Wednesday, October 07, 2020

With partner looking to exit, Tata Sons has some tough decisions to take on AirAsia India

Tata Sons continues to be in talks with its joint venture (JV) partner AirAsia on the latter's imminent exit from the Indian market. The conglomerate's holding company may invest up to Rs 500 crore through optional convertible debentures, Business Standard reported. Also, AirAsia Berhad is said to have received an offer from an unnamed fund to buy its stake in the Indian airline JV.

Tata Sons holds 51 percent stake in the low-cost airline.

Separately, Moneycontrol has learnt that the airline's top management had sought out to reassure its vendors and partners that it's not shutting shop, as Puri had indicated in a comment that went viral. A senior executive from an aviation company that does business with AirAsia India said that the airline has reiterated that it continues to do business in India.

"AirAsia’s shop is anyway shutting down....Their parent company has problems," the minister had said. Later he took back his words.

While Tata Sons' intent to invest further money in AirAsia India will soothe frayed nerves, it is also clear that it is in a bind. "The Group is in a Catch-22 situation. While it will fight to save its investment, the fact is that AirAsia India has struggled," says a senior executive from the industry.

The larger question is - what options does the Tata Group have once AirAsia Berhad exits the JV?

"Tata Sons will retain the AOC, or the air operator's certificate, to run an airline. When it comes to the fleet, most of the aircraft are from AirAsia Berhad. But of late the Indian arm had begun to lease aircraft directly. So these will also remain," said an industry official.

AirAsia India has a fleet of 30 Airbus A320 planes.

But what happens to the brand? Some answers could come from AirAsia Berhad's experience in Japan, from where it recently announced its exit, for the second time.

07/10/20 Prince Mathews Thomas/

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