Wednesday, December 09, 2020

Tata to stop paying dues to AirAsia Group if latter fails to invest in Indian JV by Dec 31 — report

Kuala Lumpur: India-based conglomerate Tata Group will stop dues payment by AirAsia (India) Ltd to AirAsia Group Bhd if the latter does not provide funding to their low-cost airline joint venture (JV) before Dec 31, 2020, The Economic Times (ET) reported, citing recently-added clauses in the AirAsia India shareholder agreement.

According to the ET report on Tuesday (Dec 8) evening, Tata will also start deducting the dues and setting them off against equity shares in AirAsia India if its JV partner AirAsia Group is unable to bring in funds by subscribing to a rights offer of at least 300 crore rupee (about RM166 million).

"The development highlights the strain that has emerged between the business allies in recent times.

"AirAsia India, a 51:49 JV where Tata is the controlling shareholder, owes AirAsia Group 489 crore as per its latest available financial statements. 

"Now, Tata Group had infused 300 crore into the budget carrier (AirAsia India) in July to keep it flying amid the Covid-19 outbreak that resulted in a two-month ban on flying from March 24. The new clauses were incorporated in the shareholder agreement at that point, people aware of the matter told ET,” ET reported.

It was reported that AirAsia India owes money to AirAsia Group on account of money it collected for selling tickets on aircraft operated by other AirAsia Group companies. 

According to the report, AirAsia India also uses services of AirAsia Group companies for maintenance of its aircraft and also procures consumables and in-flight magazines from AirAsia Group.

"Some of those payables could start converting into equity in the airline (AirAsia India) if AirAsia [India’s Malaysian] parent fails to pump funds by the end of the year. 

"Tata and AirAsia India declined to comment when contacted. AirAsia Group did not respond to queries as of press time Tuesday,” ET reported.

09/12/20 Arjuna Chandran Shankar/

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