Companies & Sectors
AirAsia gets FIPB approval to start new airline

This would be the first entry of a foreign carrier in the domestic aviation sector after the liberalisation of FDI policy in September last year

The Foreign Investment Promotion Board (FIPB) on Wednesday cleared the investment proposal of Malaysian low fare carrier AirAsia, which seeks to enter India through a joint venture with Tata Group and another company.

 

“AirAsia’s proposal has been cleared. It is as per the policy (which allows) up to 49% FDI. Rs80 crore is initial investment,” a senior government official said.

 

AirAsia has applied to the FIPB to take 49% in a venture with Tata Sons and Arun Bhatia's Telestra Tradeplace Pvt Ltd.

 

The carrier will now have to approach the aviation regulator Directorate General of Civil Aviation (DGCA) for further clearances.

 

“AirAsia will now have to take necessary licence, etc. from DGCA,” the official added.

 

This would be the first entry of a foreign carrier in the domestic aviation sector after the liberalisation of FDI policy in September last year.

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Domestic air traffic declines 5% in January

Over the past two months several Indian carriers announced mega ticket sales at discounted prices and it is yet to be seen whether such promotional ticket schemes would spur any growth in air traffic

While global air passenger demand rose 2.7% in January year-on-year, Indian domestic air traffic fell by about 5% in the same month.

 

India’s domestic market was in negative territory with a 4.9% decline in demand and 5.3% capacity reduction. Load factors stood at 75.9%, according to latest statistics of IATA (International Air Transport Association), a body representing 240 airlines that handle about 84% of global air traffic.

 

The airline body pointed out that one of the major domestic players has effectively exited the market (read Kingfisher Airlines), weak economic growth, rising infrastructure costs and the impact of high fuel prices (being exaggerated by excessive taxation) were the factors affecting air traffic in the country.

 

However, over the past two months several carriers in India announced mega ticket sales at discounted prices and it is yet to be seen, whether such promotional ticket schemes would spur any growth in air traffic.

 

In January, international air travel globally expanded by 1.1%, marginally behind a capacity expansion of 1.4%. Load factors were 76.4% in the month, but after seasonal adjustment, the load factor reached a record high, exceeding 80%. China was the second largest market for domestic air travel.

 

But, overall global air travel demand was up 2.7% on the previous January, slightly ahead of the 2.2% expansion in capacity.

 

“Passenger travel is growing in line with business confidence levels. Recent months have seen some positive economic signs emerge in both US and China, and the Eurozone crisis seems to have stabilised. Of course, risks remain and the impact of the US budget cuts has yet to play out and fuel prices are high. But even with those headwinds we see underlying support for growth,” Tony Tyler, director general and CEO, IATA said.

 

In international air traffic, Asia-Pacific airlines captured over half of the growth in demand between October 2012 and January 2013. Middle East airlines posted the strongest growth rate of 14.3% in demand with about 79% load capacity, well above the global average, while Latin American airlines posted the second highest growth in demand at 12.2%. North American carriers saw a marginal expansion of 1.5% in demand, but had the highest load factor of 79.4%, while European airlines were among the weaker performers.

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