Why Tony Fernandez bought QPR and How will Air Asia pose threat to the Indian Civil Aviation Industry?

The imminent threat of having Tony Fernandez around you is “YOU” would not know when “YOU” will be eaten alive by him.

The actual truth of Tony Fernandez having bought and owned Queen Park Rangers is to get close to the world’s richest Asian descent i.e. Lakshmi Niwas Mittal.

Lakshmi Niwas Mittal  is an England-based Indian steel magnate. He is the chairman and CEO of ArcelorMittal, the world’s largest steelmaking company. Mittal owns 41 percent of ArcelorMittal and holds a 34 percent stake in the Queens Park Rangers F.C. football team.

Mittal is the richest man of Asian descent. Despite being the wealthiest man in Britain, he does not hold British citizenship. He was ranked the sixth richest person in the world by Forbes in 2011, but dropped to 21st place in 2012, due to having lost $10.4 billion the previous year. In spite of the drop, Forbes estimates that he still had a personal wealth of US$16 billion in October 2012. He is also the 47th “most powerful person” of the 70 individuals named in Forbes’ “Most Powerful People” list for 2012.

His daughter Vanisha Mittal’s wedding was the second most expensive in recorded history.

Mittal has been a member of the board of directors of Goldman Sachs since 2008, and is also member of the board of directors of the European Aeronautic Defence and Space Company. He sits on the World Steel Association’s executive committee, and is a member of the Indian Prime Minister’s Global Advisory Council, the Foreign Investment Council in Kazakhstan, the World Economic Forum’s International Business Council, and the Presidential International Advisory Board of Mozambique. He also sits on the advisory board of Northwestern University’s Kellogg School of Management in the United States and is a member of the board of trustees of the Cleveland Clinic.

In 2006 The Sunday Times named him “Business Person of 2006”, the Financial Times named him “Person of the Year”, and Time magazine named him “International Newsmaker of the Year 2006”.  In 2007, Time magazine included him in their “100 most influential persons in the world”.

As Mittal is one of the most important business men in India; Tony Fernandez has planned ahead to use Mittal in expanding his Tune Group empire into India by luring two Indian rich investors i.e. Ratan Tata and Arun Bhatia to invest in Air Asia X – Chennai based India.

As AirAsia seeks approval to start operations in India, it can pose a threat to local low-fare carriers. AirAsia Bhd has submitted an application to the Indian government seeking approval to start domestic operations.

How will Air Asia’s entry affect Indian aviation?

After establishing joint ventures in Indonesia, Thailand, Japan and Philippines, the Malaysia-based AirAsia Bhd has submitted an application to the Indian government seeking approval to start domestic operations. As per the proposal, the airline’s investment arm AirAsia Investment Ltd will hold 49% in the proposed Indian joint venture with Tata Sons Ltd (30%) and Arun Bhatia of Telestra Tradeplace Pvt Ltd (21%). This move comes in the backdrop of the September decision by the Indian government to open up the aviation sector to foreign direct investment from foreign airlines.

How big is the threat?

Apart from AirAsia being the leading and largest low-cost carrier in Asia, the cost structure of the airline is the lowest in the world. According to local airlines’ representatives, AirAsia’s cost is at least 30% lower than Indian low-fare carriers because of low-cost terminals in other countries, cheaper jet fuel and other advantages.

With this huge cost advantage alone, AirAsia can give local low-fare carriers—IndiGo, SpiceJet Ltd and GoAir—a run for their money. Full-service carriers such as Jet Airways (India) Ltd and Air India will also feel the heat. Also, AirAsia chairman Tony Fernandes is known for unleashing Rs.1 fare from Mumbai to Kuala Lumpur.

J.P. Morgan Securities Singapore Pvt. Ltd’s analyst Corrine Png, in a note on 21 February, wrote AirAsia’s India entry is negative for Indian airlines, especially SpiceJet, given its major presence in Chennai and exposure in smaller cities. “With traffic under pressure, it would be challenging to sustain higher yields. The entry of new players could put pressure on pricing,” Png wrote.
On a conference call last week, Fernandes said it would not opt for 70-seater planes at any point and it will stick to Airbus A320 planes that have around 200 seats each. India has around 40 runways where such big planes can land. This would mean that AirAsia’s proposed Indian venture would add pressure to crowded routes, although the carrier is known for flying to smaller cities.

What can go wrong in AirAsia’s strategy?

According to a note by consultancy firm CAPA, the AirAsia brand has entered nine Indian markets since late 2008 but has had to drop three, including Mumbai and Delhi, because of lack of profitability and high airport costs in India. But AirAsia’s Fernandes is unperturbed. He says he has done his homework to stay low cost before finalizing the proposal.

So how immediate is the AirAsia threat?

AirAsia has plans to start operations with three to four planes. The smallest low-fare carrier GoAir has 13 planes. So it will take some to scale up. More importantly, AirAsia has just applied for the permission with Foreign Investment Promotion Board.

It has to seek an air operating permit. The aviation ministry is in no mood to give permission to import planes, so issuing a fresh licence would take some more time. The ministry is also concerned about the financial health of domestic airlines as two of them—Kingfisher Airlines Ltd and Paramount Airways—were grounded. This would mean it will take around a year for the threat to materialize.

Next – How AirAsia luring Tata Group and Arun Bhatia and struck the deal in Bombay?

Stay tuned to Malaysiaairlinesfamilies JV with AirAsiafamilies for more information on Tony Fernandez the Scumbag – The King of Drug lord and The Pirates.


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