The infusion will help the airlines plan their next rounds of operations as easing of 5/20 norms
With the aviation ministry easing the 5/20 norms, Tata Sons is stepping up investment in its airline ventures in India. The promoters of Vistara, Tata Sons and Singapore Airlines, have agreed to infuse Rs 150 crore (Rs 1.5 billion) in the airline.
According to regulatory filings by the Tata-SIA joint venture on June 2, 2016, the board of the airline approved the issue of fresh shares to its main owners on a rights basis.
This comes close on the heels of AirAsia India’s promoters agreeing to infuse Rs 234 crore (Rs 2.34 billion) in the airline. On June 14, the airline’s board approved the issue of fresh shares worth Rs 234 crore to its two main owners, Tata Sons and AirAsia Malaysia, on a rights basis.
The infusion will help the airlines plan their next rounds of operations as easing of 5/20 norms, under which airlines needed to have five years of domestic flying experience and at least 20 aircraft in their fleet to fly abroad, make it easier for the airlines to launch international operations. Both airlines did not respond to queries in this regard.
“Tata is committed to the growth and success of both the airlines in a highly competitive market. Both airlines are demonstrating strong customer centricity in meeting passenger expectations. They have adapted well to the market and will build on learnings from their year of operation,” a Tata Sons spokesperson said.
Sanjiv Kapoor, chief strategy officer at Vistara, had recently told Business Standard that the airline was adequately funded and would get its 20th aircraft by June 2018. Kapoor said there was no decision of advancing the delivery, but said the airline was capable of doing that. Currently, it has 11 aircraft.
The airline’s aggression is evident from the recent launch of an advertisement featuring Bollywood star Deepika Padukone, the first airline in the country to do so.
Similarly, the conglomerate’s other airline venture Air Asia India has been on a growth path after initial controversy over ownership and control. It recently received its seventh aircraft and is adding new locations.
According to Amar Abrol, chief executive officer, AirAsia India, the airline will invest around Rs 250 crore in getting new aircrafts, hiring and flying to new locations. The airline is conducting roadshows across the country for recruiting pilots.
“We have the money now, we are training all through the night, I am in a rush to get there,” Abrol said when asked about the time it would take to have 20 aircraft.
The two airlines lobbied hard for the removal of the 5/20 rule, which was amended in the national civil aviation policy in June to 0/20. Ratan Tata, chairman emeritus of Tata Sons, had publicly criticised the rule saying it was hurting the growth of the industry.
“We would have preferred, of course, that the rule be completely abolished. However, with more such forward–looking policies and steps to reduce the costs of doing business, the airline industry in India is likely to see greater activity and more competition in the years ahead,” Tata Sons said.
AirAsia India recorded an increase of 73 per cent in revenue to Rs 189 crore and cut its loss by 56 per cent to Rs 20.36 crore in Q2CY16 (y-o-y).
Photographs: PTI Photo and Reuters