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Tatas await 'favourable climate' to foray into aviation

Despite an aborted move about a year back, the Tata group is still keen on foraying into the aviation sector.

''The aviation foray is not dead for us. It is still open to us and we can still look into the idea but a favourable climate and policy framework has to be in place,'' Tata Industries resident director in New Delhi Sujit Gupta said today.

However, no time-frame has been finalised for the foray.

It may be recalled that in September 1998, the Tata group had decided to withdraw its Rs 14.75 billion domestic airline proposal after prolonged negotiations with the government.

The company had stated that it does not intend to renegotiate the project with the government. This was, in fact, the second proposal in the aviation sector from which the Tata group had pulled out, the previous one being the Bangalore Airport project.

The company had stated that the project was shelved in the absence of any credible time frame for a decision from the industry ministry.

The proposal was pending approval in the Foreign Investment Promotion Board. The proposal was once cleared by the board and sent to the Cabinet Committee on Foreign Investments for final approval. However, the CCFI had rejected the proposal stating that a new aviation policy was on the anvil and the proposal should be viewed in its light.

The new policy permits an airline company to enter code-sharing, interlining and ground-handling arrangements with other airlines as long as it is not a management contract. The Tatas have also been asked to define clearly as to which of these technical collaborations will be included in its agreement with Singapore Airlines.

While the ministry has also been seeking the exact details about the distribution of equity holding by the foreign institutional investors in Tata Airlines-American International Group and the government of Singapore Investment Corporation, the Tatas have been reluctant in coming out with the information stating that it could be made available only once the proposal is cleared.

A lot of opposition had also come up against the Tata Airline venture from all quarters. Around 40 members of Parliament had then written to Prime Minister A B Vajpayee that the proposal should not be approved as it would spell disaster for the national carrier.

Prior to this, the Air Corporation Employees' Union, which represents 16,000 employees of Indian Airlines and is supported by all the major trade unions, threatened to launch a ''prolonged, protracted struggle'', including strikes, if the government gave clearance to Tata Airline to operate in the country.

The union had alleged that the Tatas had been withholding information demanded by the civil aviation ministry as to what technical collaboration they were going to have with Singapore Airlines.

Tata Industries Limited had rejected these charges, stating that the unions' attitude smacked of bias against an Indian company which has always stood for national and consumer interests.

The Tatas had planned to raise roughly $ 80 million, which is 40 per cent of the equity base of Rs 6.90 million, from foreign institutional investors. The new policy permits FIIs to hold a 40 per cent stake, but does not allow FIIs which will in anyway be linked to foreign airlines.

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The Tata Airline project -- the full story

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