UDAN international plan under cloud as AirAsia India fails to get permit

Tata group-owned AirAsia India’s inability to get approval for international flights is hurting UDAN, the Indian government’s regional air connectivity project that also aims to link cities in Northeast India and Odisha to places abroad.

Sources said the civil aviation ministry is waiting for the low-cost airline to come under the full ownership of Tata Sons and become part of Air India, the former state-owned carrier now owned by the private conglomerate, before allowing it to operate international flights.

Tata owns 84 per cent stake in AirAsia India and it is understood that the group will complete the process of buying rest of the stake by July’s end.

According to Airport Authority of India’s rules, an operator qualified as a 'designated airline' was eligible to bid for UDAN international routes in March.

AirAsia India won bids to operate flights on eight international routes, including destinations from Bhubaneswar, as it sought the lowest subsidy.

Under UDAN international, state governments offer 100 per cent subsidies to airlines.

AirAsia India meets the condition of having 20 aircraft to fly internationally, but it has been unable to get approval as the Central Bureau of Investigation (CBI) has filed a case against top executives of AirAsia Berhad, which holds 14 per cent stake in the airline, for allegedly lobbying the government for overseas flight permits and violating rules that prevent foreign carriers from controlling Indian operators.

The CBI, in 2018, booked AirAsia Berhad CEO Tony Fernandes, deputy CEO Bo Lingam, and former Tata Trust managing trustee R Venkataramanan for allegedly trying to bribe government officials for easing rules to operate international flights.

Sources said that AirAsia India, for UDAN international, has sought significantly lower subsidies than SpiceJet and IndiGo, which were the second- and third-lowest bidders. State governments want airlines seeking the lowest subsidy.

The first round of the international UDAN failed to generate much response as state governments were not amenable to bear the subsidy burden.

“When the bidding was completed in March, AirAsia India already had 20 aircraft and was a designated airline of India which made it eligible to bid for the routes. However, the legal arm of the Ministry of Civil Aviation raised an objection that the airline has not been permitted to operate flights on international routes and hence ineligible to operate the flights,” said a person aware of the development.

AirAsia India didn’t reply to queries on the same.

Tata group is merging AirAsia India into a subsidiary of Air India Express.

It has approval from anti-trust regulator Competition Commission of India (CCI) and waiting for one from the National Company Law Tribunal.

Simultaneously, after acquiring 84 per cent stake in AirAsia India in 2020, the group is in final stages of acquiring the remaining 16 per cent stake.

“Legal approval was sought and it was decided that till the time AirAsia Berhad has any stake in the airline, it will not be given permission to operate international flights as there is an ongoing CBI investigation against the officials of the Malaysian parent.

"After it becomes a subsidiary of Air India group and Tata groups owns 100 percent stake, it will be permitted for international flying,” a government official said.

Assam, Odisha, Tripura, and Manipur participated in international UDAN and offered to provide subsidies for connecting Guwahati, Bhubaneswar, Agartala, and Imphal to multiple international destinations.

An official of the Odisha government said that the state was eager to start international flights but Air Asia India has not got the central government’s permission after winning the bid to operate flights from Bhubaneswar.

“We are awaiting clarity from the Ministry of Civil Aviation,” the official said.