Salt-to-software conglomerate Tata Sons is reportedly reviewing its joint venture with Malaysia’s AirAsia as the budget airline faces Covid-19 headwinds.
The holding company of Tata Group, which owns a 51% stake in AirAsia India, is in talks to buy the remaining 49% as its Malaysian partner is reluctant to inject fresh equity, Times of India reports. Tata Sons has the first right of refusal for the stake owned by AirAsia in its India venture.
AirAsia recently posted its biggest quarterly loss, and CEO Tony Fernandes described India as a peripheral market, which it could exit in future. Fernandes indicated that to reduce losses the budget airline was looking at exiting some of its regional subsidiaries including AirAsia India.
Launched in 2014, AirAsia India has remained unprofitable and the ongoing flight curbs due to the pandemic have taken a heavy toll on its net worth. In FY20 Tata Sons had invested 4.9 billion rupees and the joint venture and the airline posted a loss of 3.17 billion rupees. Questions are also being raised over its continued viability.
To add to the confusion, India’s Civil Aviation Minister Hardeep Singh Puri on Saturday said AirAsia’s parent company was facing problems and the airline was downing shutters. AirAsia India has declined to comment on the matter.
The launch of AirAsia India had marked Tata Group’s return to aviation. The group was instrumental in bringing commercial aviation to India. In 1932 it began the first air mail service and soon started passenger services under the name Tata Airlines. After Independence, the government bought a 49% stake in Air India in 1948, and nationalized the carrier in 1953.
Tata Sons also operates full-service airline Vistara in partnership with Singapore Airlines. It is also evaluating a bid for the ailing state-owned airline Air India, which the Indian government is keen to sell.
Meanwhile, AirAsia Japan has announced that it was ceasing operations on Monday. “We have concluded that it would be an extremely challenging feat for us to continue operating without any visibility and certainty of a post-pandemic recovery path,” said Jun Aida, the chief operations officer of AirAsia Japan. “This painful decision to cease operations was decided neither in haste nor taken lightly.”
Airlines globally have grounded thousands of planes amid flight restrictions to contain the spread of the coronavirus. Many have been raising funds via rights offerings and seeking state support in their efforts to stay afloat. Travel demand won’t return to pre-Covid level until 2024, according to the International Air Transport Association.