Air Asia applies for airline JV with Tata Sons

Asia's biggest budget carrier AirAsia Bhd of Malaysia said on Wednesday it is seeking approval to establish a joint venture involving unlisted firms Tata Sons Ltd and Telestra Tradeplace Pvt Ltd.

"We have carefully evaluated developments in India over the last few years and we strongly believe that the current environment is perfect to introduce our low fares," AirAsia chief executive Tony Fernandes said in a statement.

AirAsia, through its investment arm, AirAsia Investment Ltd, intends to own 49 per cent of the new airline with the remaining stake held by the two Indian firms. The venture plans to operate from Chennai and provide domestic flight options, said AirAsia.

The news comes after the carrier denied last year it was bidding for a stake in SpiceJet Ltd, the country's second largest budget airline.

India's aviation industry, which has seen continued losses due to high operating costs and regulatory uncertainty, was opened to foreign investors in September last year. Foreign carriers are now able to purchase up to 49 per cent of local airlines.

No foreign airline has bought a stake in a local carrier since India relaxed investment rules. AirAsia presently flies to four cities in South India as well as Kolkata, in addition to 20 countries across Asia and has indicated it plans to slow its overall expansion elsewhere.

AirAsia X, the long-haul carrier found by Fernandes, last year pulled out of India due to poor demand and profitability.

Mumbai and Delhi were taken off the AirAsia network last year due to a failure to access local distribution lines, according to market researcher the Centre for Aviation (CAPA). "Securing the right local partner could resolve many of the challenges AirAsia has faced in serving India from its home markets," CAPA said in a report.