Growing Financial Stress Urge AirAsia to Review its Investment in India

Malaysia’s Air Asia Group Berhad is considering to review its investment in the low-cost carrier Air Asia India that operates in a joint venture with the Tata Group. Air Asia India has witnessed draining cash and suffered severe financial stress. The joint venture had started its operations about six years ago and has been facing financial stress for quite some time.

Commenting on the move, Bo Lingam, President, AirAsia Group, states, “The Company’s Japan and ‘India businesses have been ‘draining cash’, causing the group ‘much financial stress’. Cost containment and reducing cash burns remain key priorities evident by the recent closure of AirAsia Japan and an ongoing review of our investment in AirAsia India.

It is said that the airlines are in talks with Tata Sons to sell its 49 percent stake in the joint venture to the Tata Group. However, the airline has also closed its operations in Japan last month.

The Directorate General of Civil Aviation's report states that Air Asia India has been operating with a 58.4 percent load factor and had about six percent share in the domestic air passengers market in September. However, the airline carried about 2.4 lakh passengers in this period, comparing its market with that of IndiGo, which held 57.5 percent market share during September and has recorded a load factor of 65.4 percent by carrying about 22.7 lakh passengers in the month.

However, Air Asia India has recorded about a 79 percent increase in the number of passengers carried in the July-September quarter as compared to its previous quarter. On the other hand, AirAsia Thailand has shown a rise of 65 percent and AirAsia Malaysia witnessed a 36 percent increase during the same period.

In a statement, Bo Lingam says, “A detailed network and fleet optimisation strategy has been implemented across the network, putting the right foundations in place for a sustainable and viable future. We continually review our network to ensure we fly the most popular and profitable routes. ASEAN is where our brand and foothold are strongest and that’s where our immediate focus will lie. Furthermore, our low fares stimulate demand and grow the air travel market such as the recent launch of a number of new domestic routes where we have seen our market share grow.”