AirAsia Gets India Operating Licence

May 08--MUMBAI -- AirAsia (India) Pvt. Ltd on Wednesday received the air operating permit from the regulator Directorate General of Civil Aviation (DGCA).

"We are thrilled to have got our licence," said AirAsia Group Bhd chief executive officer Tony Fernandes in a text message.

"It is a monumental thing for India. I have no plans to disappoint the public or any other stakeholders," AirAsia India's chief executive officer Mittu Chandilya said, adding the airline is better positioned to fly now than a few months ago.

Neither Chandilya nor Fernandes gave any details about when the service would be launched in India.

Prabhat Kumar, Director General of Civil Aviation, declined to comment.

The permit was the last regulatory approval needed by AirAsia India, a venture of Malaysia's AirAsia Bhd, Tata Sons Ltd and Arun Bhatia of Telestra Tradeplace Pvt. Ltd, to operate in India. But experts warned the airline may continue to face legal challenges.

In February, DGCA dismissed a demand by private airlines in India, including IndiGo, Jet Airways (India) Ltd, SpiceJet Ltd and GoAir, objecting to the grant of a licence to AirAsia India. The domestic airlines argued that a September 2012 policy change allowing foreign airlines to invest in local airlines was applicable only to existing airlines and not new ones.?

The approval to AirAsia India will be subject to any future directions from the Delhi high court, a DGCA official said, declining to be named.

The Supreme Court had said in February that the award of a licence to AirAsia will be subject to judges' decision in a case being heard by the Delhi high court. The high court is hearing a plea by Bharatiya Janata Party (BJP) leader Subramanian Swamy seeking a stay on further approvals to the proposed airline venture.

Swamy has also moved the Election Commission to stop the DGCA from granting licences to the venture till a new government takes over at the Centre. He claimed the aviation ministry is unaware of the principle laid down by the Election Commission while enforcing its model code of conduct. The model code of conduct, which comes into force with the declaration of poll dates, bars the government from making any policy announcements that can influence voters.

On 1 May, the Delhi high court decided to set up a special bench to hear Swamy's pleas seeking quashing of any approvals by the government to operationalize AirAsia India. The bench will hear the case on 11 July. In addition to Swamy's plea, lobby group Federation of Indian Airlines has filed two other petitions challenging the approvals granted to the Tata-AirAsia venture and a proposed Tata Sons-Singapore Airlines.

It has taken AirAsia, which announced the venture in February 2013, 15 months to get regulatory clearances, said Kapil Kaul, chief executive officer (South Asia) at consultancy firm Centre for Asia Pacific Aviation, or Capa.

"AirAsia (India) may not be fully prepared for an early launch and shouldn't rush for an early launch. More recruitment has to be done, start-up training, logistics at each operating station to be set, slots have to be approved, schedules to be marketed within their distribution system and possibly other requirements to be addressed," Kaul said.

He said AirAsia should start operations in September or October as launching in the second quarter will burn cash and impact on the company's start-up capital. He also cautioned that the airline may continue to face legal challenges in India.

Tata Sons has also formed a 51:49 joint venture with Singapore Airlines to launch an airline and is waiting for AOP (air operating permit) for its commercial operations.

In September 2012, the government allowed overseas airlines to invest up to 49% in local airlines. Previously, foreign investors, but not airlines, had been allowed to hold up to a 49% stake in local airlines.

AirAsia India has crossed a major procedural milestone even as it faces legal challenges ahead, said Peeyush Naidu, director at consulting firm Deloitte Touche Tohmatsu. AirAsia is expected to create some strong new regional routes with low fares in its initial phase, Naidu said.

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