AirAsia ties up with Tatas to start airline in India

Giving shape to the dream of Tata Group to make a comeback in the airline business, Malaysia’s leading no frills carrier AirAsia has sought the approval of the Indian Government to join hands with the Tata Group to enter the aviation sector in the country.

This would be the first investment in the aviation sector by any foreign airline after the Government last year hiked the foreign direct investment (FDI) limit from 26 per cent to 49 per cent.

In a statement issued here on Wednesday, AirAsia said it had applied to Foreign Investment Promotion Board (FIPB) to take 49 per cent in a venture with Tata Sons Ltd and Arun Bhatia's Telestra Tradeplace Pvt Ltd.

If the proposal is approved by the FIPB, the airline operators would then approach the Director General of Civil Aviation (DGCA) for a permit to start operations.

Tata Sons will hold 30 per cent in the joint venture but will not have any operating role in the airline. AirAsia will hold 49 per cent stake in the JV and Hindustan Aviation of the Bhatias will hold 21 per cent.

This move also marks the return of Tata Group to the aviation sector. State-owned Air India had grown out of Tata Airlines, which began flights in 1932. It was in the mid-nineties that Tata Group had joined hands with Singapore Airlines to bid for a stake in Air India but it could never take off.

The statement by AirAsia said the proposed joint venture will operate from Chennai and will focus on providing domestic connectivity to Tier-II and Tier-III cities. As per current rules, a carrier must complete five years of domestic operations before becoming eligible for starting overseas flights. AirAsia, through its operations based in Thailand and Malaysia, flies to Chennai, Bangalore, Kochi, Tiruchirappalli and Kolkata in addition to 20 countries across Asia.

The three parties signed the partnership agreement and submitted the proposal to the Indian government earlier this week. ``We have carefully evaluated developments in India over the past few years and strongly believe that the current environment is perfect to introduce AirAsia's low fares which stimulate travel and grow the market,’’ AirAsia founder and group chief executive Tony Fernandes said in the statement.

The Tata Group holds nearly 6 per cent equity in SpiceJet, but has maintained that it was only a financial investor in the budget carrier. Telestra Tradeplace is an investment holding company of Arun Bhatia and one of its group companies is Hindustan Aerosystems Pvt Ltd which manufactures and supplies precision components for the aerospace industry.

The statement said AirAsia is confident that it can replicate its unprecedented success across Malaysia, Thailand, Indonesia and other joint ventures. In particular AirAsia believes its success in affording people to fly through superior operational performance by emphasising a focused and disciplined cost structure will tremendously benefit the Indian consumer. An email sent to Tata Group seeking its comments on the issue evoked no response.