Home >companies >Effective control of AirAsia India was with parent, shows brand licence pact

Mumbai: Products, services and pricing. Brand artwork and inflight services. Engineering purchases and leasing contacts. Group manuals and staff uniform. Key decisions across the board at AirAsia India needed approval from Malaysian shareholder AirAsia Bhd, shows the brand licence agreement between the two entities.

The brand licence agreement between the two companies, dated 17 April 2013—a copy of which was seen by Mint—states that “the licencee (AirAsia India) shall observe and comply strictly with the following operating requirements, which are determined in AirAsia’s sole discretion".

These include “ancillary, branding, catering and inflight services, customer experience, engineering, finance/corporate finance, flight operations, innovation, commercial, technology, marketing, network planning people, quality and assurances, revenue management, safety and sales and distribution".

In India, regulations state that effective control of airline companies jointly owned by Indian and foreign entities should lie with the local company.

An AirAsia India spokesperson said that allegations concerning indirect foreign control of AirAsia India Ltd, in violation of norms set by the Foreign Investment Promotion Board, had been fully investigated by the Director General of Civil Aviation (DGCA) and it passed a detailed and reasoned 12-page order to this effect on 8 February 2017.

The DGCA order was pursuant to an investigation exercise mandated by the Delhi high court through its order on 11 November 2016, in writ petition (C) No. 1373 of 2014, the spokesperson said. AirAsia Group’s chief executive Tony Fernandes didn’t respond to queries sent by Mint.

The brand licence agreement document between AirAsia India and its Malaysian parent also states: “The Licensee (in this case AirAsia India) shall offer products and services as determined by AirAsia Group’s ancillary team from time to time."

It adds, “The pricing and appearances for products will be set by AirAsia Group’s ancillary team," and that “third-party providers of ancillary products and services shall first be approved by AirAsia Group’s ancillary team".

The Central Bureau of Investigation (CBI) had on 29 May raided the offices of AirAsia India, after filing a complaint against Fernandes, chief executive of the company’s Malaysian parent, and others on 28 May, for allegedly lobbying the government for overseas flight permits and violating rules that prevent foreign airlines from controlling Indian operators.

CBI’s first information report (FIR) says the violations occurred from 2013 to 2016, before the government eased restrictions on Indian airlines starting overseas flights in June 2016. The rule that bars giving management control to foreigners remains.

In a statement on 29 May, AirAsia India denied any wrongdoing and said it was cooperating with all regulators and agencies to present the facts.

AirAsia (India) Ltd, a joint venture between Tata Sons Ltd (49%) and Malaysia’s AirAsia Bhd (49%), started operations in June 2014.

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