New Delhi, March 7, 2013- The Foreign Investment Promotion Board (FIPB)on Wednesday cleared the investment proposal of Malaysian budget carrier AirAsia to launch a new airline in partnership with the Tata Group and Arun Bhatia’s Telestra Tradeplace.
AirAsia, through its investment arm, AirAsia Investment Ltd (AAIL), intends to own 49 per cent in the new airline with the remaining stake held by the other two Indian firms.
Soon after the FIPB cleared the AirAsia’s proposal civil aviation minister Ajit Singh told reporters that his ministry has sought clarity on the FDI policy in the aviation sector on the grounds that it spoke of allowing such investment in an existing Indian carrier and not a new one.
“The commerce ministry should change the rules to bring about clarity. Overall, I don’t see a problem in the AirAsia joint venture (JV). Our ministry will see that the joint venture adheres to the laid-down rules,” Singh said.
AirAsia will be the first foreign carrier to enter India’s aviation sector since the government changed its rules in September last year to allow foreign carriers pick up to 49 per cent stake in domestic airlines.
On a hectic weekend last week Ratan Tata emerged from retirement to meet civil aviation minister Ajit Singh on Friday, a high-level team of the Tata Group and AirAsia executives met senior ministry officials on Saturday to fast-track clearances.
Tata Sons, the holding company of the $100 billion salt-to-software conglomerate, would hold 30 per cent in the joint venture but will not have any operating role in the airline, while the Telestra Tradeplace would hold 21 per cent stake. This will mark the return of Tatas to aviation sector.
AirAsia has announced it would set up a 49:30:21 JV with the Tata Sons and Telestra Tradeplace of Indian investor Arun Bhatia to launch the new airline. The three companies would infuse $9 million within a fortnight of the FIPB clearance to set up the venture.
According to sources, the initial investment by the AirAsialed joint venture would be around Rs.80 crore.
After the FIPB approval, the joint venture company would make an application to the aviation regulator Directorate General of Civil Aviation (DGCA) for the Air Operators Permit to carry out flying operations.
AirAsia is looking to start flying operations from June this year with 3-4 planes and would be headquartered in Chennai. It would focus on providing domestic connectivity to Tier-II and Tier-III cities.
The proposed airline would not fly on international routes any time soon as the current rules allow only those airlines to operate on international routes which have completed five years of domestic operations and have a minimum fleet of five aircraft.
