduled passenger airline services in India".

The proposal also noted that "the JV company will hire Indian residents to assist in establishing its operations in India, this would create jobs, especially for young people".

The board of Tata SIA will be controlled by Tata group, said the filings. The chairman of the board will be long-time Tata executive Prasad Menon, while the board members will include Tata group's head of communications, ethics, and CSR, Mukund Rajan, and Singapore Airlines' executive vice-president (commercial) Swee Wah Mak.

This will be expanded to six board members with four from Tata and two from Singapore Airlines.

In addition to the full-service airline, Tata Sons also has a 30% stake in Air Asia India Ltd, a joint venture with AirAsia Bhd and New-Delhi based Telestra Tradeplace Pvt. Ltd.

Civil aviation minister Ajit Singh on 20 September cleared the proposal for Air Asia India Ltd, which is expected to start flights this fiscal year.

It's too early to say if the Tata Singapore Airlines venture will hurt Air India Ltd and Jet Airways (India) Ltd, said an expert.

"Jet's new business and commercial plan are yet to be unveiled. Air India's resilience cannot be underestimated. Both airlines will be subsidized by a bigger brother and now have staying power," said Shakti Lumba, an independent aviation consultant who has worked with Air India and IndiGo. His reference is to the Indian government's ownership of Air India and West Asian airline Etihad's recent investment in Jet.

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