AirAsia, Tata Sons to Form India Airline JV

[VT-ASM]

Source : Wall street journal..

Let's hope this venture sees the light of the day

Kuala Lumpur — AirAsia Bhd 5099.KU -1.52%, the largest discount carrier in Southeast Asia by fleet size, said Wednesday it plans to partner Tata Sons Limited and Arun Bhatia of Telestra Tradeplace Pvt. Ltd to set up a low-cost airline in India.

The proposed joint venture comes after a September decision by the Indian government to open the aviation sector up to direct investment from foreign carriers. The three parties have signed an initial agreement and AirAsia has applied to the government to hold 49% of the proposed Indian joint venture.

[blackbirdsr72]

AirAsia applies for Indian airline JV with Tata Sons and Telestra Tradeplace


MUMBAI: Tata Sons , India's largest conglomerate and Tony Fernandes

founded Air Asia Bhd, Southeast Asia's biggest low cost airline
plan to start an airline in India, after the country eased rules to allow overseas carriers to invest upto 49%.

An official for the Tata group said the its contribution to the joint venture would be merely as a "financial investor." "It is very clear that they (Air Asia) would be running the operations," the Tata official said. In an interesting twist, the joint venture will have a third partner Arun Bhatia of

Telestra Tradeplace Pvt, the airline informed the stock exchange in Kuala Lumpur.

Bhatia's son Amit is Lakhmi Mittal's son in law. Amit Bhatia and Air Asia's chief Tony Fernandes are also co owners of British soccer team Queens Park Rangers.Air Asia filed a request with the FIPB today. Officials in the know say that the airline will be on a 100% low cost model, Air Asia will acquire they are allowed to pick up (49%).

A few hours before the announcement to stock bourses, Tony Fernandes tweeted: "AirAsia will be making a significant step in our journey of being an ASEAN airline. Very proud day for me."

Air Asia's affiliates are Thai AirAsia, Indonesia AirAsia, Philippines'

AirAsia and AirAsia Japan. AirAsia Group is the largest low-cost carrier in Asia in terms of fleet size and number of passengers carried. Air Asia going to follow same strategy in India.

[blackbirdsr72]

Certainly good for the sector. Tony Knows the potential of the Indian Market.
when 2 million Tickets sold out on 1 single day (Jet Airways, Spice and Indigo on 20th Feb 2013) what more he wants to pich his Low cast Carrier In.....

Regards

[Travelman Africa]

more of the same

the two main share holders have zero aviation background - Just like VJ

call me sceptical but is this more of the same?

Only one commercial airline in India made a profiit last year, and the Government is restricting the amout of aircraft they can import this year.

bravo !

[superdunkaroos]

the two main share holders have zero aviation background - Just like VJ

call me sceptical but is this more of the same?

Only one commercial airline in India made a profiit last year, and the Government is restricting the amout of aircraft they can import this year.

bravo !

But the difference being both parties concerned in this case have good business sense, something that cannot be said about Mallya.

Plenty of examples of Individuals not related to aviation doing really well in the field, so that should not be a cause for concern.

[Travelman Africa]

which examples

Sorry - Which examples in Indian Commercial Aviation are they?

[VT-ASM]

@ Travelman Africa

the three protagonists of this story are
1) Air Asia
2) Tata sons : JRD Tata is regarded as the father of the Indian aviation it was he who started Air India and took it to great heights..It was only after the nationalisation of air transport policy of the Indian govt., did the begining of the end of Air India start. So if there is one member that has the most experience in aviation, It is the Tata's. With the Tatas you can expect two qualities in the JV........... Fair play and quality.
3) Telestra : I doubt if this member has any aviation background

[blackbirdsr72]

Telestra : I doubt if this member has any aviation background

Telestra Tradeplace is an investment holding company of Arun Bhatia and one of its group companies is Hindustan Aerosystems Pvt Ltd which manufactures and supplies precision components for the aerospace industry.

Bhatia's son Amit serves on the Board of Directors at Queens Park Rangers Football Club in the UK alongside Tony Fernandes, the founder of AirAsia.

Amit is married to Vanisha Mittal, the only daughter of steel tycoon Lakshmi Mittal, one of the Richest Man on the Planet.

[cyrilroy21]

Tata's are in the aviation business at present with the their TAJ AIR LTD brand part of the TAJ hotels group
They have two Falcon 2000 and a Piaggio 180

But from the relevant news articles it seems that TATA will only be a financial investor and wont take part in the operations of the airline

The only question that remains to be seen is will Ajith Singh approve the entry of a new Low Cost Operator.......
He is already very reluctant in letting IndiGo and GoAir add capacity

[blackbirdsr72]

And that too when Indigo plans a regional turbo fleet... Maybe Mr Singh will be reluctant but Second time refusal to Tatas may be difficult.

