Business

Thursday March 7, 2013

Aye for AirAsia India, new budget airline to be based in Chennai, Tata has 30% stake

By B.K SIDHU
bksidhu@thestar.com.my


<B>High achiever:</B> Fernandes staged a major coup when he inked a deal with Tata and Bhatia to set up AirAsia India. High achiever: Fernandes staged a major coup when he inked a deal with Tata and Bhatia to set up AirAsia India.

PETALING JAYA: AirAsia is said to have received the nod from India's Foreign Investment Promotion Board (FIPB) to take up a 49% stake in a joint venture to set up AirAsia India. This is in contrast to a media report out of India claiming that the deal had hit a snag.

The new airline, to be based in Chennai and managed by AirAsia, would involve Tata Sons Ltd taking a 30% stake and Arun Bhatia's investment firm Telestra Tradeplace Pvt Ltd taking the remaining stake. AirAsia would initially invest US$15mil (RM46.58mil).

Earlier media reports out of India claimed that the deal had hit a snag because the Indian Aviation Ministry was said to have reservations about the deal.

Mumbai-based The Economic Times reported that the ministry was understood to have expressed reservations in a note to the FIPB.

The newspaper reported that the ministry's reservations rested on the issue of whether the revised foreign direct investments in aviation rules were applicable to new joint ventures or only existing companies in the industry.

Furthermore, the newspaper reported that Aviation Minister Ajit Singh had expressed his views that Tata should have chosen to launch its own airline.

However, in a later article on the newspaper's website and in newswire reports, India's economic affairs secretary Arvind Mayaram said the investment proposal had been cleared.

“Now, they will have to take the necessary licences from the directorate-general of Civil Aviation. They can start operating now once they get the licence,” he said.

“AirAsia has received the nod from the FIPB to invest in a joint venture to set up AirAsia India.

“AirAsia's next step is to apply for an air operators licence to begin flying within India,” said those in the know.

AirAsia group chief executive officer Tan Sri Tony Fernandes staged a major coup just two weeks ago when he managed to ink a deal with Tata and Bhatia to set up AirAsia India, made possible because the Indian Government had relaxed rules for foreign ownership in airlines.

While earlier reports said the airline would be operational by year-end, Fernandes could be looking towards a mid-year launch now, confident that even in a tough market such as India where some airlines are now in need of cash injections his low-fare model would work.

Bloomberg, meanwhile, reported that the approval came as carriers in Asia's third-largest economy sought global equity alliances to raise funds needed to pay for expansion.

Jet Airways (India) Ltd and Etihad Airways PJSC are holding talks for an investment deal in India's biggest carrier by market value after ownership rules were eased in September.

AirAsia, along with partners Tata Sons and Telestra Tradeplace, would invest US$9mil (RM27.95mil) within 14 days of winning approval, according to the application submitted to the investment panel.

The newswire noted that the entry of the region's biggest discount airline would increase competition for Jet Airways, which conceded domestic market leadership to budget airline IndiGo last year.

In a separate story, Bloomberg reported that AirAsia X Bhd CEO Azran Osman-Rani said the airline was weighing the timing for a planned initial public offering (IPO) that may help it raise about US$250mil (RM776.28mil), as Malaysia prepares for a general election.

“We don't have a specific date yet for the general election,” he said. “We are going to be guided by the investment bank advisers whether or not it's really an issue or whether it's been priced in.”

Azran said the IPO proceeds would be used to boost the airline's fleet, and add flights and destinations. An IPO by AirAsia X, the long-haul arm of AirAsia, would be the second of three proposed listings by affiliates of the low-fare carrier.

The listing document, which was filed with the Securities Commission in November, would be resubmitted to include earnings for the six months through December.

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