SIA renews interest in Indian aviation sector

Sep 19 2012, 01:40 IST
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Summary* SIA keen after govt allows 49% FDI by foreign airlines in local carriers

Close on the heels of the government’s policy announcement to allow foreign airlines to buy up to 49 per cent stake in Indian carriers, Singapore International Airlines (SIA) has said it is keen on investing in the domestic aviation market.

In response to an email reply to a questionnaire sent to the airline, SIA has said: “We keep all investment options open, but at this point there are no discussions taking place on the purchase of a stake in an Indian airline.”

SIA, along with the Tata Group, had earlier made attempts to enter the Indian aviation market. In the mid-nineties, SIA’s proposal, in partnership with the Tatas, was scuttled in the wake of objection from the civil aviation ministry, following which the Tatas decided to go it alone, but with a technical alliance with SIA.

When even that proposal was not cleared, the Tatas withdrew their plan to start a domestic airline. Another attempt by the Tata-Singapore Airlines combine to buy stake in Air India (the international arm) also failed to materialise.

Apart from SIA, the International Airlines Group (IAG), the parent company of British Airways, has indicated that it too may invest in the Indian market in the future. “India is a key market for IAG and we will monitor the changing regulatory environment but at this stage we have no plans to invest in any Indian airlines,” IAG said in an email reply. IAG has reportedly been in talks with Kingfisher Airlines for a possible equity infusion.

Other airlines such as the Emirates, Lufthansa and Virgin Atlantic are yet to show any interest in picking up stake in Indian carriers, most of which are pressed for cash amid increasing operating costs and rock-bottom fares that they offered till a few months back.

However, analysts feel that the tide will turn towards India and a lot of international carriers could start showing interest in the coming months.

“International carriers have all been watching the sector with interest, and informal discussions have taken place in several cases. But the balance sheets of most of the incumbent carriers are relatively weak, and the sector faces numerous structural challenges, so foreign airlines will make their own assessments about whether they consider a carrier to be a suitable investment at this time,” said Kapil Kaul, India CEO for Centre for Asia Pacific Aviation, an aviation consultancy firm.

Among the Indian carriers, SpiceJet, Kingfisher Airlines and GoAir have

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