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Air Asia ties up with Tata for Budget Airline

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Tata Group will return to the Indian aviation sector by investing in a joint venture with AirAsia, the largest discount carrier in Southeast Asia, and Arun Bhatia of Telestra Tradeplace for budget airline.

The proposed joint venture came less than two months after Cyrus Mistry was appointed as Tata Sons chairman succeeding Ratan Tata, who had failed to set up an airline with Singapore Airlines in the mid-nineties.

As per the joint venture agreement, Tata Sons will hold 30%, Air Asia 49% and Hindustan Aviation of Bhatia will hold 21% stake in the JV. However, Tatas would not have any operating role. Similarly, Bhatia would be a financial investor and would not have any representation on the board.

While Air Asia will invest Rs 8.98 crore in the initial stage, Tata will pay Rs 4.85 crore and Bhatia will invest Rs 3.45 crore after the proposal gets nod from the Foreign Investment Promotion Board (FIPB). Later, they will move civil aviation ministry for the permission to launch commercial flights in India. The JV is likely to compete with the low-cost flights of IndiGo, and SpiceJet airlines if gets clearance from the ministry.

The proposed JV will be headquarters in Chennai and will connect to Tier II and III cities.

The carrier may begin overseas operation after completing five years of domestic operations as per the aviation rules. Currently, Air Asia flights are being operated from Thailand and Malaysia to Chennai, Bangalore, and Kochi, Tiruchirappalli and Kolkata and 20 other countries across Asia.

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