Thursday, January 30, 2020

Tata Sons, AirAsia to discuss joint venture's no-compete rule

Mumbai: Tata Sons and AirAsia will discuss issues related to the no-compete clause, a part of the joint venture between AirAsia Berhad, Tata Sons and Telestra Tradeplace for AirAsia India, Business Standard reported on Tuesday.

The two groups are in dispute over a no-compete clause included in the Memorandum of Agreement signed between the parties and partner company Telestra Tradeplace, which restricted all parties from investing in any competing airline that provided services similar to AirAsia.

According to this, Tata Sons, along with the other two companies, cannot invest in any airline that provides low-cost passenger airline services on narrow-body aircraft flying on domestic and international routes under four hours, the report said.

The clause can cause hindrance to Tata Sons' bid for Air India.

According to the disinvestment plan announced by Air India on Monday, the airline is looking to sell 100 per cent of its equity share capital, including 100 per cent of Air India’s shareholding interest in AI Express Ltd. AI Express is Air India’s low-cost subsidiary airline and a direct competitor of AirAsia.

Tata Sons, which currently holds a 51 per cent stake in AirAsia, had expressed its interest to invest in Air India amid discussions on the national carrier's disinvestment in 2019. One of the Tatas’ major concerns was the lack of clarity in terms of Air India’s outstanding debt and the terms of disinvestment.
The potential bidder will get some relief with regard to AI’s debt as the government has reduced its debt liability from ?60,074 crore to ?23,286 crore. The government has also clarified that the networking capital of the airline will be zero, according to previous reports.

The two groups are in talks to discuss all the pending issues, Business Standard had reported.
30/01/20 Hemani Sheth/Business Line

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