AirAsia, Tata Sons airline closer to launch in India after FIPB gives nod

Malaysia-based AirAsia and Tata Sons' proposed airline has moved closer to the licence to fly. The Foreign Investment Promotion Board (FIPB) has cleared the proposal on Wednesday.

Senior government officials confirmed the development to say the proposal satisfies the 49 per cent foreign direct investment (FDI) limit as per the sectoral norms. The promoters have also put up Rs 80 crore as the initial investment.

Significantly, a civil aviation official at the meeting raised a query about the lack of clarity on FDI norms in the proposal. The query was on the language of the Cabinet-approved FDI notification that a foreign airline can buy stake in an existing firm with licence. "The civil aviation ministry representative raised the query on clarity to the representative of the Department of Industrial Policy and Promotion (DIPP), which clarified that the norms are for both new and existing airlines. The orders clarifying the position will be issued soon," said an official.

Neither the ministry of civil aviation nor the DIPP and Department of Economic Affairs had given their written comments on the AirAsia proposal for the FIPB meeting.

AirAsia CEO Tony Fernandes thanked every one after the decision. "Exciting. Thank you all," he said in a tweet.

AirAsia will hold a 49 per cent share in the venture with the Tata Group holding another 30 per cent. The rest is from Delhi-based Amit Bhatia. Analysts also welcomed the clearance saying it will give a boost to the aviation market. "An entry of a new player will enhance competition that will bring in greater efficiency and innovation. The resultant pressure on yields may also lead to consolidation in the next 12-24 months," said Amber Dubey, partner and head-aviation at KPMG.

The proposal by AirAsia, however, still has some distance to go before take-off. The airline company will now have to approach the ministry of civil aviation for a no-objection certificate (NOC).

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