AirAsia takes Tatas back to skies in three-way JV for budget airline

Feb 21 2013, 02:50 IST
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SummaryAlmost 60 years after exiting the aviation business with the nationalisation of Air India, the Tata Group is entering the sector once again.

Almost 60 years after exiting the aviation business with the nationalisation of Air India, the Tata Group is entering the sector once again. Tata Sons, the promoter of the Tata group of companies on Wednesday said it would invest in the airline business in a three-way joint venture, where the majority stake of 49% would be held by Malaysias largest budget carrier AirAsia. Arun Bhatia of Telestra would also be a partner in the venture with 21% stake while Tata Sons would hold 30%.

Tata Sons said that it will be merely an investor in the proposed joint venture and will not have any operating role. However, it will nominate two executive directors to the board of the proposed joint venture company. Further, the proposed airline would not use the Tata brand name.

The development marks the first major decision of the group under its new chairman Cyrus P Mistry.

AirAsia Berhad through its investment arm, AirAsia Investment has submitted an application to the Indian Foreign Investment Promotion Board to seek approval for AAIL to invest 49% into a proposed joint venture together with Tata Sons Ltd and Arun Bhatia of Telestra Tradeplace Pvt Ltd, the Malaysian low-cost carrier said in a statement to the Kuala Lampur stock exchange on Wednesday.

AirAsia said the joint venture will approach the Directorate General of Civil Aviation for an air operators permit once the FIPB approves its application.

The parties have signed a Memorandum of Agreement that details high-level terms with regards to the proposed partnership including the proposal to execute definitive agreements such as a shareholders agreement, a brand licence agreement and other related documents in the event that FIPB approval is obtained, AirAsia said.

As per the arrangement, Tata Sons will pick up 30% stake in the joint venture while Arun Bhatia, who runs aircraft component maker Hindustan Aerosystems, will own 21%.

When AirAsia approached Tata Sons with the proposal for a stake in the venture, we concluded that given its reputed business model, AirAsia could be a relevant and successful service provider in the domestic sector, a Tata Group spokesperson said. The benefits to the domestic market will include AirAsias reputed service, which will further grow aviation as a mode of transport in what is a relatively under served market and employment generation.

In mid-1990s, Tatas had tried to launch an airline with Singapore Airlines but the plan failed to materialise because of regulatory hurdles.

The proposed airline will

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