AirAsia India's control issue in spotlight as govt denies knowledge of key JV agreement

AirAsia India is co-owned by Tata Sons and AirAsia Malaysia

The contentious issue of AirAsia India's ownership and control is back in the spotlight with the Civil Aviation Ministry claiming it was unaware regarding the nature of relationship between AirAsia India and its parent.

A report in the Mint news paper on Thursday says that the ministry is likely to file an affidavit in the Delhi High Court admitting that it was not aware about the brand licence agreement which gives the Malaysian partner the influence and control over key functions such as ancillary revenue, branding, revenue management, engineering and finance of the Indian airline.

The affidavit will be filed in response to Bharatiya Janata Party leader Subramanian Swamy's petition challenging the grant of permit to AirAsia India.

Lawyers specialising in aviation law said at time of granting its approval the Civil Aviation Ministry seeks the shareholder agreement between the foreign airline and its Indian partner to examine aspects related to control but there is no specific requirement in rules to submit a brand licence agreement.

In April, Swamy told Business Standard that the permit must be cancelled for violating norms. Government rules dictate that substantial ownership and effective control of an airline must vest with Indian nationals.

AirAsia India has earlier denied it has violated rules and said that majority ownership and effective control is vested with Indians.

AirAsia India is co-owned by Tata Sons (51 per cent) and AirAsia Malaysia (49 per cent).

Lawyers say a company which grants a brand licence does seek safeguards for brand protection and there is a thin line on what constitutes protection of brand and controlling operations.

In an earlier comment, lawyer Nitin Sarin had said "If 51 per cent ownership vests with Indians, they have majority shareholding and all decisions may be made or vetoed by them. Entering into a licensing agreement is a commercial decision, which would have been approved by the majority shareholders (Indian)... with this limited information, there seems no illegality whatsoever in AirAsia India.”