[contractpilot69]

Whether Singh allows this venture to be set up or not depends on how much he is 'obliged' by AI and possibly other carriers who feel threatened. Tata Sons and their new friends can try to get their way but I'm sure that the other airlines are going to hold a 'secret meeting' to tackle them. It's a subtle interplay of dirty politics...

[desertopsguy]

The 2 main shareholders have zero background in aviation? AirAsia is a major shareholder with a 49% stake and has all the experience required, what more could a new venture airline ask for? The other 2 are just investors with Tata's spokesman saying that they intend to let AirAsia run the show - that is how it should be.

The danger with a new venture in India is not whether the management has the smarts to run the company but whether they can prevent the unions that are so pervasive in Indian airlines from forming. They are company killers and preventing these self-serving cancerous groups from gaining a foothold will be essential. That, together with dealing with the infamous Indian corruption and crooked civil servants is going to be a full time job.

Like the other AirAsia entities, the brains of the organisation will remain in KUL and Jakarta and the Indian AOC will likely be ruled from there, as it should be. It's an interesting model and keen airline watchers around the world will be paying close attention to how this unfolds.

Any idea on routes? Start with domestic I would imagine.

It shouldn't be hard to find crews given Kingfisher's recent demise.

[cyrilroy21]

Tata also has partnership in the airline catering business with the TajSATS venture
I guess it would be no surprise from whom Air Asia India will source their catering
Even the tea and coffee on board will be provided by TATA beverages

Call centre for booking of tickets and customer queries might be handled by Tata Consultancy Services BPO arm as well as design , hosting and maintenance of the airline website and all associated IT services will be maintained by TCS

Ground support vehicles can be provided by TATA motors

Communication requirements like Internet connections , telephone lines etc can be provided again by TATA


I don't think Tony Fernandez could have found a better partner to start an airline in India


Oh and MOCA has allowed more imports of aircraft this year as required by IndiGo , Jet Airway , Spice , GoAir etc

Aviation ministry gives nod for import of 20 aircraft - Indian Express

[blackbirdsr72]

As speculations are soaring on the issue Government feels a Rethink on the go ahead on the deal. According to the sources The FDI was meant to boost the Investment in Indian Carriers and not the foreign carriers take advantage of the Indian Market conditions.

According to a central Minister the Government will seriously consider the Proposal and the permission will be granted only after considering several facts. I can assure that this will not be a smooth sail.

Etihad Jet deal is said to be delayed with the Interference of Mr Mallya promising Etihad the servicing of Debts by UB Group and offering the controlling share, with an Investment of 500 Crores by his side.

[clearblueskyy]

The Tata's entering the aviation market is a fresh ray of hope for a much needed boost in the aviation sector. Hopefully ,candidates will now get recruited on merit basis, unlike many underground practices going on elsewhere in this country.
I wish Air Asia all the best in their new venture - you couldn't have picked a better partner.

[blackbirdsr72]

New Delhi: On a day when Ratan Tata met Civil Aviation Minister Ajit Singh, presumably to discuss setting up an airline that the Tatas propose with AirAsia, it became apparent that the new budget airline will have to face several hurdles before it sees the light of the day.

Firspost spoke to a cross section of senior government officials and the consensus view was this: the new airline may get an in-principle nod from the Foreign Investment Promotion Board (FIPB) as early as 6 March but it is unlikely to get either the scheduled operator license (SOP) or permission to even establish an airline from the Ministry of Civil Aviation in a hurry. In short, AirAsia’s Tony Fernandes and Tata should be prepared for long procedures and many rounds of the ministries concerned in the summer of 2013.

AirAsia has already submitted a proposal to the FIPB in which it has clarified Tata Sons and the Bhatias will together own 51 percent majority stake in the new airline while AirAsia itself will own only 49 percent. Through this airline, the Tatas are seeking a third entry into the aviation sector, having failed the last two times. So it comes as no surprise that the new airline will not be granted approval anytime soon.
One senior government official we spoke to said it would have been easier had AirAsia taken stake in an existing airline instead of wanting to begin a new one.

“Now that a new airline has to be set up from scratch, there are a number of things we will need to examine. These include source of funds, how many aircraft, which kind of aircraft, which routes does this airline want to operate. Then, we will need to examine the constitution of its board of directors and whether the airline will be run by Indians. We don’t even have a business plan from AirAsia till now.”

Another official made it clear that while FIPB can approve the proposed joint venture company, it was for the Director General of Civil Aviation (DGCA) to provide it with a scheduled operator permit (SOP). “What if the FIPB approves the JV but then it fails to get the license? This is actually a chicken and egg kind of situation where the various arms of the government are a little confused over which one should grant this proposal clearance first.”

