The Indian skies are getting crowded. With the Tata Sons and Singapore Airlines venture closer to take off — the proposal was blessed by the Foreign Investment Promotion Board on Thursday — flyers will have one more option if they’re looking to fly with a full-service carrier.
By next November they may also be flying AirAsia, whose airline, also in partnership with the Tatas, was approved in March, and which plans to operate in the no-frills space.
India’s Rs 50,000-crore aviation business flatters to deceive. Airlines collectively posted losses of Rs 12,809 crore in FY12 and Rs 9,270 in FY13. Indigo was the sole carrier to have made money in both years. In 2012, low-cost players flew 32.4 million or 60% of all passengers.
On the face of it, the full-service segment looks to be the more difficult to operate in, given how price-sensitive consumers are. Jet Airways, which shares the market more or less equally with Air India, notched up a record consolidated quarterly loss of Rs 996 crore in the three months to September, the lack of pricing power evident from the numbers.
Which is why the Tata-SIA combine will probably focus more on markets overseas. The overseas market — to and from India — is expected to grow to 50 million flyers by March, says Centre for Asia Pacific Aviation. Should the ‘5/20’ rule be abolished soon — this bars domestic airlines from flying abroad before five years and have 20 aircraft — the market could hit 100 million by FY21.
In other words, an additional 35 million passengers would fly out of India and 15 million would fly in.
Experts believe the Tata-SIA alliance can do well. “If they play it right, Tata-SIA has the potential to be among the top three airlines in India by 2015,” Amber Dubey, partner and head (aerospace), KPMG, said.
Tata Sons will be the majority stakeholder in the partnership. "Very excited that the Tata-Singapore Airlines venture has got the clearance,” said Ratan Tata, chairman emeritus of Tata Sons, after meeting finance minister P Chidambaram after the approval was granted.
“A lot of work needs to be done from our end. The next step is to get a no-objection certificate for which we will apply to the aviation ministry shortly,” Tata added. Singapore Airlines, a subsidiary of Temasek Holdings, is the world’s 10th-largest carrier with revenues