DGCA gives AirAsia India clearance for take-off

Air Operator’s Permit issued, subject to court verdict on a petition.

By: ENS Economic Bureau | New Delhi | Published: May 8, 2014 1:07 am

Fifteen months after AirAsia India announced its airline joint venture in India, the low-cost carrier got the final nod to start operations from the Directorate General of Civil Aviation (DGCA).

“The Air Operator’s Permit (AOP) has been issued subject to the final high court order on the petition filed by BJP leader Subramanian Swamy,” director general of DGCA Prabhat Kumar told The Indian Express.

Swamy’s petition in the Delhi High Court has termed the approval to the airline illegal on the grounds that the easing of the foreign direct investment (FDI) rule did not cover new airline proposals. AirAsia India, which currently has one aircraft in its fleet, will have to add four more in 12 months from now to keep the licence valid. The airline is likely to start operations in two months from now, as they would require that time before they release their inventory.

AirAsia India, which will launch operations with Chennai as its hub, would focus on connections between smaller cities, a market that is yet to be tapped fully by other domestic carriers. The carrier will operate flights through a fleet of 180-seater Airbus A-320s.

“AirAsia may not be fully prepared for an early launch and should not rush for an early launch. More recruitment has to be done, start-up training, logistics at each operating station to be set, slots have to be approved, schedules to be marketed within their distribution system and possibly other requirements to be addressed. AirAsia will face a very hostile competitive environment and will be severely tested in the market,” said Kapil Kaul, CEO of Centre for Asia Pacific Aviation in India.

AirAsia, which will be the first airline to be launched after the foreign direct investment norms were amended in September 2012, is also the first airline that had to face a public scrutiny before its application was considered.

The final clearance by the DGCA came after it disposed of about 20 objections from various parties, including Federation of Indian Airlines, and Swamy and others.

Many of them had argued that FDI by foreign airlines had been allowed into existing Indian arilines, not for creating joint venture start-ups. They had also claimed that the new airline would disrupt industry equilibrium.

AirAsia India is a three-way joint venture between Malaysia’s AirAsia, Tata Sons and Telestra Tradeplace. AirAsia, through its investment arm, owns 49 per cent of the new airline, with Tata Sons Ltd, the holding company of salt-to-software conglomerate Tata group, owning 30 per cent.

Arun Bhatia, who owns investment firm Telestra Tradeplace, will hold the remaining stake.

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