..:: India Strategic ::. Civil Aviation: AirAsia to invest between $30-$60 million in airline venture in India

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Editorial

AirAsia to invest between $30-$60 million in airline venture in India

Published: Feburary 2013

New Delhi. Malaysian budget carrier AirAsia is set to invest anywhere between $30 million to $60 million in its airline venture in India.

According to a proposal sent to the Foreign Investment Promotion Board (FIPB) and the company's Indian origin founder and chief executive Tony Fernandes, AirAsia will hold a 49 percent stake in the venture.

The joint venture (JV) company will include industrial conglomerate Tata Group and Arun Bhatia promoted Telestra Tradeplace.

The proposal says the company will have six board members, including AirAsia's Fernandes.

The southeast Asian carrier will also be represented by another board member.

However, under the Indian laws, the airline will require to have a majority of its members being Indians.

Tata Sons, which will hold 30 percent in the airline, will also have two members, while Telestra Tradeplace which holds only a 21 percent stake will be represented by Bhatia.

The sixth board member shall be an Indian national and appointed as a non-executive chairman of the board.

Fernandes made these known while interacting with the media over a conference call.

"We have carefully evaluated developments in India over the last few years and strongly believe that the current environment is perfect to introduce AirAsia's low fares which stimulate travel and grow the market," Fernandes said in a statement earlier.

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

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

Tata Group has so far not said anything on the development. Incidentally, India's first airline 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 part manufacturing firm, Hindustan Aerosystems, from New Delhi.

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

Last year, the government allowed foreign airlines to invest up to 49 percent in private domestic carriers.

The foreign carriers were so far not allowed to directly invest in Indian carriers for security reasons although 49 percent FDI by non-airline players was allowed.