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AirAsia is investing $14.5 million in a joint venture with Tata Sons Ltd. and another local company to start a low-cost airline in India.
This marks the initiation of a foreign carrier into the domestic aviation sector for the first time.
With a 49 per cent controlling stake, AirAsia will have operational control over the joint venture, while Tata Sons will be the minority investor with a 30 per cent stake.
Tata Sons is the holding company that manages Tata Group, India’s largest industrial conglomerate.
Tony Fernandes, AirAsia CEO has said that his focus will be on the “1 million people that travel by train”.
India liberalised rules for foreign direct investment in the aviation sector in September 2012, whereby the revised policy allows foreign carriers to own up to a 49 per cent stake in Indian firms.
“We bring the expertise in running the airline like the Tatas’ joint venture with Starbucks,” Fernandes said earlier this month.
The third partner, Telestra Tradeplace, will hold a 21 per cent stake.
The airline will be based in the southern Indian city of Chennai and the partners will initially invest $30-50 million in the venture.
The FIPB is a national agency in India that has the power to recommend foreign investment in the country.