Ajit Singh on AirAsia dealNEW DELHI: Civil Aviation Minister Ajit Singh said he was "not opposed" to Malaysian airline AirAsia's alliance with the Tata Group to set up a new low-cost carrier in India, but indicated he would have preferred the country's pre-eminent conglomerate to start its own airline.
In his first comments on the development, Singh also said the main purpose of a recent policy change in the civil aviation sector, which allows foreign airlines to own up to 49% stake in an Indian carrier, was to increase investment in existing Indian carriers. "I'm not opposed to the (AirAsia-Tata) alliance... The idea of the policy was to increase investment in Indian carriers. It would have been nice had the Tatas, with their kind of resources, started a new airline," he told ET in an interview on Thursday.
The proposed alliance among AirAsia, Tata Sons and the New Delhi-based Bhatia family (the Bhatias are relatives of steel baron LN Mittal), if approved by the government, will introduce a formidable new entrant into India's airline industry, where the dominant narrative has been one of pain, exemplified by the collapse of one-time leader Kingfisher AirlinesBSE 3.02 %.
But the minister's comments may be interpreted by some as a less-than-enthusiastic welcome to the first planned foreign investment in India's aviation sector after last September's change in foreign holding guidelines.
The ministry's action on the AirAsia-Tata proposal in the weeks ahead has the potential to become a test case of the government's stance towards foreign investment in general and the airline industry in particular.
AirAsia is expected to own 49% of the venture, with Tata Sons and Bhatia-controlled Telestra Tradeplace holding 30% and 21%, respectively.
Industry experts say the entry of a player like AirAsia-Tata combine with deep pockets, high staying power, and record of running a hugely successful regional airline could shake up Indian aviation.
New Carrier to Face Old Challenges
Asked what the entry of a new airline, especially a globally successful one like AirAsia, would do to existing Indian carriers, most of which are battling high costs and thin margins amid an aggressive fare war, the minister said the new carriers would also face the same challenges as the existing ones.
"Indian businessmen are second to none. The new airline will have to deal with the same cost structures as IndiGo or SpiceJetBSE -1.98 % or anyone else for that matter. So why the worry?" he asked. Singh said India needed more homegrown airlines flying to far-away destinations rather than more short-haul carriers. "We need more of Air India and Jet Airways. Aren't IndiGo and SpiceJet already going to Bangkok and Malaysia? We need to fly to Johannesburg, Chicago and the likes and not to another small country."
Civil aviation ministry officials said the main objective of the policy change last September was to attract large international airlines to invest in Indian carriers so that these could fly to distant destinations rather than those within a range of six hours, once again raising questions whether the proposal for the new airline will pass smoothly. The Tata Group, which founded and ran Air India before it was nationalised in 1953, has long been interested in the aviation business, but its plans to enter the sector have been thwarted twice, once in the 1990s and again in 2000.
The group's impending entry this time around elicited a mixed response from existing players. The chief of one private sector airline said the move to allow foreign carriers to invest in Indian airlines was aimed at improving the lot of existing airlines. "Does it match with that objective? Many airline operators are suffering now," this person said, asking not to be named.
Another airline boss said he was sure "the government will look very closely at this development and be careful in allowing capacity addition by the new entrant" while the CEO of Jet AirwaysBSE -4.41 % was more resigned. "New foreign airlines setting up shop in India as a result of the new policy was expected. Long term, the new policy will have positive impact. But there will be pain," said Jet CEO Nikos Kardassis.
http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/would-have-been-nice-if-tatas-set-up-own-airline-ajit-singh-on-airasia-deal/articleshow/18608070.cms
In his first comments on the development, Singh also said the main purpose of a recent policy change in the civil aviation sector, which allows foreign airlines to own up to 49% stake in an Indian carrier, was to increase investment in existing Indian carriers. "I'm not opposed to the (AirAsia-Tata) alliance... The idea of the policy was to increase investment in Indian carriers. It would have been nice had the Tatas, with their kind of resources, started a new airline," he told ET in an interview on Thursday.
The proposed alliance among AirAsia, Tata Sons and the New Delhi-based Bhatia family (the Bhatias are relatives of steel baron LN Mittal), if approved by the government, will introduce a formidable new entrant into India's airline industry, where the dominant narrative has been one of pain, exemplified by the collapse of one-time leader Kingfisher AirlinesBSE 3.02 %.
But the minister's comments may be interpreted by some as a less-than-enthusiastic welcome to the first planned foreign investment in India's aviation sector after last September's change in foreign holding guidelines.
The ministry's action on the AirAsia-Tata proposal in the weeks ahead has the potential to become a test case of the government's stance towards foreign investment in general and the airline industry in particular.
AirAsia is expected to own 49% of the venture, with Tata Sons and Bhatia-controlled Telestra Tradeplace holding 30% and 21%, respectively.
Industry experts say the entry of a player like AirAsia-Tata combine with deep pockets, high staying power, and record of running a hugely successful regional airline could shake up Indian aviation.
New Carrier to Face Old Challenges
Asked what the entry of a new airline, especially a globally successful one like AirAsia, would do to existing Indian carriers, most of which are battling high costs and thin margins amid an aggressive fare war, the minister said the new carriers would also face the same challenges as the existing ones.
"Indian businessmen are second to none. The new airline will have to deal with the same cost structures as IndiGo or SpiceJetBSE -1.98 % or anyone else for that matter. So why the worry?" he asked. Singh said India needed more homegrown airlines flying to far-away destinations rather than more short-haul carriers. "We need more of Air India and Jet Airways. Aren't IndiGo and SpiceJet already going to Bangkok and Malaysia? We need to fly to Johannesburg, Chicago and the likes and not to another small country."
Civil aviation ministry officials said the main objective of the policy change last September was to attract large international airlines to invest in Indian carriers so that these could fly to distant destinations rather than those within a range of six hours, once again raising questions whether the proposal for the new airline will pass smoothly. The Tata Group, which founded and ran Air India before it was nationalised in 1953, has long been interested in the aviation business, but its plans to enter the sector have been thwarted twice, once in the 1990s and again in 2000.
The group's impending entry this time around elicited a mixed response from existing players. The chief of one private sector airline said the move to allow foreign carriers to invest in Indian airlines was aimed at improving the lot of existing airlines. "Does it match with that objective? Many airline operators are suffering now," this person said, asking not to be named.
Another airline boss said he was sure "the government will look very closely at this development and be careful in allowing capacity addition by the new entrant" while the CEO of Jet AirwaysBSE -4.41 % was more resigned. "New foreign airlines setting up shop in India as a result of the new policy was expected. Long term, the new policy will have positive impact. But there will be pain," said Jet CEO Nikos Kardassis.
http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/would-have-been-nice-if-tatas-set-up-own-airline-ajit-singh-on-airasia-deal/articleshow/18608070.cms
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