AirAsia is planning to join forces with Indian conglomerate Tata, to form a new domestic low-cost carrier based in Chennai.
Through its investment arm, AirAsia Investment, the Malaysian airline group has submitted an application to the Indian Foreign Investment Promotion Board (FIPB) for permission to invest the maximum 49% into a new Indian carrier. Tata Sons and Arun Bhatia of Telestra Tradeplace Pvt Ltd will hold the remaining 51%.
“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,” AirAsia’s Group CEO, Tony Fernandes said.
If the joint venture is approved, AirAsia will base its new airline in the southern city of Chennai, from where it will offer connections to India’s second and third tier cities. The move will make it the only major airline based at Chennai. Paramount Airways previously operated from the city, but has not flown since 2010. The move into Indian airspace will be a direct challenge to the country’s domestic LCCs, most notably IndiGo, which, like AirAsia, has placed huge aircraft orders in recent years.
AirAsia already operates flights into India, connecting from either Bangkok or Kuala Lumpur to Chennai, Bengaluru, Tiruchirappalli, Kochi and Kolkata. Any move into international airspace for the new Indian airline however, will have to wait. Indian carriers are forced to operate five years of domestic flights before they are permitted to launch international services.
This is unlikely to be a major concern for AirAsia, however. Fernandes has previously spoken of the major opportunities India offers, with its huge potential pool of domestic travellers.
“India is an exciting market and I have been overwhelmed with the developments of the country recently in terms of promoting air travel,” Fernandes said last month.
AirAsia has ordered a total of 475 Airbus A320 aircraft, of which only 114 have so far been delivered. This makes markets like India, which a population of more than one billion people, hugely attractive to the carrier, in terms of meeting its future capacity growth.
Subject to FIPB approval, the proposed joint venture company will make an application to Indian aviation regulators for an Air Operator’s Permit. This will pave the way for AirAsia India to become the company’s sixth national subsidiary, following Malaysia, Indonesia, Thailand, the Philippines and Japan.
