AirAsia Group CEO Tony Fernandes defied rules to enter Indian market

As the Central Bureau of Investigation (CBI) registered a corruption case against AirAsia Group Chief Operating Officer Tony Fernandes, the investigating officer found that the company from day one had violated the rules and regulation laid out by the Ministry of Civil Aviation and the Indian government to enter the Indian market.

In 2013, AirAsia (India) was a joint venture between Tata Sons, Arun Bhatia's Telestra Tradeplace and AirAsia Investment, Malaysia.

AirAsia (India) submitted applications to the then Foreign Investment Promotion Board (FIPB) in February, 2013, and received a formal approval in April, 2013, followed by the No Objection Certificate in September, 2013 and air operating permit in May, 2014, for carrying out domestic aviation the country.

Currently, AirAsia (India) is a joint venture between Tata Sons (49 per cent) and Malaysian carrier AirAsia, Berhad (49 per cent). The rest two per cent is owned by chairman S Ramadorai (0.5 percent) and R Venkataramanan (1.5 per cent).

AirAsia, Berhad is owned and controlled by Tony Fernandes, a Malaysian national of Indian origin.

The CBI stated that AirAsia (India) was indirectly controlled and operated by AirAsia Group, particularly AirAsia, Berhad, thus violating the various norms of the then FIPB.

This structure was indirectly formalised through a 'Brand License Agreement', signed between AirAsia (India) — represented by Tony Fernandes — and AirAsia, Berhad (represented by Tharumalingam Kanagalingam) on April 17, 2013, which indirectly made Air Asia (India) a de facto subsidiary rather than a joint venture.

As per the then FDI policy, foreign airlines were allowed to own up 49 per cent shares in domestic airlines, but effective management control must remain with the Indian partner.

GROUNDED

• In 2013, AirAsia (India) was a joint venture between Tata Sons, Arun Bhatia’s Telestra Tradeplace and AirAsia Investment, Malaysia. 
   
• AirAsia (India) submitted applications to the then FIPB in February, 2013, and received formal approval in April, 2013.