AirAsia inks pact with Odisha to run direct flights to Kuala Lumpur

2 min readUpdated May 28, 2025Feb 19, 201711:58 PM

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Malaysia-based low-cost carrier AirAsia on Friday signed a memorandum of understanding (MoU) with the Odisha government for running direct international flights from Bhubaneswar to Kuala Lumpur.

The agreement was signed between Nitin Bhanudas Jawale, Director of tourism department in the state and AirAsia Chief Executive Officer (CEO) Aireen Omar.

“AirAsia’s engagement is very important for Odisha. This pact marks the culmination of our efforts and very soon, we will be starting international flights. We have asked for permission to ply two to three flights per week. The state government is offering subsidy in the form of Viability Gap Funding (VGF)”, said Jawale

AirAsia CEO said an announcement would be made shortly regarding the commencement of international flights from Bhubaneswar — a development industry experts feel could attract other players to launch operations from Odisha’s capital.

“Sometime in April, the services will start but it may be in the first or the last week. The exact date will be known in a week’s time. Air Asia will also be starting another flight to Bangkok in the next three to four months. With Air Asia launching its operations, we are hopeful that other players will be attracted to start their operations from Bhubaneswar. Invest Bhubaneswar has been pursuing Air Asia for the past five years to start operations from the city”, said Debasish Patnaik, convenor of the Invest Bhubaneswar event.

AirAsia has selected through competitive bidding. The state government had invited an Expression of Interest (EoI) from the scheduled air carriers for running flights to destinations in South East Asia like Singapore, Bangkok and Kuala Lumpur. To woo the air carriers, the state government had agreed to provide reasonable VGF in the form of subsidy grant.

The state government has offered to provide the subsidy grant initially for six months with the possibility of extending it for a year from the date of starting commercial flight operations. The continuation of subsidy grant would depend on the trend in passenger traffic.

If an operator is already running flights from an Indian city to Singapore, Bangkok or Kuala Lumpur and is keen to use Bhubaneswar as a hopping destination, the state government would offer subsidy grant. However, the grant would be released on the condition that the operator reserves 30 per cent of seats for passengers flying from and to Bhubaneswar.

The subsidy would be provided on a monthly basis and would be given if there are regular flights on scheduled days irrespective of the passenger flow. If the operator chooses to increase or decrease the frequency as per demand, the state government would vary the subsidy grant accordingly. Despite getting the international tag since October in 2013, international flight operations are yet to take off from Bhubaneswar except for Air India, which currently routes international passengers from the city via New Delhi.

To incentivise global flight operations, the state government has announced the complete waiver of VAT (value added tax) on aviation turbine fuel (ATF).

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Questions & Answers

What kind of financial support is the Odisha government offering AirAsia for these new flights?

The state government is providing a subsidy grant, referred to as Viability Gap Funding. This grant is offered initially for six months, with a possibility of extension for up to a year depending on passenger traffic.

What conditions must an airline meet to receive the subsidy if using Bhubaneswar as a hopping destination?

The operator must reserve 30 per cent of seats specifically for passengers flying to and from Bhubaneswar. The subsidy is provided monthly, based on regular flights on scheduled days, regardless of passenger flow.

When does AirAsia expect to begin its direct flights from Bhubaneswar to Kuala Lumpur?

AirAsia expects services to start sometime in April, though the exact date in the first or last week will be confirmed within a week. Another flight to Bangkok is planned within the next three to four months.

How long has Invest Bhubaneswar been working to bring AirAsia operations to the city?

Invest Bhubaneswar has been pursuing AirAsia for five years to encourage them to start operations from the city. This persistence has now culminated in the signing of the memorandum of understanding.

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