Tony Fernandes’ AirAsia Group and Tata Sons have come to an agreement to form a joint-venture (JV) airline, bringing the Tata family back into the airline sector for the first time since 1953 when Tata Airlines was nationalised to form Air India. The Bhatia family is involved in the JV via their Telestra Tradeplace investment vehicle giving direct links to the Mittal family. AirAsia will have a 49% stake, Tata Sons 30% and Telestra Tradeplace 21%.
The new airline, to be headquartered at Chennai, will start operations in the last calendar quarter of 2013 under the powerful AirAsia brand. The airline already flies into several south Indian cities, linking them with major Asian hubs so this JV is simply joining the dots and filling the Kingfisher void at the same time.
This is the first foreign direct investment (FDI) after the Indian government relaxed ownership rules, allowing foreign carriers to hold 49% stake in a domestic airline.
The parties have made an application to the Foreign Investment Promotion Board for approval, after which they require the blessings of the civil aviation ministry. They will then have to approach the airline regulator for an air operator's permit.
This is a positive move for India – these players carry serious political weight in the country, which seems to be what an airline needs right now in India in order to succeed. All the signs are that this airline will be able to capture the imagination of the Indian people to travel by air and competitors should be both worried and expectant at the same time for this airline could bring with it some sway in the fight against the mass of red tape that strangles the Indian aviation sector at this time.
Commenting when the AirAsia India deal was announced, Fernandes said: “India would be the final piece of the puzzle for the time being and there will be no further joint ventures. India is a huge market with big possibilities and it is only right for AirAsia to start an operation there. Indian aviation is still at its early stage of development with an approximately 400 total fleet serving 1.2 billion. We are very familiar with the market as AirAsia already flies to India. Our focus would be on the domestic market in southern India with Chennai as the main hub. Tata Group has always been the first choice for AirAsia, based on the company’s stature in India and historical ties to aviation. The Bhatia family as well is a natural partner for this JV as they also co-own the Queens Park Rangers. India will be big, and we are excited.”