AirAsia entry a positive move: experts

AirAsia last week received regulatory approvals from the Foreign Investment Promotion Board (FIPB), for investing around Rs800mn in the venture and hold up to 49% stake.

IANS/New Delhi

The decision of Malaysian budget carrier AirAsia to launch a new airline in partnership with the Tata Group in India will help the domestic aviation industry grow and get better deals to passengers, say sector watchers.

“It is a very positive move for the industry and the passengers. More players would help in development of the industry which is at a very nascent stage,” Ankur Bhatia, chairman of the Confederation of Indian Industry’s national committee on civil aviation, and executive director of Bird Group, said.

The joint venture will represent the first foreign company to try to capture the rising demand in India’s aviation sector. Currently, there are six airlines in the country - Air India, Jet Airways, Jet Lite, SpiceJet, IndiGo and GoAir. IndiGo is the leading passenger carrier with 27.3% of market share as of November last year, followed by Air India at 20.7% and SpiceJet at 19.5%.

“For passengers, a new airline will mean better fares and services. This is not the first time that a new airline will start and the existing airlines would know how to fend for themselves,” Bhatia said.

AirAsia last week received regulatory approvals from the Foreign Investment Promotion Board (FIPB), for investing around Rs800mn in the venture and hold up to 49% stake.

The company plans to start an airline from Chennai which will focus on providing connectivity to smaller cities by the end of 2013.

The new airline venture will be in partnership with the Tata Group and Arun Bhatia-promoted Telestra Tradeplace.

Aviation analysts say that foreign investments in forming new airlines will not impact the chances of existing airlines in attracting foreign capital.

“If the stakes are attractive in existing airlines and an opportunity exists, foreign carriers may seek to buy,” said Rajiv Chib, associate director of PricewaterhouseCoopers. The experts also say that there will not be any real threat to the existing airlines by AirAsia’s entry as the new airline will focus on tier II-III cities.

“In the short run, there is no real threat to existing players as AirAsia plans to start with a small fleet. However, other Indian passenger carriers would sooner or later need to focus on the emerging traffic from tier-II, tier-III cities,” Sharan Lillaney, aviation analyst at broking firm Angel Broking, said.

Lillaney added that the FIPB approval to AirAsia has cleared the air on the government’s policy on inviting foreign capital into the sector.