Malaysia's AirAsia in deal in India

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MUMBAI, Feb. 21 (UPI) -- The Tatas, who launched India's first commercial airline, will come back into the business through a joint venture with AirAsia, Malaysia's low-cost carrier.

AirAsia, led by Tony Fernandes, concluded an initial agreement to set up a budget carrier in India with Tata Sons Ltd. and Indian investor Arun Bhatia.

The agreement comes as the Indian airline industry is facing tough economic times but the Tata brand still commands much respect in the country.

Speaking to Economic Times' ET NOW, Fernandes said the initial investment could be $30 million-$50 million, with Air Asia owning 49 percent and the Indian partners 51 percent. Under the Indian government's new reforms, foreign carriers are allowed direct investments of up to 49 percent.

Fernandes said the venture's board hasn't been made final but he said he hoped Ratan Tata, who recently retired as chairman of the Tata Group, would be on it.

Fernandes said the Bhatia family is in aerospace "and so it makes sense to bring them in."

He said the venture would begin operations as soon as regulators approve it.

When reminded about the difficult environment for Indian carriers, Fernandes told ET NOW: "First, there are a billion people in India. Second, a million people travel in trains. And third, there is a big potential in under-developed routes. We have been studying the Indian markets for the past three years and we feel now is the right time."

He said the model of the new venture would also follow the same ultra-low cost model.

AirAsia, which operates flights to five Indian cities from Thailand and Malaysia, has a fleet of 118 planes and has orders for about 350 more, The Wall Street Journal reported.

Analysts told the Journal for foreign carriers such as AirAsia, the large Indian population and a growing number of Indians abroad are the main market attractions.