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Thursday, 30 January, 2020, 14 : 30 PM [IST]

Tatas, AirAsia in talks to sort out no-compete rule

According to a report in The Business Standard, Tata Sons, the Tata group’s holding company, and AirAsia, owned by Malaysian businessman Tony Fernandes, are in talks to sort out differences that cropped up between the two groups over the non-compete clause signed for their joint venture — AirAsia India. 

The exclusivity clause in the memorandum of agreement signed between AirAsia Berhad, Tata Sons, and their erstwhile partner Telestra Tradeplace on February 19, 2013, bars all the partners and their affiliates from directly or indirectly engaging in low-cost aviation business. The non-compete agreement disallows investments by all the parties in any other airline that provides low-cost passenger airline service, operating narrow-body aircraft flying under four hours both on the domestic and international routes. 

According to a source in the know, the non-compete clause will make it difficult for the Tatas to bid for Air India, which has been put on the block by the government. This is because of Air India's no-frills subsidiary Air India Express, which competes directly with AirAsia India. Expressions of interest have to be submitted by March 17. 

The Tatas own 51 per cent in AirAsia India and have taken complete control of the joint venture by appointing its own managing director and CEO in the past two years. AirAsia owns the rest of the equity. “The two groups are in talks to sort out all the pending issues,” said a source close to the development. 

The talks between the two partners come at a time when Fernandes is facing an Enforcement Directorate (ED) enquiry over allegations of money laundering and has been summoned by the probe agency on February 5, seeking details about the airline’s operations since it was launched in 2014. Apart from the ED probe, Fernandes is also facing a CBI investigation on charges of criminal conspiracy. AirAsia has denied the allegations and Fernandes has not yet appeared before the investigating agencies. 

According to a source, the fracas over the non-compete clause is a prelude to the exit of AirAsia from the joint venture at a higher valuation for its stake.

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