AirAsia wants Ratan Tata to head JV

 NEW DELHI: The chairman of AirAsia Bhd, the low-cost airline which is entering India through a joint venture with Tata Sons, has said that he will try to persuade Ratan Tata to become the chairman of the new carrier.

"Mr Tata would be the right person as he would bring tremendous confidence to the regulators, to the consumers and to the government as well. Over the next few weeks we will start serious discussions with Mr Tata on the subject. He has neither said 'yes' nor said 'no' till now," AirAsia Chairman Anthony (Tony) Fernandes said in a conference call on Thursday.

The joint venture between Asia's largest low-cost airline and Indian companies, Tata Sons and Telstra Tradeplace, will be set up with a capital base of $30 million (163.5 crore) with AirAsia giving the JV company its consent for the use of 'Air Asia' name and corporate logos, according to the application to the foreign investment promotion board (FIPB), the nodal agency that clears foreign direct investments in India.

AirAsia has said the board of the joint venture will have six directors comprising two nominees each from it and Tata Sons and one representative from Telstra Tradeplace, the other Indian partner. There will be an independent director on the board who will also be the non-executive chairman of the company.

Tata Sons, which had shown keen interest in acquiring Air India along with Singapore Airlines during the NDA regime in 2000, has nominated R Venkatramanan, former executive assistant to Ratan Tata, and Bharat Vasani, the chief legal counsel of the Tata group, on the board of the new joint venture. AirAsia will be represented by Dr Anthony Francis Fernandes and Dato' Kamarudin Bin Meranun, who are among the largest shareholders in AirAsia Bhd. Arun Bhatia, a close relative of steel czar LN Mittal, will represent Telstra Tradeplace on the board of the newly formed company that will be named AirAsia (India) Pvt Ltd.

The joint venture company has told the FIPB "it will provide low-cost scheduled passenger airlines services operating single-aisle narrow-body aircraft flying under four hours initially in domestic route in India and at a later date on international routes, if permitted by the government of India."

As part of the joint venture agreement, AirAsia shall play the role of a strategic partner in the business and will provide necessary support and knowhow, which will include infrastructure to the JV company, technical and business training to the staff of the JV, training and assistance for preparing operating procedures for the business and support for leasing of aircraft on most favoured terms.

This is the first investment in India's aviation space after the government relaxed norms for foreign direct investment. In September 2012, the government allowed foreign airlines to invest up to 49% in Indian aviation companies operating scheduled and non-scheduled air transport services, subject to prior approval from the FIPB and DGCA.

In the concall, Fernandes said price would be the airline's biggest differentiator as the company has mastered the low-cost model but said AirAsia's entry is unlikely to put any Indian carrier out of business. "Businesses put themselves out of business, not competition,'' he said.

He said AirAsia has been interested in India for a while and is optimistic about doing business in the country. "We don't see any difficulties," he said. The company will start operations with 3-4 A-320s and will scale up quickly to focus on domestic operations because of its growth potential. Indian partners will play a big role, especially the Tata Group, which has many interfaces with the Indian consumer that can be leveraged, he said.