Tata Sons partners AirAsia to fly back into civil aviation

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SummaryMaking its third foray into civil aviation in 16 years, the Tata group has picked up a 30 per cent stake in a three-way joint venture with Malaysia’s AirAsia to start a low-fare domestic airline in India.

Making its third foray into civil aviation in 16 years, the Tata group has picked up a 30 per cent stake in a three-way joint venture with Malaysia’s AirAsia to start a low-fare domestic airline in India.

An AirAsia statement said Wednesday that it had filed an application with the FIPB to invest 49 per cent in the venture that includes Tata Sons and Arun Bhatia’s Telestra Tradeplace.

The proposal is the first since the government last September allowed 49 per cent FDI in civil aviation from foreign carriers. AirAsia is Asia’s largest budget airline with 118 planes.

“This is an AirAsia initiative. When (they) approached Tata Sons with the proposal, Tata Sons concluded that given their reputed business model, AirAsia could be a relevant and successful service provider in the domestic sector. That is the reason for (our) investment in the venture,” a Tata spokesperson said.

The move should be seen as an investment decision and not as a plan to enter the civil aviation sector at this stage, he added.

Tata had in 1997 tried to join hands with Singapore International Airlines (SIA) to float a domestic carrier but FIPB rejected it. Tata and SIA had also tried to buy a stake in Air India when the government had planned to divest in the state carrier.

“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,” said AirAsia CEO Tony Fernandes.

After FIPB approval, the firm, with an initial investment of about $40 million, will seek aviation permits to start operations from Chennai to connect Tier II and III cities.

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