New Delhi, March 6
Paving the way for the entry of first foreign airline in the domestic skies, the Finance Ministry today cleared the investment proposal of Malaysian budget carrier AirAsia through a three-way joint venture with Tata Group and Arun Bhatia, related to steel tycoon LN Mittal.

“AirAsia’s proposal has been cleared. It is as per the policy (which allows) up to 49 per cent FDI. Rs 80 crore is initial investment,” a senior government official said.

The Foreign Investment Promotion Board (FIPB), headed by Department of Economic Affairs (DEA) Secretary, Arvind Mayaram, approved the proposal at its meeting here. AirAsia will have a 49% stake in the venture, Tata Sons Ltd will hold 30 per cent and Arun Bhatia’s Telestra Tradeplace the remaining 21%.

The carrier will now have to approach the aviation regulator Directorate General of Civil Aviation (DGCA) for further clearances. 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. AirAsia is looking to start flying from this year-end with three-four planes and an initial investment of about $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.

This will also mark the return of Tatas to aviation sector though mostly as an investor. State-owned Air India had grown out of Tata Airlines, which began flights in 1932.