AirAsia has applied to FIPB to take 49 per cent in a venture with Tata Sons Ltd and Arun Bhatia's Telestra Tradeplace Pvt Ltd. The carrier will now have to approach the aviation regulator Directorate General of Civil Aviation (DGCA) for further clearances.
"AirAsia will now have to take necessary licence etc. from DGCA," the official added.
This would be the first entry of a foreign carrier in the domestic aviation sector after the liberalisation of FDI policy in September last year.
Normally, the DGCA clearance should only be a formality but there are views that FDI in aviation is only meant for existing airlines and not for new airlines. If DGCA raised a roadblock, then it would mean that Jet airways has struck again to block a project in which Tata is a partner. Earlier efforts by Tats to enter aviation has also been blocked for one reason or another.
Air Asia is a budget airlines which could send the already tottering aviation industry into a tailspin. Jet Airways is close to stitching up a deal with Etihad Airlines which will give it much needed cash and also a great spread in terms of network.
AirAsia is looking to start flying from this year-end with 3-4 planes and an initial investment of about USD 50 million by the Malaysian budget carrier.
The proposed joint venture will operate from Chennai and will focus on providing domestic connectivity to Tier-II and Tier-III cities.
As per current rules, a carrier must complete five years of domestic operations before becoming eligible for starting overseas flights.
Tata Sons, the holding company of the USD 100 billion salt-to-software conglomerate, will hold 30 per cent in the joint venture but will not have any operating role in the airline.
This will mark the return of Tatas to aviation sector. State-owned Air India had grown out of Tata Airlines, which began flights in 1932.
AirAsia, through its operations based in Thailand and Malaysia, flies to Chennai, Bangalore, Kochi, Tiruchirappalli and Kolkata in addition to 20 countries.
AirAsia, Tatas and Hindustan Aviation of Bhatias have signed a partnership agreement for the venture.
Air Asia has made the move to invest even as Etihad and Jet Airways continue to work towards finalising a deal for the Gulf carrier to invest in Jet.