Logistics

AirAsia India’s co-owner may just be running out of patience, cash

K Giriprakash Bengaluru | Updated on June 22, 2020 Published on June 22, 2020

Tony Fernandes, CEO of AirAsia   -  AFP

‘We would never say that we would never exit India,’ Tony Fernandes says in an investor call

AirAsia India might have to look for a different suitor with reports about its co-parent AirAsia Berhad showing signs of running out of patience with its chairman claiming that there is a possibility of exiting the joint venture.

After letting go of several senior and middle-level executives including pilots recently, AirAsia, according to various sources, had indicated that to reduce losses, it was looking at exiting some of its regional subsidiaries including AirAsia India.

Signals on AirAsia Berhad’s possible exit from the joint venture emerged during a global investors’ call that its head, Tony Fernandes, had with Credit Suisse, wherein he said that India and Japan are peripheral markets for its aviation group while Asean was its core market.

“He acknowledged India is peripheral, and while currently committed and growing, an exit could be a possibility,” Credit Suisse said in its note to investors.

Even as he said “we would never say that we would never exit India,” Fernandes added that he shared a good partnership with Tata Sons, Credit Suisse’s Lokesh Garg and Gaurav Birmwal said in their note.

Both AirAsia India and Tata Sons did not respond to queries till the time of going to press. AirAsia Berhad has a 49 per cent stake in the venture, while the rest is with Tata Sons.

Turbulent history

AirAsia India has had a turbulent history since it commenced operations in India in June 2014. Its former CEO Mittu Chandilya was allegedly involved in a case of fraud n his personal capacity and had to hurriedly leave the airline.

Two years later, the CBI and the ED started a probe against the airline for allegedly trying to influence the government over relaxation of the 5/20 rule which made it mandatory for airlines to complete five years or have at least 20 aircraft before being permitted to fly international routes.

Later, Cyrus Mistry, who was ousted as chairman of Tata Sons in a boardroom coup, alleged that there were corporate governances lapses between the two joint venture partners.

AirAsia India itself has not had a good run so far.

It has never made profits since its launch six years ago.

Financial stress

As per its latest results, it recorded a fourth-quarter net loss of ₹123.3 crore in FY2019, 26 per cent lower than the same quarter, the previous year.

Its revenues were ₹1,057.6 crore, a 65 per cent increase from the fourth quarter of FY18.

Published on June 22, 2020
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