AirAsia plans budget airline in India

KUALA LUMPUR, Malaysia (AP) -- AirAsia, Southeast Asia's top budget carrier, said Wednesday it will set up an airline with India's Tata conglomerate to tap the world's second most populous nation after moves to liberalize its airline industry.

AirAsia said it has applied to Indian authorities to take a 49 percent stake in a joint venture, with the remaining 51 percent held by Tata Sons Ltd. and tycoon Arun Bhatia. The move follows the Indian govenrment's decision to ease foreign investment rules in aviation and other industries to help revive a slowing economy.

"We have carefully evaluated developments in India over the last few years and strongly believe that the current environment is perfect to introduce AirAsia's low fares which stimulate travel and grow the market," AirAsia Chief Executive Tony Fernandes said in a statement.

"AirAsia believes Indian aviation has enormous long-term growth potential and is expected to produce tremendous upside for first movers," the airline said.

The joint venture will be based in Chennai to service domestic cities.

India's airline industry has expanded enormously in recent years, but only one airline — Indigo — has been able to turn a consistent profit, while others suffered from labor strife and mismanagement.

AirAsia, which is Southeast Asia's top no-frills carrier, has similar ventures in Thailand, Indonesia, the Philippines and Japan.