The civil aviation ministry is likely to file a detailed affidavit in the high court on 11 November regarding the ownership of Air Asia India

Indian law allows a foreign airline to own up to 49% of an Indian one, but the Indian entity has to be controlled and run by Indian partners. AirAsia Malaysia owns 49% in AirAsia India. The Tata group owns 49%. And two directors in the firm—S. Ramadorai and R. Venkataramanan—hold the rest. Photo: Mint

The civil aviation ministry says that it granted an airline licence to AirAsia India because it was not aware of the details of the relationship the company has with its parent, Malaysia-based AirAsia Bhd.

In April, Mint first reported the nature of this relationship, detailed in a brand licence agreement between AirAsia India and AirAsia Bhd, which effectively grants control of the former to the latter in contravention of Indian law.

This control is currently the matter of a case in the Delhi high court filed by Bharatiya Janata Party parliamentarian Subramanian Swamy.

The ministry is likely to file a detailed affidavit in the high court on 11 November admitting the above.

Indian law allows a foreign airline to own up to 49% of an Indian one, but the Indian entity has to be controlled and run by Indian partners. AirAsia Malaysia, through AirAsia Investment Ltd, owns 49% in AirAsia India. The Tata group owns 49%. And two directors in the firm—S. Ramadorai and R. Venkataramanan—hold the rest.

In April, aviation regulator Directorate General of Civil Aviation (DGCA) said it was not aware of any brand licence agreement between AirAsia India and its Malaysian parent.

A few weeks ago, according to two government officials who asked not to be named, DGCA asked its parent, the aviation ministry, if it had a copy of the brand licence agreement.

DGCA grants airline licences only after the ministry issues a so-called no-objection certificate.

The aviation ministry has admitted, Mint learns, that it does not have a copy of the agreement.

The agreement was signed on 17 April 2013 by Tharumalingam Kanagalingam (AirAsia Bhd’s group chief operating officer Bo Lingam) for AirAsia Bhd and Anthony Fernandes (AirAsia founder Tony Fernandes) acting on behalf of AirAsia India Pvt Ltd.

AirAsia India got its operating licence from DGCA in 2014.

The civil aviation ministry, said one of the government officials quoted above, would have liked to issue a show cause notice to the airline but has decided to let the court decide on the matter.

Civil aviation secretary Rajiv Nayan Choubey said as much in an interview with Mint last month. “The court will tell us what to do,” he said.

AirAsia India’s current CEO Amar Abrol did not respond to an email seeking comments on the subject.

The second government official said the government does not want to be seen as shutting down an operating airline at a time when its emphasis is on creating jobs.

Several thousand jobs were lost when Kingfisher Airlines Ltd shut down in 2012. Some of those employees finally found work with AirAsia India and other new airlines such as Vistara, and in the fast-expanding IndiGo.

“It is a fait accompli. I think it is very difficult to go back on it,” this official added, implying that the aviation regulator will not proceed against the airline.

The court, however, could take a different view.

Swamy disagreed with the argument that it is fait accompli and compared the case with the so-called 2G scam which prompted the Supreme Court in 2012 to scrap 122 licences issued to telecom firms at throwaway prices.

Swamy added that he is looking forward to the 11 November affidavit.

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%.

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