In the din that followed the unveiling of a partnership between Tata Group and Singapore Airlines (SIA) on September 19 to start a full-service airline in India, an announcement by South East Asia’s biggest carrier five days later may have gone unnoticed. SIA and SilkAir, its wholly-owned regional offshoot, said they will increase services between India and Singapore to 107 times a week from 98 across 11 Indian cities, including a third daily service from New Delhi, from October 27, 2013.
Company officials say there is little to link two announcements, but there is no denying that both underscore the importance of India for SIA. Indian aviation has always been a lodestone for the Tatas, but the same is true for SIA. In each futile attempt the Tatas made in the past to enter aviation — creation of a joint venture in the 1990s and purchase of government-owned Air India in 2000 — their partner happened to be none other than SIA. SIA was actually one of the first global airlines to enter India, launching services to Chennai as early as 1970. An exposure to India is critical now more than ever owing to two factors — a 3-lakh strong Indian diaspora who have settled in Singapore and a growing number of Indian visitors, 9 lakh last year.
Nicholas Ionides, vice-president of public affairs at SIA, says India’s aviation market has been expanding rapidly and the airline has been eager to participate in this growth story for many years. The time for the joint venture as a new growth opportunity for SIA was right thanks to liberalisation (the government permitted foreign airlines to invest 49% in Indian carriers a year ago), according to him.
Growth (or lack of) Story
That is only half the story. In spite of the huge potential, SIA’s growth in India has been tempered by bilaterals, or air traffic rights, known as Air Service Agreements (ASAs) in aviation parlance that foreign airlines like SIA are captive to.
The ASAs that India signed with foreign states until recently were complicated and archaic, based on a coefficient of aircraft capacity and the market potential of destinations. To cite an example, a coefficient of 1 was affixed to a Boeing 777 aircraft though few airlines fly the plane any more. Thankfully for SIA, the civil aviation ministry did away with the previous arrangement in April. Singapore was allotted 28,700 seats a week under the revised ASA.
GM Toh, the affable general manager of SIA’s Indian operations, has mixed feelings about the new arrangement. Earlier, it was not uncommon to see empty seats on SIA planes — nine on every flight — due to restrictions on sales. “We had to use smaller aircraft on routes to comply with the rules,” he says, sitting in his office in Mumbai. (Guess where the SIA headquarters in India is located — the Taj Mahal Palace at Colaba, a Tata property).
The new arrangement is only slightly better, according to Toh. Archaic rules have gone, but restrictions remain in place. SIA faces seat capacity constraints in all the metros and Coimbatore. In Delhi and Mumbai, for example, the airline cannot fly more than 6,000 seats a week. “We may be flying three flights a day from Mumbai, but we are only using 5,800 seats,” he says.
Tata-Singapore Airlines JV: SIA taking another shot at India, despite barriers ...
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