NEW DELHI Malaysian airline AirAsia Berhad, which owns a 49% stake in AirAsia India, indicated on Tuesday that it could exit its joint venture with Tata Sons due to financial difficulties caused by the COVID-19 pandemic.
“Our businesses in Japan and India have been running out of cash, causing the Group a lot of financial stress. Cost containment and reducing cash burn remain key priorities evident from the recent closure of AirAsia Japan and an ongoing review of our investment in AirAsia India, “the Malaysian airline said in a statement on Tuesday.
“A detailed network and fleet optimization strategy has been implemented across the network, laying the right foundation for a viable and sustainable future. We continually review our network to ensure we fly the most popular and profitable routes,” he said, adding that the airline would focus on the Asean region, where its operations are the strongest.
When contacted, AirAsia India spokespersons and a Tata Sons spokesperson did not offer comment.
During June, leading investment bank and financial services company Credit Suisse said in a report that AirAsia Berhad could exit its Indian venture with the Tata Group, citing the Malaysian company’s chief executive, Tony Fernandes.
The Asean region is a core market for AirAsia Berhad, while India and Japan are peripheral markets, Fernandes said during a global call organized by Credit Suisse in June. “Thus, he shared that while he is currently growing and engaging, ‘we would never say we would never leave India,’ the Credit Suisse report added.
Mint had reported in July that AirAsia Berhad, facing headwinds due to disruptions to the airline industry due to covid-19, had approached the Tata group in June to sell its stake, as stipulated by the terms of the joint venture (JV) under which Tata Sons the right of first refusal.
The airline, which started operations in 2014, has never reported an annual net profit despite being very conservative with its growth plans.
The airline’s losses expanded to ₹Rs 332 crore during the April-June 2020 period mainly due to closure and travel restrictions to contain the covid-19 pandemic, compared to ₹Loss of 15.11 million rupees during the same period of the previous year.
According to the latest passenger traffic data from the Directorate General of Civil Aviation (DGCA), AirAsia India reported a load factor of 58.4% and a market share of 6% in September. The airline carried 0.24 million passengers during the period. By comparison, market leaders IndiGo, which had a 57.5% market share in September, posted a 65.4% load factor, carrying 2.27 million passengers for the month.
The load factor, or passenger load factor, is an aviation industry metric that measures an airline’s passenger carrying capacity.
Indian airlines are negatively affected by the ongoing covid-19 pandemic, which has led to a decline in demand amid travel restrictions, especially in international sectors. According to industry lobby group International Air Transport Association (IATA), airlines in the Asia-Pacific region, including India and Malaysia, are the hardest hit by the COVID-19 pandemic, with losses expected are around $ 29 billion by 2020. more than a third of the industry’s losses of $ 84.3 billion globally.
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