The senior official quoted earlier made it clear that the new airline, if and when it is allowed to take to the skies, will be barred from several things:
1) It cannot use the name AirAsia in India, the new airline will need to have a new name, even if it is AirAsia India.
2) It cannot fly overseas, in keeping with existing norms which require five-year mandatory domestic operation before flying abroad.
3) Since it will not be allowed overseas operations, there is no way the new airline will gain access to cheaper jet fuel – something which could be critical to its operation as a budget carrier in the cut throat Indian market.
So this is how it works: FIPB may, if it is satisfied, clear the AirAsia proposal in-principle at its meeting on Wednesday. Thereafter, the action will shift to the Ministry of Civil Aviation where the new company will have to first fulfill criteria like having five aircraft within one year to even become eligible for applying to DGCA for a flying permit.

The officials quoted earlier also made it clear that despite proclamations of AirAsia about its ultra low cost model in India, they do not see how its cost of operation would be any lower than the Indian LCCs such as IndiGo and SpiceJet.

“So there is no question of AirAsia distorting the market with ultra cheap fares. Anyway, the Competition Commission of India will look into any predatory pricing,” they warned.

AirAsia plans to invest as much as $60 million initially in the venture. India is one of the fastest growing aviation markets in the world but high fuel prices and operating costs have also made it one of the most challenging. Last year, Indian airlines posted combined losses of $2 billion.

Tata meets Ajit Singh but new airline far from taking to skies | Firstpost

[blackbirdsr72]

There is this story of two cats fighting over a piece of cake. As they fight, a monkey appears on the scene and offers to divide it equally. He first slices it into two, but one slice appears bigger. He bites off a bit from the bigger piece, and now the smaller piece appears bigger. Whenever once piece of the cake appears bigger, the monkey himself takes a bite, and soon there is no cake left for the two cats themselves.

The story of Indian aviation is beginning to resemble this story of cats losing out to the monkeys.

The sector has been run into the ground by players who were so busy fighting that they used (or allowed) the monkeys – usually politicians, the regulators and canny global airlines – to destroy the cake itself.
Civil Aviation Minister Ajit Singh’s comments on the AirAsia proposal to start a domestic airline with 49 percent stake (with the Tatas as financial investors with a 30 percent) confirms the suspicion that ministers have largely been playing monkeys to the resident and non-resident cats of the aviation sector.

Singh told The Economic Times: “I’m not opposed to the (AirAsia-Tata) alliance… The idea of the policy was to increase investment in Indian carriers. It would have been nice had the Tatas, with their kind of resources, started a new airline.”

This statement reeks. Look at what he is saying. “I’m not opposed…” to the AirAsia alliance. Is a Civil Aviation Minister merely not supposed to be “opposed” to offers of investment in his sinking sector or positively welcome them? When the policy allows a foreign airline to take up 49 percent in a domestic airline, why should he even think of opposing it?
We shall let that pass. Singh says the “idea of the policy was to increase investment in Indian carriers.” Once again, should a minister be concerned about giving aviation a push or giving specific promoters, whether Indian or foreign, a push? Even assuming you wanted Indian aviation reserved for Indians, is Ajit Singh unaware that the old policy, and even the new one, was entirely intended to keep specific Indian investors (like the Tatas, with the ability to bankroll a difficult sector) away?

Today, India’s aviation cats are in the process of being swallowed or sidelined by the global monkeys for the simple reason that the cats were too busy trying to trip one another, with the aid of friendly monkeys in the ministry and the regulatory agencies.

Cat No 1 in India has always been Jet Airways. And Cat No 2 is a combo of Indian Airlines and Air India, now merged. In the second half of 1990s, the Civil Aviation Ministry under CM Ibrahim made a curious policy under the influence ofCat No 1.
Ibrahim knew that no Indian promoter had the cash to pay for the high costs of running an airline. So he said foreign parties can invest in domestic airlines. But, horror of horrors, this simple policy attracted Singapore Airlines along with the Tatas.
So what did Cat No 1 do? He got the policy changed by Monkey No 1 to ensure that no foreign airline can invest in an Indian airline. That Cat No 2 himself needed to abandon his own foreign equity did not matter. If an airline can’t invest in an airline, do we expect grocers to do so? Cat No 1 was too smart for his own good.

Cat No 2 was the only airline with the ability to counter Cat No 1. This is where another simian came into the picture to help Cat No 1. Civil Aviation Minister Praful Patel saddled Cat No 2 with so much debt that it almost went under.

But Cat No 2 was able to get Monkey No 2 off its back by virtue of being a public sector company. And, in any case, there were simply too many cats in the fray to make the sector viable only for Cat No 1.

Meanwhile, Cat No 1 had swallowed Cat No 4 (Sahara), and Cat No 3, a.k.a. Kingfisher, was having indigestion after swallowing Cat No 4 (a.k.a Air Deccan). Only Cat No 5, SpiceJet, which had his own godfathers, seemed reasonably safe.

