Partnership with Tata Sons a marriage made in heaven for us: AirAsia

AirAsia Group CEO Tony Fernandes described the tie-up with Tata Sons as "a marriage made in heaven".

"They know the Indian economy well. They are in most parts of the economy... they have a fantastic reputation and are good partners to be with. They understand partnership very well and I have a good relationship with Ratan Tata and now the new CEO," Mr Fernandes told NDTV Profit in an exclusive interview.

Malaysia's AirAsia and the Tata group on Wednesday announced plans to launch a regional airline in the country. AirAsia Bhd is Asia's largest budget carrier. (Read full story here)

AirAsia is likely to start its India operations by the fourth quarter, provided all approvals are in place, the company said. It plans to invest $30-50 million or over Rs 250 crore initially.

AirAsia will own 49 per cent of the new airline, with Tata Sons Ltd, the holding company of the Tata Group, owning 30 per cent. Arun Bhatia, who owns Telestra Tradeplace, an investment firm, will hold the remainder. Tata Sons, however, will not have an operating role in the proposed new carrier.

"We bring the expertise in running the airline like the Tata's joint venture with Starbucks," Mr Fernandes said.

Shares in budget carrier SpiceJet, India's number 4 operator by market share, fell sharply on Thursday as analysts said AirAsia's entry will intensify competition in an already fierce market. (Read full story)

Mr Fernandes, however, said his company is not looking at the present market. AirAsia's focus would rather be on the 1 million people that travel by train, he added.

"We have stayed away from India because we felt we couldn't get a product that was low enough to stimulate the market...we now have a low cost structure that can stimulate the market with low fares," he said.

India's aviation industry has been plagued by losses due to high operating costs and fierce competition, but AirAsia is confident that it will survive and emerge profitable in the tough environment.

"It's tough everywhere in the world. Nothing has been easy for us...but the appetite for low fares, the appetite to the country's economy a successful low fare airline can bring helps us to deal with all these regulatory hurdles," Mr Fernandes said.

The AirAsia CEO said he will speak with the state governments to lower taxes on Aviation Turbine Fuel (ATF), which has proved to be the biggest hurdle for domestic carriers.

"We will use our good offices to try and impress to the local governments that ATF in the long run causes more damage to the economy than if they had more vibrant travel industry which would bring more positive dollars to the state economy," he said.