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AirAsia and Tata to set up Indian airline
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy AirAsia and Tata group have announced plans to jointly establish a domestic Indian airline to capitalise on the countrys growing aviation market.
If the deal between southeast Asias largest low-cost carrier and Indias largest industrial conglomerate goes ahead, it would mark the first international investment in Indias struggling airline industry since September, when New Delhi said it would allow foreign airlines to hold up to 49 per cent of its local carriers.
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. AirAsia and Tata to set up Indian airline - FT.com
AirAsia, founded by Tony Fernandes with just two aircraft in Malaysia in 2001, has expanded rapidly in recent years, setting up businesses in Japan, Thailand, Indonesia and the Philippines. In 2011, it became Airbuss biggest customer for the A320neo after ordering 200 jets.
The southeast Asian airline reported to Kuala Lumpur Stock Exchange on Wednesday that it has applied to Indias Foreign Investment Promotion Board for permission to establish an airline joint venture with Tata Sons and businessman Arun Bhatia of Telestra Tradespace.
The deal would mark a return to the airline industry for Tata, which founded Indias first private carrier in the 1930s, only to have it nationalised in the years immediately after Indias independence from British colonial rule.
Though it released few details of the potential deal, AirAsia said it would hold a 49 per cent stake in the company, which would apply for an airline licence from Indias civil aviation authorities. Tata will hold a 30 per cent stake. The new carrier would be based in Chennai, in southern India, and focus on connecting smaller cities.
AirAsia believes Indian aviation has enormous long-term growth potential and is expected to produce tremendous upside for first movers, it said.
Tata, Indias largest business group by revenues, has long dreamt of re-entering the sector in which it has a storied history. It is seen as an unexpectedly bold move by the groups new chairman Cyrus Mistry, who replaced long-time chairman, Ratan Tata in January.
Tata said the conglomerate would be a strategic financial investor, while the carrier would be managed by the Malaysian carrier.
The initiative on this was Air Asias, they came to Tata Sons to see if we would take a stake, Tata Sons told the Financial Times. Given AirAsias successful business model and strong record, we felt they would succeed in India, and decided to take that stake in the venture, but we will not be involved in operating an airline.
Indian aviation analysts hailed the development as positive for a struggling industry labouring under high costs and heavy debts.
This will enhance competition, expand spread of air connectivity to smaller cities and bring down airfares for the Indian passenger, said Amber Dubey, head of aviation at KPMG, the global consultancy.
However some observers questioned Tatas decision to invest in an airline when most established incumbents are struggling to make a profit. A senior business figure in Mumbai called the move a strange decision, given how competitive the Indian airline sector is, and given the capital commitments of the group.
In the 1990s after New Delhi opened its aviation sector to private investment, the Tata group, under then chairman Ratan Tata, sought to establish an airline joint venture with Singapore Airlines, but never got the regulatory go-ahead.
In 1997, New Delhi changed its policy to bar foreign airlines from investing in Indian carriers, a move widely interpreted intended to scupper Tatas airline, and protect incumbent rival Jet Airways.
This airline thing was always Ratans baby, said the Mumbai business leader. The fact that they have done this now makes you wonder if this is some sort of hangover from his time in charge.
AirAsia and Tata to set up Indian airline - FT.com
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy AirAsia and Tata group have announced plans to jointly establish a domestic Indian airline to capitalise on the countrys growing aviation market.
If the deal between southeast Asias largest low-cost carrier and Indias largest industrial conglomerate goes ahead, it would mark the first international investment in Indias struggling airline industry since September, when New Delhi said it would allow foreign airlines to hold up to 49 per cent of its local carriers.
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. AirAsia and Tata to set up Indian airline - FT.com
AirAsia, founded by Tony Fernandes with just two aircraft in Malaysia in 2001, has expanded rapidly in recent years, setting up businesses in Japan, Thailand, Indonesia and the Philippines. In 2011, it became Airbuss biggest customer for the A320neo after ordering 200 jets.
The southeast Asian airline reported to Kuala Lumpur Stock Exchange on Wednesday that it has applied to Indias Foreign Investment Promotion Board for permission to establish an airline joint venture with Tata Sons and businessman Arun Bhatia of Telestra Tradespace.
The deal would mark a return to the airline industry for Tata, which founded Indias first private carrier in the 1930s, only to have it nationalised in the years immediately after Indias independence from British colonial rule.
Though it released few details of the potential deal, AirAsia said it would hold a 49 per cent stake in the company, which would apply for an airline licence from Indias civil aviation authorities. Tata will hold a 30 per cent stake. The new carrier would be based in Chennai, in southern India, and focus on connecting smaller cities.
AirAsia believes Indian aviation has enormous long-term growth potential and is expected to produce tremendous upside for first movers, it said.
Tata, Indias largest business group by revenues, has long dreamt of re-entering the sector in which it has a storied history. It is seen as an unexpectedly bold move by the groups new chairman Cyrus Mistry, who replaced long-time chairman, Ratan Tata in January.
Tata said the conglomerate would be a strategic financial investor, while the carrier would be managed by the Malaysian carrier.
The initiative on this was Air Asias, they came to Tata Sons to see if we would take a stake, Tata Sons told the Financial Times. Given AirAsias successful business model and strong record, we felt they would succeed in India, and decided to take that stake in the venture, but we will not be involved in operating an airline.
Indian aviation analysts hailed the development as positive for a struggling industry labouring under high costs and heavy debts.
This will enhance competition, expand spread of air connectivity to smaller cities and bring down airfares for the Indian passenger, said Amber Dubey, head of aviation at KPMG, the global consultancy.
However some observers questioned Tatas decision to invest in an airline when most established incumbents are struggling to make a profit. A senior business figure in Mumbai called the move a strange decision, given how competitive the Indian airline sector is, and given the capital commitments of the group.
In the 1990s after New Delhi opened its aviation sector to private investment, the Tata group, under then chairman Ratan Tata, sought to establish an airline joint venture with Singapore Airlines, but never got the regulatory go-ahead.
In 1997, New Delhi changed its policy to bar foreign airlines from investing in Indian carriers, a move widely interpreted intended to scupper Tatas airline, and protect incumbent rival Jet Airways.
This airline thing was always Ratans baby, said the Mumbai business leader. The fact that they have done this now makes you wonder if this is some sort of hangover from his time in charge.
AirAsia and Tata to set up Indian airline - FT.com
