Tata group increased its holdings in AirAsia India to 84 per cent
While everyone is busy ringing in hopeful celebrations for 2021, Tata Group took the celebrations a notch up as it announced about the increase of its stake in the budget carrier, AirAsia India. Tata Group, hopes to enhance its role in India’s airline industry, had also put in a bid for the national carrier, Air India.
According to the reports, Tata Group will increase its holding in the India-based joint venture with AirAsia, that started in 2014, to about 84 per cent from 51 per cent, having bought an additional 32.67 per cent stake from AirAsia Berhad at 276.69 crore.
AirAsia Group Berhad (AirAsia Group) announced the disposal of 32.67 per cent of its equity shares in AirAsia (India) Limited (AAI) held by the Group’s whollyowned subsidiary, AirAsia Investment Limited (AAIL), bringing its shareholding in AAI down to 16.33 per cent.
Owned by Malaysian businessman Tony Fernandes, AirAsia has had a challenging year, trying to sail through the COVID pandemic amid cash burns. The Malaysia-based budget carrier, posted its biggest-ever quarterly loss in August and recently shut down its Japanese subsidiary. Reportedly Tata is paying AirAsia around $38 million for the increased stake in the low cost carrier, AirAsia India (AAI). With such a large share control, Tata will also have a stronger say in the significant manner of running the airline in a competitive market like India.
Tata currently operates Vistara airline in partnership with Singapore Airlines owning a 51 per cent stake in the full service carrier, seems to be in a strong lead to secure Air India which is presently on sale by the Indian government. The national airline was originally found by Tata group in 1932 but was sold to the government in the 1950s. Additionally, it was AirAsia and Singapore Airlines that were the first two foreign investments in the aviation sector in India after the government had allowed foreign direct investment of 49 per cent by foreign airlines in domestic carriers.
These recent happenings direct Tata Group towards a significant position in the aviation sector in the country. While that does seem to be a positive side of things and a major step to consolidate the company’s aviation business, it won’t come without challenges especially the ones that have lately been incurred with the global pandemic. According to the Centre for Asia Pacific Aviation (CAPA), Vistara and AirAsia India have together lost around $845m through March this year.
The airline stated that since the start of the Covid-19 pandemic, aviation has been one of the hardest hit industries. “Airlines around the world have cancelled flights and grounded planes and AirAsia India (AAI) is no exception. Due to this, the directors expect further capital requirements for AAI. As India is a non-core market for AirAsia (being a non-ASEAN country), the company will continue to regularly re-assess its business strategies and dispose of non-core investments to augment its liquidity,” it stated.
President (Airlines) of AirAsia Group, Bo Lingam said, “This transaction is in line with our initiatives towards reducing cash utilisation for the Group and will allow us to use cash to grow market share in our core markets in ASEAN, particularly in Malaysia, Thailand, Indonesia and the Philippines as well as for our future expansion into Cambodia, Myanmar and Vietnam. AirAsia Group has been reviewing its forward business strategy regularly, including its investment in AAI. This transaction will ensure strict cost containment for AirAsia Group in the short term, and strengthen our presence in ASEAN while continuing our market dominance for travel from ASEAN to India and North Asia. India will remain an important market for AirAsia.”
Headquartered in Bengaluru, AAI flies to 19 domestic destinations across India with 30 Airbus A320 aircraft. AirAsia operates over 100 weekly flights from Malaysia and Thailand to nine destinations in India. Meanwhile, international services to India from Malaysia and Thailand will resume in the future after travel restrictions are lifted and borders with India are reopened, the airline informed.
As the industry is holding on to innovation and collaboration to sustainably come out of the pandemic year, many transformations, challenges and new ventures await especially for the aviation industry.