Budget carrier AirAsia’s India operations appear to be remote controlled from overseas with even routine decisions such as fares and in-flight food menu decided at the airline’s global headquarters in Malaysia.
This has raised questions whether the airline has broken rules by giving away effective control to its foreign partner.
AirAsia India (AAI), which started operations two years ago, is a joint venture between Malaysia-based Air Asia and India’s Tata Group.
Documents in HT’s possession show that AAI needs permission from Malaysia even for regular decisions such as on-board services, ticket pricing and branding.
“AAI shall observe and comply strictly with the following operating requirements which are to be determined in AirAsia’s sole discretion: ancillary, branding, catering and in-flight services, engineering, finance, flight operations, marketing, network planning.....,” said the Brand License Agreement signed in 2013 between AAI and its Malaysian parent AirAsia Bhd.
Laws require that the local partner effectively control the airlines in India. The Tata Group and AirAsia Bhd own 49% stake each in AAI. Two board members hold 2%.
According to the agreement AAI cannot enter into negotiations with any vendor for any system of equipment without prior approval from its global headquarters.
AAI did not offer comments for the story.
A Tata Sons spokesperson said that AAI has not broken any rules.
“Majority ownership and effective control are with Indian parties,” the spokesperson said in an e-mailed statement.
“Further, all the important decisions concerning the day-to-day operations of the airline are taken by the management team of the airline under the overall supervision, control, and direction of the board of directors (which include a majority of Indian nationals)”.
According to the agreement, AAI can offer services such as excess baggage and duty-free only if the Malaysian parent approves.
Managers’ appointments in AAI also need the headquarters’ approval. Contracts with oil vendors to buy jet fuel in India are also approved from Malaysia.
“Any and all artwork representing the AirAsia brand shall be approved by AAG. AAI shall establish such promotions, advertising and publicity budget templates as are approved by AirAsia. AAI shall establish an internal reporting system as approved by AirAsia,” said the agreement.