The finance ministry on Wednesday approved Malaysia-based budget carrier AirAsia’s proposal to enter the Indian aviation sector with a no-frills airline in a joint venture with Tata Sons and Telestra Tradeplace.
Tony Fernandes-promoted AirAsia is Asia’s largest low-cost carrier in terms of fleet size.
The joint venture plans to operate from Chennai and focus on providing connectivity to smaller cities. At present, AirAsia, through its operations in Thailand and Malaysia, already connect s Chennai, Bangalore, Tiruchirappalli, Kochi and Kolkata to several south-east Asian nations.
While AirAsia, which has a fleet of 118 aircraft and over 350 planes on order, will hold a 49% stake in the proposed airline, Tata’s stake would be 30%. Arun Bhatia-promoted Telestra Tradeplace will hold the rest.
Bhatia’s son Amit reportedly serves on the board of Queens Park Rangers Football Club in the UK with Fernandes. Amit is married to Vanisha Mittal, the only daughter of ArcelorMittal chairman Lakshmi Mittal.
The Foreign Investment Promotion Board approved the venture’s application.
This is the first foreign investment after the Centre allowed overseas airlines to buy up to 40% equity in domestic carriers.
The civil aviation ministry, however, has sought further clarity on AirAsia’s application on the technicality whether the foreign direct investment (FDI) policy in aviation allowed a foreign airline to invest in a new venture.
A senior government official said the initial investment by the AirAsia-led joint venture would be Rs. 80 crore.
Civil aviation minister Ajit Singh, however, did not foresee any major hurdles in the proposed airline’s plans to start operations in India.
“I don’t see any big hurdles, whether they form joint venture before or after. The aviation ministry will check procedures of taking no objection certificate, having two-third of India directors and others were followed,” said Singh.