MUMBAI:
AirAsia plans to launch an Indian airline in partnership with a local promoter
as the desire to earn share in one of Asia's biggest aviation markets trumps
fears of a hypercompetitive industry full of bureaucratic obstacles.
Two people close to the development said Asia's largest budget carrier is exploring options to set up a company that will be majority owned by an Indian promoter, preferably a well-known business group.
AirAsia will hold 49% in the venture that will apply for an aviation licence. The Malaysian carrier has broached the issue with the VideoconBSE 0.64 % Group and the talks are at a preliminary stage, one person said.Venugopal Dhoot, the chairman of the Videocon Group, confirmed that they had been approached by the airline.
"They had approached us. These were preliminary discussions. There's nothing I can say now," Dhoot said. An AirAsia spokesperson in Malaysia declined to respond to an ETquery on the matter.
Tony Fernandes, the promoter of AirAsia, is a flamboyant businessman with a taste for Formula Oneracing and football. He built AirAsia into Asia's largest budget carrier and stunned the aviation industry in 2011 by ordering 200 A320 NEOs, breaking the record set by Delhi-based IndiGo that had ordered 180 aircraft for $15.6 billion.
Though initially not very enthusiastic about the liberalisation of FDI in aviation in India, he is believed to have changed his mind recently. He tweeted after a visit to Mumbai that he is feeling good about India, which he says will be a big market for AirAsia like China.
Fernandes is the owner of Queen's Park Rangers (QPR), which currently languishes at the bottom of the English Premier League and which he says is his biggest worry. "QPR keeps me awake at night, not the aviation business," he told the Financial Times of London recently.
Fernandes' interest in India adds an intriguing twist to the scrappy battle for market share in India between low-fare airlines IndiGo and SpiceJetBSE -0.44 %, the state-owned Air India, and Jet AirwaysBSE -0.95 %, which has full-service and low-fare options. Heavy debt and a cut-throat price war had savaged the balance sheets of many airlines and forced the once-high-flying Kingfisher AirlinesBSE 2.38 % to down shutters. The government intervened by allowing foreign carriers to hold up to 49% stake in local airlines and bailing out Air India.
AirAsia's entry would further stir up the industry and probably trigger consolidation by forcing some companies to come together in some way.
Despite potential, Indian aviation is hobbled by high taxes, an intrusive government and a plethora of rules and regulations that stifle growth, industry executives say. AirAsia may be awed by the growth prospects, but it will have to negotiate its way through a labyrinth of rules, regulations and taxes.
Tim Clark, president of the Dubai-based Emirates Airlines, told ET in an interview last year that India is a difficult environment to operate in and the carrier is not happy with the 49% ceiling.
"Our point of view on this has been that what are you buying into? Would you buy into the balance sheet of Kingfisher or Air India? If the Indian government is having a tough time managing its carriers, how can we run them? Buying into Indian airlines means putting equity into them first.
Then one has to have a business plan, making which is not a difficult thing. But it is its implementation in the Indian environment which is a challenge," Clark had said.
The government is also not very keen on giving new aviation licences. "Overall, the environment for the aviation industry does not look good. All existing airlines are losing money heavily. Where is the scope for another airline?," a top civil aviation ministry official had told ET some time ago.
Two people close to the development said Asia's largest budget carrier is exploring options to set up a company that will be majority owned by an Indian promoter, preferably a well-known business group.
AirAsia will hold 49% in the venture that will apply for an aviation licence. The Malaysian carrier has broached the issue with the VideoconBSE 0.64 % Group and the talks are at a preliminary stage, one person said.Venugopal Dhoot, the chairman of the Videocon Group, confirmed that they had been approached by the airline.
"They had approached us. These were preliminary discussions. There's nothing I can say now," Dhoot said. An AirAsia spokesperson in Malaysia declined to respond to an ETquery on the matter.
Tony Fernandes, the promoter of AirAsia, is a flamboyant businessman with a taste for Formula Oneracing and football. He built AirAsia into Asia's largest budget carrier and stunned the aviation industry in 2011 by ordering 200 A320 NEOs, breaking the record set by Delhi-based IndiGo that had ordered 180 aircraft for $15.6 billion.
Though initially not very enthusiastic about the liberalisation of FDI in aviation in India, he is believed to have changed his mind recently. He tweeted after a visit to Mumbai that he is feeling good about India, which he says will be a big market for AirAsia like China.
Fernandes is the owner of Queen's Park Rangers (QPR), which currently languishes at the bottom of the English Premier League and which he says is his biggest worry. "QPR keeps me awake at night, not the aviation business," he told the Financial Times of London recently.
Fernandes' interest in India adds an intriguing twist to the scrappy battle for market share in India between low-fare airlines IndiGo and SpiceJetBSE -0.44 %, the state-owned Air India, and Jet AirwaysBSE -0.95 %, which has full-service and low-fare options. Heavy debt and a cut-throat price war had savaged the balance sheets of many airlines and forced the once-high-flying Kingfisher AirlinesBSE 2.38 % to down shutters. The government intervened by allowing foreign carriers to hold up to 49% stake in local airlines and bailing out Air India.
AirAsia's entry would further stir up the industry and probably trigger consolidation by forcing some companies to come together in some way.
Despite potential, Indian aviation is hobbled by high taxes, an intrusive government and a plethora of rules and regulations that stifle growth, industry executives say. AirAsia may be awed by the growth prospects, but it will have to negotiate its way through a labyrinth of rules, regulations and taxes.
Tim Clark, president of the Dubai-based Emirates Airlines, told ET in an interview last year that India is a difficult environment to operate in and the carrier is not happy with the 49% ceiling.
"Our point of view on this has been that what are you buying into? Would you buy into the balance sheet of Kingfisher or Air India? If the Indian government is having a tough time managing its carriers, how can we run them? Buying into Indian airlines means putting equity into them first.
Then one has to have a business plan, making which is not a difficult thing. But it is its implementation in the Indian environment which is a challenge," Clark had said.
The government is also not very keen on giving new aviation licences. "Overall, the environment for the aviation industry does not look good. All existing airlines are losing money heavily. Where is the scope for another airline?," a top civil aviation ministry official had told ET some time ago.
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