The Birth of AirAsia India Indias Newest Budget Airline

Tuesday, 19th March 2013 at 02:17am

AirAsia's top honcho, Tony Fernandes, must be grinning from ear to ear following the approval of the Indian government of his new venture in the world's second fastest growing and Asia's third largest economy.

Tony Fernandes has recently struck a deal with Tata Group, India's largest conglomerate, in a joint venture to create a local subsidiary of Asia's largest and pioneering low-cost airline in India.

To be called AirAsia India, it will be the country's newest carrier with the participation of a foreign airline following the easing up of FDI policy in the country's aviation sector in September last year. AirAsia owns 49% of the new airline while the rest is shared between Tata Group and Arun Bhatia

Tata Group was not new to aviation business as it used to operate the first commercial airline in India in 1932 until its takeover by the government in 1953. AirAsia, meanwhile, was a government-controlled airline and was heading for dissolution in 2001 due to mounting debts when Tony Fernandes rescued it for a token sum of one ringgit.

Today, AirAsia has grown to become Asia's largest budget carrier by any measure including the most number of fleet, the most routes served and the most passengers flown.

The recent approval of the new venture signals the realization of a liberalized aviation industry in India which used to be heavily controlled by the government, banning foreign airlines or foreign companies, for that matter, to own more than 24% of an airline business venture. The FDI policy had been amended since September of last year, allowing foreign capitalists to own up to 49% of the venture.

The new venture will enable the Malaysia-based low-cost carrier to penetrate into the domestic air travel market in India whose growth has been hampered by frequent flight cancellations, costly airfares, among others. All, but one local airline in India, have piled up losses for the last five years due to several factors including high airport charges, stiff competitions and skyrocketing jet fuel prices, which are among the highest in the world.

This will also mark the return of Tata Group to the aviation business since the acquisition of the government of its airline business, Tata Airlines, in 1953.

Obviously, AirAsia will assume the actual operations of the new airline owing to its extensive and current experience in the industry.

AirAsia India is expected to commence operations in the last quarter of this year with the initial fleet of 3 to 4 Airbus A320 aircraft.

By: Pete Lee.