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The fate of the ‘struggling’ AirAsia India hangs in the balance with one of its strongest critics, Cyrus Mistry, back at Tata Sons, one of the joint venture partners of the airline.
One of the key issues raised by Mistry in his petition against his ouster as Tata Sons’ chairman in October 2016 was what he claimed were “corporate governance’’ lapses while floating the airline venture. In case the Supreme Court upholds the National Company Law Appellate Tribunal’s ruling that reinstated him as chairman of Tata Sons, there is a strong possibility that Mistry may want the board to either stop funding AirAsia India further — which could eventually result in the company having a reduced stake in the airline, something that the scion of the Shapoorji Pallonji group always wanted — or completely exit the airline by selling off Tata Sons’ stake to another corporate house.
It may be recalled that Mistry, after reluctantly agreeing to the decision made during a board meeting in 2012 to float the airline with AirAsia Berhad, wanted Tata Sons to limit the stake in the venture to 30 per cent. But Tata Sons later raised its stake to 51 per cent after buying one of the partners’ stakes in the carrier.
The airline itself has been facing lot of turbulence ever since it began operations in 2014. It has been hit by regular exits at the CXO-level, while losses have been mounting over a period of time. The latest to leave the company was Sanjay Kumar, COO of the company. A year ago, Amar Ambrol, the CEO of the airline, left the organisation. In 2017, five functional heads resigned after the exit of the high-profile CEO Mittu Chandilya in 2016.
Financial woes
The airline has also been struggling financially with losses growing to over ₹670 crore during 2018-19 even though it has not prevented the joint venture partners from infusing fresh funds worth ₹466 crore recently into the venture with Tata Sons’ contribution being ₹238 crore. Tata Sons also has a joint venture with Singapore Airlines in the form of Vistara, a full-service carrier.
However, if Tata Sons decides to pull out of one of the two ventures, it could be AirAsia India as it is on a weaker wicket than Vistara because of various cases it faces: In 2013, BJP leader Subramanian Swamy had filed a petition in the Supreme Court claiming that the clearance given to AirAsia India was in violation of the FDI norms for foreign airlines.
He had also opposed giving the airline a go-ahead for flying international routes.
In fact, AirAsia Berhad itself is not performing well financially. AAI’s auditors last year had also pointed out the “material uncertainty about the company’s ability [Air Asia’s] to continue as a going concern.”
For 2018-19, the total losses posted by Vistara and AirAsia India together amounted to ₹1,500 crore. Tata Sons own 51 per cent stake each in both the airlines.
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