No major foreign control in AirAsia India and Vistara; Tatas deny rivals’ accusations in the ongoing 5/20 rule debate

The Tata group has absolutely denied the accusations made by its rivals that the carriers that it holds stakes in are violating the law on management control.

"Majority ownership and effective control of both airlines - AirAsia India and Vistara - are with the Indian parties as per the requirements of press note 6," said a release by Tata Sons. "All the important decisions concerning the day-to-day operations of the airlines are taken by the management teams of these airlines under the overall supervision, control, and direction of the respective boards of directors (which include a majority of Indian nationals)."

The release also said that it opposes the 5/20 rule because of national interest. As of now, the rules say that local carriers can only start international flights if they have been operating for at least five years and have 20 planes in their fleet. Ratan Tata, the Chairman Emeritus of the Tata Group, had said last week that older carriers were resisting the abolition of this rule as a protectionist measure. He was later criticised for this comment.

The release added that the 5/20 rule must be abolished for Indian aviation to achieve its full potential and also to improve connectivity with the rest of the world. It further said that the rule has only served to benefit foreign carriers.

As an argument, the older carriers accused that AirAsia India and Vistara, two carriers in which Tatas hold stakes, are controlled by their overseas stakeholders - Air Asia Bhd and Singapore Airlines, respectively.

"In Air Asia, the Indian majority ownership is spread between two independent unrelated Indian shareholders who effectively have less shareholding then the foreign partner, namely AirAsia, Malaysia. De facto therefore, Air Asia, Malaysia is the largest shareholder," said Federation of Indian Airlines (FIA) in a statement.

It also alleged that since KPMG, which advised the ministry in drafting the aviation policy, is consultant to Singapore Airlines since June 2015, it might have suggested changes at their behest. To this, the civil aviation ministry told ET that it would do whatever was best for the industry.

Image source