AirAsia Bhd. (AIRA) won approval in India to form a joint venture, the country’s first foreign investment proposal after airline ownership rules were eased.
The airline venture, which includes the Tata group, was approved by the Foreign Investment Promotion Board and will now need to get a license from the Directorate General of Civil Aviation, Economic Affairs Secretary Arvind Mayaram told reporters in New Delhi today. AirAsia, which will own 49 percent of the venture, will initially invest about 800 million rupees ($14.6 million) in the airline operator, he said.
The approval comes as carriers in Asia’s third-largest economy seek global equity alliances to raise funds needed to pay for expansion. Jet Airways (India) Ltd. and Etihad Airways PJSC are holding talks for an investment deal in India’s biggest carrier by market value after ownership rules were eased in September.
The aviation regulator may take as many as eight months to approve the permit as it involves steps including inspection of aircraft proposed to be deployed, according to a civil aviation ministry official, who declined to be named citing rules.
Shares of AirAsia, Asia’s biggest budget carrier, gained 1 percent to 2.96 ringgit at the close in Kuala Lumpur.
AirAsia along with partners Tata Sons Ltd. and Telestra Tradeplace Pvt. will invest $9 million within 14 days of winning approval, according to the application submitted to the investment panel. The entry of the region’s biggest discount airline will increase competition for Jet Airways that conceded domestic market leadership to budget airline IndiGo last year.
The new airline will operate from Chennai in south India and will provide services to smaller cities in the country, AirAsia said in a statement Feb. 20. Tata Sons will hold 30 percent in the venture and Telestra 21 percent.
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