AirAsia ropes in Tatas to launch airline; seeks FIPB nod

The airline has filed an application with India’s Foreign Investment Promotion Board (FIPB) for proposed joint venture with Tata Sons.

Mumbai: Malaysian carrier AirAsia, Asia's biggest budget airline, Wednesday said it has sought approval to start a venture in India with the Tata Group, a move that will mark return of the Indian conglomerate to aviation sector.

AirAsia has applied to Foreign Investment Promotion Board (FIPB) to take 49 percent in a venture with Tata Sons Ltd and Arun Bhatia's Telestra Tradeplace Pvt Ltd, the low-fare carrier said in a statement.

Once approved, they will seek an air operators permit.

The move follows government's recent decision to allow foreign carriers to invest in Indian airlines.

Tata Sons, the holding company of the USD 100 billion salt-to-software conglomerate, will hold 30 percent in the joint venture but will not have any operating role in the airline.

This will mark the return of Tata to aviation. State- owned Air India had grown out of Tata Airlines, which began flights in 1932.

More than a decade back, it had joined Singapore Airlines to bid for a stake in Air India. The plan did not materialise as the government dropped disinvestment plans due to stiff political opposition.

The proposed joint venture will operate from Chennai and will focus on providing domestic connectivity to Tier-II and Tier-III cities, statement by the Malaysian carrier from its headquarters in Sepang said.

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.

AirAsia, Tatas and Hindustan Aviation of Bhatias have signed a partnership agreement for the venture.

"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.

It was in September last year that the government decided to open up the aviation sector to Foreign Direct Investment from foreign carriers.

Air Asia has made the move to invest even as Etihad and Jet Airways continue to work towards finalising a deal for the Gulf carrier to invest in Jet.

For the USD 100 billion Tata Group, this would be its second foray into the aviation segment after the late JRD Tata launched Air India before the Independence.

Ratan Tata, Chairman Emeritus of the Tata Group, once pioneers in civil aviation, had indicated in an interview to PTI days before he retired as chairman last year that the conglomerate was unlikely to enter into the sector because of "destructive competition".

The Bombay House could not be contacted immediately for a reaction on the AirAsia announcement.

The Tata Group holds nearly 6 percent 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.

Bhatia's son Amit serves on the Board of Directors at Queens Park Rangers Football Club in the UK alongside Tony Fernandes, the founder of AirAsia.

Amit is married to Vanisha Mittal, the only daughter of steel tycoon Lakshmi Mittal, according to the Wikipedia.

Within 11 years of its existence, AirAsia has become the largest no-frill carrier in Asia with 118 aircraft, and over 350 on order.