Regulator Clears Way For Tata-SIA Launch Ahead Of Court Hearing

July 10--NEW DELHI -- Aviation regulator Directorate General of Civil Aviation (DGCA) has backed Tata-SIA Airlines Ltd's application for a licence ahead of the matter coming up for hearing in the Delhi high court on Friday.

The regulator on Wednesday rejected all the objections against the proposed airline, clearing the way for it to be granted an airline licence in the next few weeks.

The regulator had called for public comments on the application submitted by Tata-SIA to start an airline operation in India. A total of six representations were received by the regulator and, of them, two were in support of granting the licence.

"After the detailed examination of objections/issues raised in the representations, the response of M/s. TATA SIA Airlines Ltd, and various rules and other provisions for issuance of air operator permit, I am of the view that the representationists have not been able to make out any case against M/s. TATA SIA Airlines Ltd, for refusing to consider its application for grant of AOP (Scheduled)," DGCA director general Prabhat Kumar said in an order uploaded on the regulator's website on Wednesday evening.

"I, therefore, do not find any reason for not considering the application of M/s. TATA SIA Airlines Ltd, for grant of AOP (Scheduled). In view of the above, the objections raised by the representationists are not sustainable. It is, therefore, decided to consider the application of M/s. TATA SIA Airlines Ltd, for issuance of AOP (Scheduled) subject to the compliance of various requirements in terms of rules," he added.

Local airlines, including IndiGo and Jet Airways (India) Ltd, were among those who opposed the launch of Tata-SIA. State-run Air India Ltd did not oppose the entry.

Besides local airlines, ruling Bharatiya Janata Party politician Subramanian Swamy also filed a lawsuit in the Delhi high court, opposing the grant of a licence.

The matter is scheduled to be heard on Friday, but DGCA's green signal days before the hearing shows the regulator feels it is on firm footing, said a government official who declined to be named.

Civil aviation minister Ashok Gajapathi Raju had also promised to listen to Swamy's grievances.

The ministry, which has been made a party to the Delhi high court case, is likely to convey to Swamy the same arguments it has given to the Delhi high court, the same government official said -- that the government has followed all rules and regulations in granting clearances to the proposed airline venture.

No communication has been sent by the aviation ministry to Swamy on his letters to Raju as the matter is sub judice, said a second government official who too declined to be named.

Swamy and some of the local airlines have argued that a September 2012 decision by the aviation ministry only allowed foreign airlines to invest in existing Indian airlines and that government agencies had wrongly interpreted the decision to allow such foreign direct investment (FDI) in start-ups. He says existing airlines would be hurt by allowing the investment.

DGCA said all its decisions are subject to law.

In two objections to DGCA, airlines made out a similar case.

However, DGCA in its five-page order explained the rules and its implications clearly.

It said that as far as its rules are concerned, the airline needs to be registered and its principal place of business should be in India; the chairman and at least two-thirds of its directors should be citizens of India; and the airline's substantial ownership and effective control should be vested in Indian nationals. DGCA said the airlines fulfils all of these conditions.

One of the more unusual complaints, by someone identified by DGCA as only Mr Jain, argued that 18.5% shareholding with foreign nationals in Tata makes effective equity contribution by Tata in Tata-SIA Airlines less than 51%.

However, Tata-SIA replied to this charge, according to the DGCA website, by saying that Jain is "factually incorrect and 18.47% of the paid-up capital of Tata is held by two Indian entities and only 0.03% is held by foreign nationals".

Approvals for Tata-SIA have so far come in record time. On 24 November, SIA said it had received formal clearance to invest in the Indian airline from India's Foreign Investment Promotion Board. The airline then approached the home ministry for its approval on 13 January and the no-objection certificate was granted on 2 April.

Tata Sons Ltd, the holding company of the $109 billion Tata group, and Singapore Airlines propose to start a full-service airline with $100 million in initial investment, with the Indian partner holding 51% and the city-state's national airline the remainder. The launch will mark the realization of an ambition that Tata Sons and Singapore Airlines have together cherished for one-and-a-half decades.

The Tata group has already launched a budget airline AirAsia India last month.

Ratan Tata, who retired as Tata Sons chairman in December 2012, said earlier this month that "there is place for both, a budget airlines like AirAsia India and a full-service airline like Tata-SIA".

"There is a huge market to allow both segments to compete," he said

A third government official, who declined to be named, said the Tatas are looking at their first plane arriving in September and that they were not in a hurry to get the licence as there is still ample time for the launch of the airline.

Copyright 2014 - Mint, New Delhi

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