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Business News/ Companies / News/  AirAsia India hasn’t violated foreign control rules: DGCA
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AirAsia India hasn’t violated foreign control rules: DGCA

Based on the review of brand licence pact along with the definition of control as provided in the FDI policy DGCA did not find that AirAsia India violated Indian rules on foreign control

The Tony Fernandes promoted-AirAsia Bhd, through AirAsia Investment Ltd, owns 49% in AirAsia India. Photo: MintPremium
The Tony Fernandes promoted-AirAsia Bhd, through AirAsia Investment Ltd, owns 49% in AirAsia India. Photo: Mint

New Delhi: Aviation regulator Directorate General of Civil Aviation (DGCA) has ruled that AirAsia India has not broken Indian rules on foreign control.

In April 2016, Mint first reported the relationship between AirAsia India and Malaysia’s AirAsia Bhd—detailed in a brand licence agreement (BLA) and emails—which seemed to effectively give control of the former to the latter in contravention of Indian law, which prescribes local control.

Worse, AirAsia India had not provided the brand licence agreement to the regulator at the time of seeking a licence from DGCA. Late last year the Delhi high court asked the airline to provide the copy of the agreement to DGCA, which was asked to review it.

“Based on the review of BLA along with the provisions of Aircraft Rules 1937 and Schedule XI and definition of control as provided in the FDI (foreign direct investment) policy I do not find that the terms and conditions laid down in BLA dilute the “substantial ownership and effective control" of AirAsia India being vested with Indian nationals," Balwinder Singh Bhullar, director general of civil aviation said in a 8 February order.

ALSO READ: DGCA may avoid AirAsia scrutiny

Mint has reviewed a copy of the order.

“Further," Bhullar, who was previously with the aviation ministry said, “status on issuance of AOP (air operators permit or the licence) to AirAsia India does not change."

In plain English that means the aviation regulator sees no reason to withdraw AirAsia India’s licence.

Still, the ruling does not mean AirAsia India’s troubles are over.

Bharatiya Janata Party (BJP) leader Subramanian Swamy who sought the quashing of the airline’s licence by the court said he is looking forward to the next hearing.

“DGCA giving clean chit does not mean anything. They have to come to the court. You can’t have a joint venture in the airline industry. You can only have FDI of a foreign airline in an existing Indian airline. Joint venture ipso facto is illegal," Swamy said referring to the fact that AirAsia India was not an existing airline when it received foreign direct investment, unlike Jet Airways where Etihad bought a 24% stake.

Interestingly, the DGCA order also includes extracts from the brand licence agreement that highlight the extent of AirAsia Bhd’s involvement in the Indian operation.

For instance, AirAsia India “requires approval of AirAsia Group" for all decisions on all ancillary services such as inflight catering, baggage handling, branding, and customer management.

ALSO READ: Case lodged against AirAsia India over Rs22 crore fraudulent transaction

All engineering related purchases or leasing contracts “shall be on the terms approved by AirAsia Group", according to the BLA.

It also requires that AirAsia India’s budget be “approved by AirAsia Group’s chief executive officer"

The airfares of the airline “will be set by AirAsia Group’s revenue management team" and even the fare buckets will be “determined" by the same team, the agreement says.

The Tony Fernandes promoted-AirAsia Bhd, through AirAsia Investment Ltd, owns 49% in AirAsia India. The Tata Group owns 49% and two directors of AirAsia India —S. Ramadorai and R. Venkataramanan (both Tata Group loyalists)—hold the rest.

“AirAsia India remains committed to the Indian aviation industry and to the dreams of millions of Indians who are yet to experience flying," AirAsia India said in a statement.

New York-based former Jet Airways CEO Steve Forte said “the

(aviation) ministry needs to come up with some rules and procedures to ensure control stays in the country, and not only for AirAsia India but for Jet Airways and all future foreign partnerships that may involve Indian airlines."

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Published: 09 Feb 2017, 08:04 PM IST
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