After AirAsia ceases Japan operations, Tata eyes operations on its India exit

As AirAsia Group Bhd. has stopped funding its Indian affiliate following the global travel slump due to International COVID lockdown, it is speculated that future may now depend on Indian conglomerate Tata Group. Air Asia India reported a 56.2 per cent passenger load factor and a 6.2 per cent market share in June.

New Delhi:Amid reports of AirAsia Group Bhd. closing down its operations in Japan, sources said that the Tata Group, which owns 51 per cent stake in Air Asia India, is looking for various options for its venture with the airline.

AirAsia Group Bhd. announced that its 33 per cent owned associate AirAsia Japan Co Ltd (AAJ) is ceasing operations due to 'highly challenging operating conditions'. Air Asia is working on raising as much as $600 million to deal with the financial blow of the Covid-19 pandemic. AirAsia's long-haul arm AirAsia X has said that it needs to reach an agreement with major creditors to restructure outstanding debt as it faces 'severe liquidity constraints' that threaten its ability to resume flying and continue as a going concern.

"The first option for which Tata Sons Ltd is looking at is to buy out the remaining 49 per cent held by the Malaysian firm in the Indian affiliate. Another option for which they are considering, is for a merger of the businesses of Vistara and AirAsia," said a person requesting anonymity. He, however, said that this is less possible for the Tata Group, as Vistara, which has a 51:49 joint venture between Tata Sons and Singapore Airlines, is in good financial condition watching the Covid-19 related uncertainty and won't be going to disturb that venture.

When ETV Bharat tried to contact AirAsia India and Vistara, they did not respond.

According to the aviation regulator Directorate General of Civil Aviation, Air Asia India reported a 56.2 per cent passenger load factor and a 6.2 per cent market share in June. In August, airlines' market share had gone up to 6.8 per cent.

Notably, Union Civil Aviation Minister Hardeep Singh Puri on Saturday said, "AirAsia ki dukan band ho rahi hai...matlab unki parent company main problems hai...(AirAsia is downing its shutters... there are problems in the parent company). They may be in financial stress." However, the ministry spokesperson later said that the minister's comment was taken out of context. But, industry insiders told ETV Bharat that soon after minister's comment gone viral, airline's management had to ensure its partners that the airline is not shutting and it will continue its operations in India.

All airlines in India have taken cost-cutting measures by announcing pay cuts, LWP and firing of employees in order to conserve cash flow.