Malaysia's AirAsia forming airline JV with Tata

KUALA LUMPUR/NEW DELHI Thu Feb 21, 2013 1:49am IST

1 of 4. An Air Asia Airbus A320-200 aircraft approaches its parking space at the Low Cost Carrier Terminal (LCCT) in Sepang, outside Kuala Lumpur March 21, 2012.

Credit: Reuters/Tim Chong/Files

Stocks

   
A statue of Ganesh, the deity of prosperity, is carried in a taxi to a place of worship on the first day of the ten-day-long Ganesh Chaturthi festival in Mumbai August 29, 2014. REUTERS/Danish Siddiqui

Ganesh Chaturthi Festival

During Ganesh Chaturthi idols will be taken through the streets in a procession accompanied by dancing and singing, and will be immersed in a river or the sea in accordance with Hindu faith.  Slideshow 

KUALA LUMPUR/NEW DELHI (Reuters) - Malaysia's AirAsia Bhd(AIRA.KL), Asia's largest budget carrier, plans to launch a regional airline in India in a venture with the Tata group, marking a return to aviation for India's biggest business house.

The new airline, AirAsia India, will be managed by the Malaysian company and based in Chennai. Serving smaller cities, it will enter a fiercely a competitive Indian market that has proved challenging for AirAsia.

India's aviation industry, which has been plagued by losses due to high operating costs and fierce competition, was opened to foreign investors in September last year. Foreign carriers are now able to purchase up to 49 percent of local airlines.

No foreign airline has bought a stake in a local carrier since India relaxed its investment rules, although Abu Dhabi's Etihad Airways is in talks to buy a stake in Jet Airways (JET.NS).

AirAsia, through its investment arm, will own 49 percent of the new airline, with Tata Sons Ltd, the holding company of salt-to-software conglomerate Tata Group, owning 30 percent. Arun Bhatia, who owns Telestra Tradeplace, an investment firm, will hold the remainder.

Tata Sons said in a statement it will not have an operating role in the proposed new carrier.

"It's a formidable combination. It brings (together the) ... expertise of two giants," said Rajan Mehra, India head of U.S.-based private jet operator Universal Aviation and ex-head of Qatar Airways' India operations. "They will expand the market. Wherever AirAsia has gone, they have brought in new customers."

Tony Fernandes, AirAsia's chief executive, said in a statement: "We have carefully evaluated developments in India over the last few years and we strongly believe that the current environment is perfect to introduce our low fares."

LARGEST AIRLINE

Tata Airways was India's largest airline before the government took it over in 1953 as part of its nationalisation drive following India's independence from Great Britain and was rebranded Air India.

In 2000, the Tatas and Singapore Airlines (SIAL.SI) jointly bid for a stake in Indian Airlines, the state carrier that later merged with Air India, although rules preventing foreign airlines from investing in Indian carriers thwarted a deal.

Budget carrier SpiceJet (SPJT.BO), India's No. 4 operator by market share, runs a business model similar to the one proposed by the AirAsia venture. Last year, AirAsia held talks to buy a stake in SpiceJet, a senior government source had said.

AirAsia flies to four south Indian cities and Kolkata in addition to 20 countries across Asia and has indicated it plans to slow its overall expansion elsewhere.

AirAsia X, the long-haul carrier founded by Fernandes, last year pulled out of India due to poor demand and profitability.

India's two biggest cities, Mumbai and Delhi, were taken off the AirAsia network last year due to a failure to access local distribution lines, according to market researcher the Centre for Asia Pacific Aviation (CAPA). "Securing the right local partner could resolve many of the challenges AirAsia has faced in serving India from its home markets," CAPA said in a report.

Another Indian carrier, former No. 2 operator Kingfisher Airlines (KING.NS), has not flown since the start of October after racking up debt estimated as high as $2.5 billion and faling to pay staff, airports, banks and others.

(Editing by Tony Munroe and David Holmes)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Market Eye

REUTERS SHOWCASE

Coal Block Allocation

Coal Block Allocation

Government urges Supreme Court to not cancel some 'illegal' coal mines  Full Article 

Modi in Japan

Modi in Japan

Japan and India agree to boost strategic ties at summit  Full Article 

HSBC PMI

HSBC PMI

Factory activity expands at slower clip in August.  Full Article 

Market Outlook

Market Outlook

Indian shares headed for correction, but outlook strong - BofA Merrill.  Full Article 

India Infrastructure

India Infrastructure

RBI rule handicaps India's infrastructure hopes  Full Article 

Book Talk

Book Talk

Reema Abbasi and a glimpse of Pakistan’s Hindu past  Full Article 

China Economy

China Economy

Retreat in China's PMIs heightens calls for policy easing.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage