New Delhi: The Foreign Investment Promotion Board on Wednesday approved AirAsia's proposal to set up an airline jointly with the Tata group, a Finance Ministry official said. Malaysia's AirAsia, the largest budget carrier in Asia, plans to launch a regional airline in India. The new airline, AirAsia India, will be managed by the Malaysian company and will be based in Chennai.
AirAsia will hold a 49 per cent stake in the joint venture with the third partner being Telestra Tradeplace. India's aviation industry, which has seen continued losses due to high operating costs and regulatory uncertainty, was opened to foreign investors in September, 2012. Foreign carriers are now able to purchase up to 49 percent of local airlines.
No foreign airline has bought a stake in a local carrier since India relaxed investment rules. The UAE's Etihad Airways is in talks to buy a stake in Jet Airways, but no agreement has been reached. Sources previously said it makes more sense for foreign carriers to start an airline with a local partner so they don't have to assume the debt of an existing Indian airline.
The new airline, AirAsia India, will be managed by the Malaysian company and will be based in Chennai.
AirAsia presently flies to four south Indian cities and Kolkata in addition to 20 countries across Asia and has indicated it plans to slow its overall expansion elsewhere. AirAsia X, the long-haul carrier found by Fernandes, last year pulled out of India due to poor demand and profitability.
India's two biggest cities, Mumbai and Delhi, were taken off the AirAsia network in 2012 due to a failure to access local distribution lines, according to market researcher the Centre for Aviation. "Securing the right local partner could resolve many of the challenges AirAsia has faced in serving India from its home markets," CAPA said in a report.
With Additional Inputs from Reuters