Emirates Group and Qatar Airways are also evaluating local operations
According to an industry consultant, who did not want to be named, two more foreign carriers, Emirates and Qatar Airways, were evaluating the market’s potential. “We are under an understanding that both Emirates and Qatar are estimating their entry in India,” he said. Jet Airways is already in a deal to sell 24 per cent stake to Etihad by the end of this month.
So far, few except Tata’s low-cost airline partner Arun Bhatia of Telestra Tradeplace, find problems with India’s biggest corporate group running two independent airline JVs for full-service and no-frills operations, respectively. However, nobody is quite sure how soon the SIA venture would take off.
While Tata Sons owns 30 per cent in AirAsia India, it would retain a 51 per cent stake in the $100 million venture with the Singapore Airlines.
“The Tata-SIA deal will definitely add impetus to the sector, which is undergoing a lot of stress. There have been too many weak players in the sector for too long, with only one profitable venture. It will be interesting to see how the civil aviation ministry and the regulatory authority treat this deal. There’s nothing wrong for a company to have multiple JVs or partnerships, but in a country where there isn’t much difference between a full-service carrier and a low-cost carrier, it becomes challenging for the regulator,” said the industry consultant.
Amber Dubey, partner and head of aerospace and defence at KPMG (India), said,“The Tatas and SIA must have done their homework before inking the deal. There’s nothing in the rulebook that prohibits an airline from having multiple airline JVs. One situation where one may see a challenge is when India’s bilateral quota on a particular route is nearly exhausted and there are Indian carriers asking for more. The government may then have to come up with a methodology to allocate limited quotas to seekers, some of whom may be JVs of the same corporate entity.”
The deal has, however, created trouble in the Tata-AirAsia venture, with Arun Bhatia of Telestra Tradeplace, who has 21 per cent stake in AirAsia India, accusing the Tata group of being ‘unethical’ in keeping him in the dark about its joint venture with Singapore Airlines. But AirAsia’s global CEO Tony Fernandes has maintained silence on the issue.
“Tony has a reputation of being a straight talker. This could be the proverbial lull before he comes back with his side of this stormy story. Arun Bhatia has already expressed his sentiments. SIA and AirAsia are bitter rivals in the Asean market and beyond. A lot of clarity is expected over the next few weeks,” Dubey added.
But on the other hand, the deal is considered positive for domestic aviation, with a couple more FDAs in the pipeline.
“The Indian aviation market, which is deeply under-penetrated, offers huge potential. Only about 5 per cent of the market is served. With more FDIs, the sector can get back on the growth path in the long run, though it looks a little bumpy in the short-term,” said Peeyush Naidu, senior director, Deloitte India. He believed that the investments would provide more capacity and stability to the market.
“This is a welcome development considering that the civil aviation market in India is under-served and has tremendous potential for growth. Additional capacity will help link more cities and add more seats on existing routes, thus growing the market by making air travel more affordable.
While AirAsia would be based in Chennai and may have a regional approach, Singapore Airlines would have Delhi as its hub in India,” said Sharat Dhall, president of online travel portal Yatra.com.
Source : Mydigitalfc.com