The entire cat family was in trouble by 2011, which is why all monkeys were in a panic. If all cats went down the drain, there would be no cakes for them either.

But then, they had to pretend to help all the cats while making sure some of them went down the tubes. Hence the delay in allowing foreign airlines to pick up 49 percent equity in domestic airlines. Cat No 3 had to be packed off before allowing foreign airlines to help Cat No 1 or Cat No 5.
Unlike Cat No 2, Cat No 3 did not take basic precautions on debt and bank guarantees. He has been sent to the cleaners. In any case, Cat No 3 showed more interest in printing calendars with bikini-clad girls than running an airline.

Today, the cats of Indian civil aviation have more or less given themselves over to the monkeys.

To get cash, Cat No 1 has to sell its soul to a foreign airline, Etihad. A Business Standard report today says Etihad is paying hard to get and is insisting on being allowed to raise its stake to 49 percent at the appropriate time and also sought operational control of Jet. In short, Cat No 1 has two options: lose the airline to Monkey No 3, or find another source of cake.

The moral of the story is simple: in trying to keep the whole cake to themselves, India’s cats have lost out to the monkeys. Instead of Tatas, Ajit Singh is going to get a foreign airline, AirAsia, into domestic aviation. And Jet may yet lose out to Etihad.

Never mind, that even Jet and IndiGo, which account for over half the Indian market, are already semi-foreign, since they are owned by non-resident Indians (NRIs), not resident Indians. They will be joined by a third NRI, Tony Fernandes of Air Asia. The only two purely Indian ops left are SpiceJet and GoAir.

In trying to keep Indian aviation Indian, and in trying to edge rival Indians off the tarmac through crony capitalist lobbying, both promoters and policy-makers have lost out. The Cats have lost out to the Monkeys. Finally.

AirAsia-Tata alliance: How the Cats lost out to the Monkeys | Firstpost

[desertopsguy]

Cats, monkeys, whatever you want to call them, there was a comment earlier about taking a stake in an existing carrier... that is not really an attractive proposition for a well run, profitable airline that has its own way of doing things.

The airline industry there is, overall, not well run.

AirAsia are well able to turn their backs on a steaming pile when they see one and have already done so at least once in the past when they walked away from a bunch of crooks in Vietnam and the lost cause that was Batavia. The same will happen in India if the value equation doesn't present itself as being worth it, so those cake eating monkeys will only get so far but am pretty sure they won't be eating any of Tony Fernandes' except maybe for the bit he wants them to have.

At the end of the day it will be Chennai's loss, not AirAsia's...

[cyrilroy21]

Tony Fernandes selects AirAsia India CEO - Livemint

[blackbirdsr72]

Air Asia hits RoadBlock

MUMBAI: A day before the FIPB meeting to look into AirAsia's proposed joint venture to launch a new airline, the aviation ministry is understood to have opposed the plan saying the new FDI rules are meant for existing carriers only.


The Foreign Investment Promotion Board (FIPB) is slated to take up Air Asia's JV proposal with the Tatas and Arun Bhatia. The ministry is understood to have expressed its reservations in a note to FIPB stating that the new company should have been formed before seeking the government's nod.

The ministry's opposition comes amid reports in a section of the media that AirAsia Group CEO Tony Fernandes was keen to kick off his airline in the country as early as May-June instead of his earlier plans towards the year-end.


It can be noted that a day after the AirAsia announced its 49:30:21 joint venture with the Tatas and Telestra Tradeplace promoted by Delhi-based Arun Bhatia late last month, aviation minister Ajit Singh had expressed his displeasure saying he would have been happy had the Tatas chosen to launch its own airline.

Earlier, ministry sources said FDI rules allowing up to 49% investment by a foreign airline in domestic carriers are for existing airlines and not for a new company.

Over the weekend, Tata Group patriarch Ratan Tata, who is an avowed aviation buff and whose group is credited with bringing the first airline into the country way back in October 1938, met Singh, for reportedly discussing the JV plan.

In a related development earlier in the day, Fernandes said he had chosen the head for the JV.

"I have selected the CEO for AirAsia India. A very smart boy from the South, Madras (Chennai). An amazing CV. Will impress all...," Fernandes tweeted without naming the person.

Late last month, Air Asia's investment arm AirAsia Investment had moved an application with FIPB seeking approval for the JV in which AirAsia would hold 49 per cent stake with the rest being held by Tata Sons (30%) and Arun Bhatia's Telstra Tradeplace holding 21%.

Fernandes had recently said the new airline would be based in Chennai and in the initial phase would concentrate on destinations in the south where AirAsia already operates and would also focus on providing connectivity to small towns.

AirAsia's plan hits aviation ministry roadblock - The Times of India