Tata Group, AirAsia Bhd deal: Tony Fernandes to invest $50 mn, puts 'flying license' onus on Indian govt

Feb 21 2013, 18:27 IST
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Air Asia CEO Tony Fernandes answers a question during a news conference in central Sydney January 6, 2010. (Reuters) Air Asia CEO Tony Fernandes answers a question during a news conference in central Sydney January 6, 2010. (Reuters)
SummaryTentalising links to ArcelorMittal's Lakshmi Mittal start emerging via Arun Bhatia's son Amit.

relating to the ongoing airfare war, he said he had studied that airfare structure and "I think we can give a fair competition ... I think irrational competition has gone out of the (Indian) market. Now there are sensible businessmen running their (aviation) business sensibly."

Observing that pricing and costs were two major factors for airlines in India, he said the "purchase price (of tickets) will be the number one differentiator (from other airlines). Besides, the strong brand image and the wide network will also make a difference."

Regarding the costs in India, he spoke of high airport charges in Mumbai as well as the high taxes on jet fuel, saying "we will work hard to try and convince" the airport operators and state governments to reduce these charges.

Asked whether the entry of the new airline promoted by AirAsia would lead to the demise of some existing airline, Fernandes replied "businesses put themselves out of business. It is not competition which puts them out. If an airline is rightly capitalised, follows the right business model and the right people are running it, there should be no problem."

The chief of Air Asia, which recently denied it was bidding for a stake in SpiceJet, said "enough market exists in India for all of us. It is a question of finding the right structure and partners and we have chosen excellent partners."

He also said that this was a "renaissance period" in the Indian aviation sector, with the government keen on attracting investment for the domestic airlines.

This was the first concrete announcement of FDI flowing into the Indian aviation sector since the FDI policy for aviation was liberalised last September to allow foreign airlines invest in Indian carriers.

Fernandes said, "We strongly believe that the current environment is perfect to introduce AirAsia's low fares which stimulate travel and grow the market."

For the USD 100 billion Tata Group, this would be its second foray into the aviation segment after the late JRD Tata launched Air India before the Independence. The Tatas had also gone through the botched up process of Air India disinvestment in 2001, along with Singapore Airlines which walked out.

Besides investing in this new venture, the Tata Group holds nearly six per cent equity in SpiceJet and maintains that it was only a financial investor in the budget carrier.

Telestra Tradeplace is an investment holding company of Arun Bhatia and one of its group companies is Hindustan

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