The new contender
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Just two months back, outgoing chairman Ratan Tata had unambiguously stated that the Tata group was unlikely to get into the Indian aviation sector because of "unhealthy competition". Recalling the group's proposal for a tie up with Singapore International Airlines (SIA) for a domestic carrier in India in the mid-1990s, the Tata group patriarch was quoted by a news agency as saying that "it is a different sector today than it was at that time".
So Wednesday's announcement by AirAsia Berhad — Asia's leading low-cost carrier group — that it had submitted an application with the Foreign Investment Promotion Board for approval to invest 49 per cent in a proposed joint venture with Tata Sons and Arun Bhatia of Telestra Tradeplace Pvt. Ltd, did come surprise the street. Tata Sons, the group clarified later in the day, will be a minority shareholder with a 30 per cent stake. Interestingly, the announcement by AirAsia comes just a day after domestic carriers announced an aggressive churn in fare offerings. AirAsia, in all respects, is a regional aviation biggie that could strongly impact the market dynamics in the Indian market. Having ferried 33.83 million passengers in 2012 at an enviable load factor of 80 per cent, the AirAsia Group currently consists of five short-haul carriers in four ASEAN countries as well as Japan, along with long-haul carrier AirAsia X. According to a January 30 CAPA analysis, AirAsia is projected to spend most of 2013 growing in its five home markets and expanding international services to some strategic non-home markets.
The India entry plan comes at a time when congestion in Singapore — AirAsia's largest non-home market — is prompting the carrier to focus more on other markets. Hitherto, AirAsia has struggled to make inroads here since the group launched its first Indian route, Kuala Lumpur-Tiruchirapalli, in December 2008, partly because of its inability to access local distribution networks. India has been the only market in Asia where AirAsia as seen a decrease in capacity over the last year. Securing the right partner could resolve many of the challenges AirAsia has faced in serving India from its home markets of Malaysia and Thailand. The JV with the Tatas could herald a new beginning for AirAsia, apart from transforming the Indian aviation space into a possible three corner fight, with Jet Airways on one side and the IndiGo-SpiceJet combine on the other.