India’s foreign investment promoters announced on Wednesday that they approved a joint venture between Malaysia's AirAsia BhD (5099.KU) and India's Tata Sons Limited. The approval will allow the Malaysian budget carrier to seek official permission to operate in India, the world’s second-fastest growing economy, which is notable for its booming demand for regional airline service.
The merger between AirAsia and Tata Sons, the primary asset of India’s largest industrial conglomerate, Tata Group, marks the first foray into India’s airline sector by a foreign company following a move by Delhi in September to increase the limit that a foreign aviation company can hold in a local joint venture from 24 percent to 49 percent.
The move is part of a broad series of economic reforms by India's prime minister, Manmohan Singh, to liberalize the country’s economy and spur much-needed economic growth.
The deal also includes participation by Indian businessman Arun Bhatia, who owns investment holding company Telestra Tradeplace Pvt.
Bhatia and Tata Sons, which owns Jaguar Land Rover, will limit their participation to administrative duties as per the deal's terms.
The venture's actual air travel operations will be handled by AirAsia's outspoken CEO, Tony Fernandes, who has been Tweeting about the deal excitedly, and the team of qualified Indian talent he assembles as he builds the next segment of his growing Asian regional-carrier empire. The new company will be called AirAsia (India) Pvt. Ltd.
Fernandes said late last month that operations would begin in the fourth quarter of the year with three or four Airbus A320 aircraft, according to Reuters.
The entry of AirAisa into the Indian market for budget regional air service comes as Mumbai-based Kingfisher Airlines Ltd. struggles with financial losses, which grounded its operations in October. AirAsia currently has a fleet of 118 planes, and it has more than 350 on order.