FDI in Indian aviation critical: AirAsia chief

Tony Fernandes, the chief executive of Southeast Asia’s largest budget carrier, AirAsia, feels it is “critical” for India to further open up its aviation sector to foreign direct investment (FDI).

“I think it’s critical,” Fernandes told Business Standard. “I think capital needs to go into the airlines industry and regulation needs to change. There have been some sounds from the (Union) minister of commerce (Anand Sharma) on this.”

His comments came a day when the civil aviation ministry proposed to allow 24 per cent FDI into the sector, subject to Cabinet approval, and close on the heels of beleaguered Kingfisher Airlines boss Vijay Mallya's pleas for opening up the industry to international strategic investors.

India currently allows for FDI up to 49 per cent in the domestic airlines sector, but not by foreign airline companies. Nonetheless, many Indian carriers remain short of cash, and permitting the entry of these foreign investors would come as a shot in the arm for the industry.

Fernandes also said he would be open to picking up a stake in an Indian carrier if the sector was opened up. "Yes, absolutely. I am of Indian descent, so my father would be very happy," the Indian-origin Malaysian quipped.

There was also a need for certain regulatory amendments in the sector, he added. In line with the stance of International Air Transport Authority, the aviation body that represents 93 per cent of scheduled global air traffic, Fernandes identified fuel and taxation as problem areas.

"I think fuel is one issue and also, there are too many local taxes," he said on the sidelines of the Asean Business and Investment Summit, held alongside the ongoing 19th Asean Summit.

ASEAN FOCUS
Meanwhile, the carrier will shift its regional headquarters from Kuala Lumpur, Malaysia, to Indonesia's capital, Jakarta, in an effort to align itself better with markets within the Asean bloc, which consists of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

"I think we carry more Asean people than any other airline and I think that's important and key for us. So, I think we will continue to push the Asean agenda and I'm moving my regional office here, which will be probably launched around January," Fernandes said.

"We want to make a statement that we aren't Malaysian, Singaporean, Indonesian or Thai. We are an Asean airline, so it has to driven from the top," he added.

Although Fernandes refused to comment on reports he was exploring setting up of a premium full-service airline, he did acknowledge that AirAsia's long-haul business was facing challenges.

"Long-haul takes time. It's a new model. I think we have tried to do too much too quickly and there are some issues. But it's a strong business model and it will work," he said.

"Business is strong for us and we don't see any slowdown at all at the moment. Year-on-year, I think, we will grow about 20 per cent this year, and we are adding almost 20 per cent capacity every year," Fernandes said.