AirAsia gives clear indication of India joint venture exit

Mumbai: Malaysian carrier AirAsia Berhad has given its clearest indication yet that it wants to exit its Indian joint venture.
Its businesses in Japan and India have been “draining cash, causing the group much financial stress,” airline president Bo Lingam said in a statement on Tuesday. “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.”

The airline said passenger growth in India was 79% in the July-September quarter over last year.

AirAsia Berhad shut its Japanese affiliate last month. It owns 49% in its India joint venture and has been in talks with partner Tata Sons to exit the business for a few months, with both parties struggling to arrive at a price. In June, a Credit Suisse report cited AirAsia global CEO Tony Fernandes as hinting there would be an exit from India.

In August, ET reported the auditors of Tata Sons raised doubts about the capability of the airline to continue as a going concern, months after AirAsia’s own external auditors EY raised similar concerns.

AirAsia India’s losses widened to Rs 332 crore in the June quarter from Rs 15 crore a year earlier, according to a Kuala Lumpur stock exchange filing.

“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 is strongest and that’s where our immediate focus will lie,” Lingam said in the statement.

He expressed confidence about other markets.

“AirAsia is already seeing strong signs of recovery in our key domestic markets where there is much pent-up demand. AirAsia’s domestic services in Thailand, for example, are already at close to 100% of pre-Covid capacity levels and there are similar strong positive signs from across the AirAsia Group including in Malaysia, Indonesia and the Philippines,” he said.

“Positive developments on travel bubbles already being formed in Asia and numerous Covid-19 vaccines in near-final stages of testing are certainly great news for the industry. The general outlook is that air travel will be bouncing back real soon; we expect to get back to pre-pandemic levels on many routes across the Group by mid-2021, if not earlier,” he added.