Air Asia JV update

The Foreign Investment Proposal Board (FIPB) has cleared Malaysian low-cost carrier (LCC) AirAsia’s proposal to form a budget airline in a JV with the Tatas and Telstra Tradeplace at an initial investment of Rs 80 crore.
“I welcome the proposed new airline. But, the policy of FDI cleared by the commerce ministry allows foreign airlines to invest in existing Indian carriers. FIPB may have cleared the proposal but it has to meet the existing requirements. Now the commerce ministry will have to change that rule and allow a startup FDI JV,” aviation minister Ajit Singh said, while terming it a “procedural issue that will not derail the proposal.”
Tata Group chairman emeritus Ratant Tata tweeted: “FIPB approval of the airline project … reflects the true investor friendly policies of the government. This and other similar actions will, without doubt, reinforce investor confidence in India. I applaud the government for its transparency and its principled implementation of the stated policy.”
Highly placed sources say that the government is unlikely to allow any technical issue to delay the new airline despite stiff opposition from some influential existing carriers, since the AirAsia-Tata JV is being seen as a test case of India’s commitment to attract foreign investors. In the past also, Tata Group’s attempts to enter aviation space by tying up with Singapore Airlines were thwarted by a big Indian airline and the government is unlikely to allow a repeat this time.
AirAsia chief Tony Fernandes has started making preparations for an early launch of the Indian subsidiary in which the Malaysian LCC, Tata Group and Telstra Tradeplace will have 49%, 30% and 21% stake respectively. Subject to getting the clearance from the aviation ministry, Chennai-based AirAsia India could take off as early as this summer with a fleet of three to four aircraft that would then be ramped up. Fernandes remains hopeful of an early nod and has already chosen an Indian as the JV’s CEO and is looking at more recruitment.