Tatas' AirAsia partner Arun Bhatia miffed, says he knew nothing of SIA deal

Barely 24 hours after the Tatas announced a joint venture with Singapore Airlines for setting up a full service airline from scratch, one of Tatas’ partners in the first airline venture seems miffed.

The Tatas had announced a three way joint venture with AirAsia (49%) and Telestra Tradeplace (21%) in February this year where the Tatas themselves hold 30% stake. Arun Bhatia, the promoter of Telestra Tradeplace today seemed miffed about the Tatas not having informed him before announcing the second venture with SIA.

“Ethically speaking, they (the Tatas) should have informed us, discussed it with us,” Bhatia told Firstpost over phone. He said he had not heard of the second airline venture by the Tatas even from AirAsia Chairman Tony Fernandes.

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“I have not been able to speak to Tony since yesterday,” Bhatia said. When we reminded him that Tony, who is a compulsive tweeter and makes all announcements on twitter, has been strangely quiet over the Tata-SIA deal since the news first came in yesterday evening, Bhatia said “Tony must have been travelling”.

Is Bhatia so miffed that he is contemplating walking away from the three way JV of AirAsia India? “I cannot say anything on this right now. The AirAsia India board of directors is scheduled to meet on September 28, where all these things will be discussed,” he said.

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With one partner miffed and deafening silence from the second one, will the Tatas be able to convince Bhatia and Fernandes about remaining in the AirAsia India venture? Or have cracks already begun to appear in the famous cozy relationship between the three partners?

This morning’s Financial Express newspaper carried comments from Mukund Rajan, one of the board members of the Tata-SIA venture where he asserted that "

Singapore Airlines investment is not in conflict with our earlier investment in AirAsia India. All our partners in AirAsia India were aware of our talks with SIA and they have been very supportive in their approach." In the same interview, he further said that the Tatas’ ownership and representation on the board of AirAsia India will remain unchanged.

If what Rajan said is true, then Bhatia’s comments indicate a thaw in the partnership which may be difficult to overcome.

The industry has been pointing towards regulatory and other problems the Tatas might face since they now want to launch not one but two airlines, from scratch, in India in partnership with two different foreign airlines.

KPMG’s Amber Dueby said after the Tata_SIA deal announcement yesterday:

“This deal may create some problems in the Tata-AirAsia JV. We expect clarity to emerge over the next few weeks. We hope the government agencies do not waste their precious man-hours in over-scrutinizing these deals. Questions are being asked about the Tatas entering into two separate JVs. As long as there is no violation of FDI norms and national security, these deals are best left to the companies involved and market forces.”

And aviation consultancy CAPA’s Kapil Kaul had also cautioned the new proposed airline on the road ahead. “This announcement could play out negatively on Air Asia’s regulatory approval as Tatas have 30% stake in the JV with Chairman from Tata Sons. More clarity is required from Tatas on their proposed airline investments.”

Well, regulatory clarity will emerge eventually but first, the three existing partners of AirAsia India need to sort out differences, if any. It would be sad to see the Tatas forging a successful partnership with SIA but losing out on an equally lucrative one for launching a budget carrier in India.