India’s foreign investment promoters announced Wednesday they approved a joint venture between AirAsia BhD (5099.KU) and Tata Sons Limited, opening the way for the Malaysian budget carrier to seek official permission to operate in the world’s second-fastest growing economy with a booming demand for regional airline service.
The merger between AirAsia and 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 from 24 percent to 49 percent the amount a foreign aviation company can hold in a local joint venture.
The move is part of a broad series of economic reforms by the administration of 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, would limit their participation to administrative duties.
The actual air travel operations would be handled by AirAsia under its outspoken CEO Tony Fernandes, who has been Tweeting excitedly about the deal and the pool of qualified Indian talent to pick from as he builds the next segment of his growing Asian regional-carrier empire. The new company would be called AirAsia (India) Pvt. Ltd.
Fernandes said late last month 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 that grounded its operations in October. AirAsia currently has a fleet of 118 planes with more than 350 in order.
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