Indian law allows a foreign airline to own up to 49 per cent of an Indian one, but the Indian airline has to be controlled and run by Indian partners, according to a report in Livemint.com
AirAsia Bhd, through AirAsia Investment Ltd, owns 49 per cent in AirAsia India, the Tata group owns 49 per cent and two directors in the firm – S Ramadorai and R Venkataramanan – hold the rest.
The problem, according to Livemint, is a brand licence agreement that was subsequently signed by AirAsia India and AirAsia Bhd which effectively grants control of the former to the latter in contravention of Indian law.
Part of this agreement says AirAsia India “will observe and comply strictly with the following operating requirements which are to be determined in AirAsia’s sole discretion”.
According to the report, the compliance includes just about every possible area – ancillary revenues, branding, catering and in-flight services, customer experience, engineering, finance, flight operations, innovation, commercial and technology, marketing, network planning, people, quality and assurance, revenue management, safety, sales and distribution.
This breach in India’s law has been taken to the Delhi High Court by Bharatiya Janata Party parliamentarian Subramanian Swamy.
The Livemint report said the ministry was likely to file a detailed affidavit in the high court on Nov 11, when the case comes up, admitting there has been a breach of the law.
The aviation ministry has admitted, according to Livemint, that it did not have a copy of the agreement which was signed on April 17, 2013, by Tharumalingam Kanagalingam (AirAsia Bhd’s group chief operating officer, for AirAsia Bhd and Anthony Fernandes (AirAsia founder Tony Fernandes) acting on behalf of AirAsia India Pvt Ltd.
One official who spoke to Livemint said the civil aviation ministry would have liked to issue a show cause notice to the airline but had decided to let the court decide on the matter.
Another government official said the Government did not want to be seen as shutting down an operating airline at a time when its emphasis was on creating jobs.
Livemint said AirAsia India CEO Amar Abrol did not respond to an email seeking comments on the subject.
AirAsia India, which started operations in June 2014, has eight Airbus A320 planes, flies to 11 cities, and has a domestic market share of 2.2 per cent, according to Livemint.