FIPB to consider AirAsia's India entry proposal Wednesday

AirAsia has applied to FIPB to take 49 percent in a venture with Tata Sons Ltd and Arun Bhatia's Telestra Tradeplace Pvt Ltd.

Updated: Mar 05, 2013, 21:27 PM IST

New Delhi: The Finance Ministry is likely to consider on Wednesday the investment proposal of Malaysian budget carrier AirAsia which seeks to enter India through a joint venture with Tata Group and another company.

The investment proposal of AirAsia Investment, Malaysia, has been listed on the agenda of the Foreign Investment Promotion Board (FIPB) meeting, an official said.

AirAsia has applied to FIPB to take 49 percent in a venture with Tata Sons Ltd and Arun Bhatia's Telestra Tradeplace Pvt Ltd.

If cleared by FIPB, this would be the first entry of a foreign carrier in the domestic aviation sector after the liberalisation of FDI policy in September last year.

The new policy allows foreign carriers to invest in Indian airlines.

The new airline is looking to start flying from this year-end with 3-4 planes and an initial investment of about USD 50 million by the Malaysian budget carrier.

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

As per current rules, a carrier must complete five years of domestic operations before becoming eligible for starting overseas flights.

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 Tatas to aviation sector. State-owned Air India had grown out of Tata Airlines, which began flights in 1932.

AirAsia, through its operations based in Thailand and Malaysia, flies to Chennai, Bangalore, Kochi, Tiruchirappalli and Kolkata in addition to 20 countries.

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

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.

The FIPB would also take up for consideration an investment plan of Farnair Switzerland AG, an European cargo airline, along with 23 other proposals.

Farnair Switzerland AG had bought a majority stake in Quikjet last February. Tata Capital Ltd is one of the key investors in Quikjet Cargo.

Quikjet Cargo, which started operations in February 2012, carries out commercial operations within the country with a small ATR-72 turboprop plane and is in the process of expanding its fleet to have a pan-India network.

The Bangalore-based firm offers its services in domestic destinations for global air cargo companies, while Farnair provides planes and operational expertise.

Farnair will offer its aircraft for long-term lease, while also setting up a scheduled network. It plans to increase fleet as business grows.

Other major FDI proposals on the FIPB agenda are that of YES Bank, ICICI Venture Funds Management Company and SIDBI Social Venture Trust.

The Board will again take up the application of the Bangalore based Bharat Electronics Ltd. Earlier also, the FIPB had taken up the case in November 2012 but had deferred decision.