AirAsia India’s control is with Indian parties, clarifies airline

AirAsia India, which is a 49:51 joint venture betweeen Malaysia’s AirAsia and Tata Group and its associates, on Friday sought to quell speculation that it is controlled…

AirAsia India, which is a 49:51 joint venture betweeen Malaysia’s AirAsia and Tata Group and its associates, on Friday sought to quell speculation that it is controlled by its foreign shareholders in violation of the foreign direct investment guidelines, which while allowing up to 49% foreign investment in domestic carriers stipulates that apart from ownership, even control remains in the hands of Indian partners.

Reacting to a report in the Mint newspaper that the Indian JV is controlled by the Malaysian partners and even day-to-day decisions relating to the minutest aspect are taken by it, AirAsia India and Air Asia’s global CEO Tony Fernandes denied any such thing in separate statements issued on Friday.

However, both the statements did not provide a point by point rebuttal highlighted by the newspaper relating
to control of the various aspects.

“We wish to point out that Clause 5.30 of the agreement explicitly states that ‘substantial ownership and effective control of the licensee remains at all times with Indian residents’.

The agreement further states that ‘the licensee shall not be obliged to undertake any act or omission which will result in a breach of the provisions of clause 5.30’. We note with disappointment that the media reports have completely overlooked clause 5.30,” AirAsia said.

“The brand licence agreement is also referenced in the original Shareholders’ Agreement among the founding shareholders of AirAsia India.

The Shareholders’ Agreement was lodged immediately after execution in April 2013 with the Indian government, in full compliance with all regulations,” it added.

Separately, Fernandes said, “The Modi government has promised fairness and transparency and having met the Prime Minister, I am even more excited about our future in India. The constant attack on AirAsia, especially by certain members of media has saddened me but we will prevail. It is time for India to end patronage and put people first. We remain committed and determined and together with my staff, we will see this dream through. We will make sure that we share the beauty of India with the world and that we enable many Indians to see the world”.

Emphasising that it has done nothing illegal, AirAsia said, “We once again reiterate that AirAsia India is fully compliant with the requirements of Indian regulation. Majority ownership and effective control are with Indian parties as per the requirements of press note 6. Further, all the important decisions concerning the day-to-day operations of the airline are taken by the management team of the airline under the overall supervision, control, and direction of the board of directors (which include a majority of Indian nationals). The board is chaired by long-time Tata veteran, S Ramadorai”.

Tata Sons last month announced that it has decided to increase its stake in AirAsia India to 49% from the existing 41.06% by acquiring 7.94% equity stake from Arun Bhatia’s Telestra Tradeplace.

Two directors of the airline S Ramadorai and R Venkataramanan, in their individual capacity, proposed to acquire 0.5% and 1.5% shareholding respectively of Telestra’s remaining 2% equity stake in the company.

AirAsia India has been in the news recently due to a change in its top management. Mittu Chandilya, who was the former CEO resigned a month ago and was succeeded by Amar Abrol. It also announced the appointment of Ankur Khanna as the chief financial officer and Kiran Jain as the head of Commercial from Air France/KLM. In 2014, Air Asia carried 3.28 lakh passengers in the domestic market which subsequently increased by 329.87% to 14.10 lakh passengers in 2015.

This is significantly lower than most of its peers. In the October to December quarter last year, Air Asia reported an operating loss of R25.65 crore while revenue rose by 232% y-o-y to R208 crore.

For the quarter ending September 31, 2015, airline reported an operational loss of R65 crore.

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First published on: 16-04-2016 at 06:21 IST