AirAsia, if allowed to start an airline in India along with the Tata Group and Arun Bhatia of Telestra, would pose serious competition to the incumbents, more specifically IndiGo and Jet Airways Group which, in turn, would benefit air passengers. Airfares are expected to remain low as witnessed in the past few years, except for last year.
“This announcement is on expected lines and not surprising. However, (I am) surprised with Tatas agreeing to be part of the joint venture without taking a lead role in the consortium. This will be an AirAsia-led consortium which might face regulatory challenges,” Kapil Kaul, CEO, South Asia, Centre for Asia Pacific Aviation (CAPA), told The Hindu.
“It is not clear if government will clear their licence as there is no clarity on the issue of new licenses. Overall, CAPA welcomes strong and well capitalized airlines as it will be positive for the overall sector,” Mr. Kaul added.
AirAsia, which has developed a successful low-cost model, will get its expertise to the Indian market, bring down fares and boost regional connectivity.
“The Tata-AirAsia deal is in line with our estimate that the policy change will lead to equity deals in two to three existing airlines and one or two fresh start-ups. This will enhance competition, expand spread of air connectivity to Tier III and Tier-IV cities and bring down airfares for the Indian passenger,” said Amber Dubey, partner and head-aviation at global consultancy KPMG.
“We may also see some consolidation in line with what’s happening in the U.S. and EU since clearly, India, with its low flyer-base, regulatory challenges and high cost structure, cannot afford more than four strong national airlines,” Mr. Kaul said.
Indian aviation seems to be heading for an interesting phase and the re-entry of Tatas into airline business will add excitement.