Tatas hope to fly again with AirAsia in cockpit

K.R. Balasubramanyam        Last Updated: February 21, 2013  | 09:56 IST

K.R. Balasubramanyam
K.R. Balasubramanyam
Allowing foreign carriers to invest up to 49 per cent equity in an Indian carrier is no small reform measure by the United Progressive Alliance (UPA) regime, going by the response it is getting both in India and overseas.

The most interesting response has come from the Tata Group, which owned India's first carrier before it was nationalised. The Tatas will tie up with Tony Fernandes, the CEO of AirAsia, the most successful low-cost airline in Asia, which is headquartered in Kuala Lumpur.

According to regulatory filings in Kuala Lumpur, AirAsia will own 49 per cent of the new airline venture. It has also applied to India's Foreign Investment Promotion Board (FIPB) for approval. The Tata Group and Telestra Tradespace will be minority shareholders, holding the remaining 51 per cent. Telestra is owned by Arun Bhatia, whose son Amit Bhatia is the son-in-law of steel czar Lakshmi Mittal.

AirAsia has been active in southern India for a long-time. In particular, its Thiruchirapalli-Kuala Lumpur service is the very popular. The airline's chief, Tony Fernandes, is a Malaysian national with Indian origins. AirAsia has been expanding well in India. Currently, it operates flights to Thiruchirapalli, Chennai, Bangalore, Kolkata and Kochi. Last year, it pulled flights from the Delhi and Mumbai airports protesting the steep airport charges there.

The Tata Group entered the aviation business in 1932, establishing Tata Airlines. It was, however, nationalised and renamed Air India in 1953. Under Rata Tata, the group had toyed with the idea of re-entering the aviation sector. It even made an attempt to do so in the mid-1990s when C.M. Ibrahim was the civil aviation minister. But the efforts were in vain.

Aviation sector analysts say foreign airlines, especially AirAsia and those in the Middle East, would not sit idle and watch while the UAE's Etihad Airways gears itself to pick up a stake in India and woo foreign travelers. And this is what has given hopes for Kingfisher Airlines, as picking up a stake in an existing airline is easier than forming a joint venture and starting a new one.

If the Tatas and AirAsia do launch a new airline, it will need to complete five years before it can fly overseas, under current regulations. AirAsia will therefore try to seek growth through domestic operations. It is known to stuff more seats in its aircraft to squeeze costs and offer lower fares.

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