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AirAsia gets government's nod to start a new airline

Posted on Mar 07, 09:48AM | IANS

New Delhi/Kuala Lumpur, March 6 : Malaysian budget carrier AirAsia is all set to roll out the seventh scheduled domestic carrier in the Indian skies, after its proposal for starting a new airline was approved by the government Wednesday.

Currently, there are six scheduled domestic airlines in the country -- Air India, Jet Airways, Jet Lite, SpiceJet, IndiGo and GoAir.

IndiGo is the leading passenger carrier with 27.3 percent of market share as of November last year, followed by Air India at 20.7 percent and SpiceJet at 19.5 percent.

The operating licence of now defunct Kingfisher Airlines has been suspended since last year.

On Wednesday, the Foreign Investment Promotion Board (FIPB) gave its nod to the Malaysian budget carrier's proposal to start a new airline joint venture (JV) with partners, the Tata Group and Arun Bhatia-promoted Telestra Tradeplace.

"The good always win. People and companies with good intentions to create jobs and make life of the average man better will always win," tweeted an elated Tony Fernandes, Air Asia's Indian-origin founder and chief executive.

"Thank you all. AirAsia - Tata India airline proposal gets government nod."

In its proposal, the company had said that it intended to hold 49 percent stake in the JV.

The Malaysian budget carrier intends to invest anywhere between $30 million to $60 million in the airline venture. While Tata Sons will hold 30 percent, Telestra Tradeplace will hold a 21 percent stake.

Incidentally, India's first carrier was Tata Airlines, which took flight in 1932. In 1953, it was nationalised and renamed Air India.

The Tatas had earlier tried to start an airline with Singapore International Airlines in the mid-1990s, but could not succeed.

The other partner, Arun Bhatia, runs an aviation parts manufacturing firm, Hindustan Aerosystems, from New Delhi.

When contacted a senior finance ministry official told IANS: "The proposal has been accepted under merit and policy."

Meanwhile, Civil Aviation Minister Ajit Singh said he does not foresee any problem in the venture as long as all regulatory requirements are fulfilled.

"I don't see any big hurdles. The aviation ministry will check procedures of taking no objection certificate, having two-thirds of India directors and others were followed," Singh said at an event organised here.

However, the minister said that the JV may face some procedural problems that would require certain clearances from FIPB.

Earlier, the civil aviation ministry had sought a clarification from FIPB on the new foreign direct investment policy in the domestic airline sector.

The ministry wanted to know whether the new rules were exclusively for existing domestic airlines or even for new start-ups.

Fernandes has tweeted that he has chosen an Indian to lead the airline, as per law.

"I have selected our CEO (chief executive) for Airasia India. Very smart boy from the south, Madras. An amazing CV (curriculum vitae). Will impress all," Fernandes said in a tweet.

According to the low-cost carrier (LCC), the JV plans to operate from Chennai and will focus on providing connectivity to smaller cities with a small fleet initially. It plans to start operations by the end of 2013.

AirAsia said it is confident of replicating in India its successful business model which it delivers in Malaysia, Thailand, Indonesia and other JVs.

AirAsia has a fleet of 118 aircraft and has ordered 350 planes to service its network. Currently, AirAsia through its operations based in Thailand and Malaysia operates in Chennai, Bangalore, Tiruchirappalli, Kochi and Kolkata.