INDIA: AirAsia Bhd, the Malaysian airline that plans to launch a low-cost carrier in India sometime this year in partnership with the Tatas, has won the first round against its future rivals.
The DGCA on Friday rejected incumbent carriers' objection to grant an air operator's permit to AirAsia India, denying their claim that the new airline would disrupt industry "equilibrium".
Also, the apex court has refused to interfere in the process to issue the licence. BJP leader Subramanian Swamy and the Federation of Indian Airlines lobby group had approached the court, arguing that the current rules on foreign direct investment in the sector don't allow the setting up of a new airline. ET reported on February 20 that DGCA would decide soon on the various objections against AirAsia India getting a flying permit.
On February 21, the paper reported in detail about two letters sent by the industry group and budget carrier IndiGo against the proposal. The airline lobby group had raised the issue of FDI rules with the DGCA as well.
According to it and IndiGo, which wrote separate but similar letters in response to a public notice from the regulator, the rules allow investments by foreign airlines only in existing local carriers and not in a new airline like AirAsia India.
Among India's airlines, only Indi-Go posts regular profits. Others have been hit by their strategy to pursue debt-funded expansion in the past decade, just before the economic downturn brought down passenger traffic and pushed them into losses.
The government in September 2012 allowed foreign airlines to hold up to a 49% stake in local carriers, a move that the industry expected would help it shrug off financial problems. But so far, Jet Airways is the only existing airline that has found a foreign investor — Abu Dhabi's Etihad Airways.
On Friday, the DGCA said it had received as many as 18 responses to its January 20 notice seeking opinions on AirAsia's application seeking an air operator's permit.
A committee appointed to look at the responses has not found any reason to keep on hold the processing of AirAsia India's application, DGCA said. "The committee's conclusion is based on the detailed examination of the representations received in the background of various rules, regulations and other provisions."
Responding to the regulator's decision, the airline lobby group and IndiGo said they don't have anything new to add. Earlier in the day, a Supreme Court bench headed by Justice BS Chauhan disposed of two special leave petitions filed by Swamy and the airline association against the proposal. The court asked the Delhi High Court to take up the matter for final hearing on March 5 and said all government decisions between now and March 5 will be covered in the final hearing.
The high court had in its interim order earlier refused to stay the process to issue a licence to AirAsia India on a petition filed by Swamy. Swamy had appealed to both courts. The airline association later tagged its petition with his. "Both SLPs (special leave petitions) filed have been disposed of. And no further interference in the Delhi High Court interim order till the matter is finally heard," AirAsia India CEO Mittu Chandilya told ET.
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