Malaysian budget airline AirAsia Berhad will soon reduce its stake in the Indian joint venture with Tata Sons, as it looks to reduce cash burn in low-priority markets such as India and Japan in the wake of Covid-19 headwinds.
AirAsia’s stake in its India venture will fall to 13% from 49% and it will be reduced to a financial investor, Times of India reports. It has already ceased flying in Japan. The Indian joint venture will, however, continue to use the AirAsia brand and other agreements such as aircraft maintenance and ticket accounting software for some time, the daily added.
After the stakes rejig Tata Sons’ share will go up to 87%. The Indian salt-to-software conglomerate has started the process of separating AirAsia India’s website from the common portal run by the Malaysian airline to cater to different markets.
The joint venture airline began its services in 2014, but is yet to post profit. The Covid-19 crisis has forced the AirAsia group to review its investment in the country and it has not taken part in the recent fundraising rounds.
On the other hand, Tata Sons had in July infused 3 billion rupees (US$40.6 million) in AsiaAsia India and hiked its stake to 76% from 51%. It also runs another airline, Vistara, in collaboration with Singapore Airlines.
The Indian conglomerate is also keen to buy the ailing state-run carrier Air India, which the Indian government has been trying to sell for the past couple of years. Initially it had tried to bid for the airline through Vistara, but Singapore Airlines was not keen. It now intends to acquire Air India through AirAsia India and later integrate its airline businesses.
It may be recalled that the Tata 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 Indian government bought a 49% stake in Air India in 1948, and nationalized the carrier in 1953.