AirAsia proposes joint venture in India

21 Feb 2013

Malaysia-based low-cost carrier, Air Asia, has submitted an application to the Indian Foreign Investment Promotion Board (FIPB) for a proposed joint venture with Tata Sons, one of India’s largest conglomerates with a reach in diverse industries that include information technology, energy, consumer products and materials. 

The investment proposal, facilitated by the Indian government’s decision in September last year to allow direct foreign investment into the aviation sector, will see Air Asia holding a 49 per cent stake in the new airline and will also include Telestra Tradeplace, an Indian investment holdings company. According to a statement from the carrier, the venture, operating from Chennai, Tamil Nadu, will be “focused on providing domestic Tier 2/Tier 3 city connectivity.”

So far, the involved parties have signed a Memorandum of Agreement and, upon receiving approval from the FIPB, the new company will then apply for an Air Operators Permit.

This joint venture will follow the business models of Air Asia’s joint ventures in other countries, including Japan and the Philippines.

Since the Indian government decided to open up the Indian aviation market, deals have been springing up across the industry. Most notably, Etihad Airways and Jet Airways have come together to take advantage of the relaxed restrictions (see story here), providing the cash-strapped Indian carrier with a much-needed boost. 

While the decision to open up the aviation industry is a welcome development, the Indian government still has to implement several other reforms in order for the industry to be truly competitive at a global level. As director general and chief executive of the International Air Transport Association (IATA), Tony Tyler, suggested, the government still needs to transform the tax, costs and infrastructure frameworks that currently cripple carriers in the nation (see story here).

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Alisha Haridasani

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