AirAsia is officially selling 32.67% of its stake in AirAsia India to majority shareholder Tata Sons for $37.7 million. The sale comes after AirAsia reportedly stopped funding its India subsidiary in October, leaving the airline’s fate with the Tatas. Tata already owns a majority stake in Vistara and is currently bidding for flag carrier Air India.
Sale official
The first details of the sale first emerged last week, where we learned that Tata would increase its stake in AirAsia India. While reports suggested AirAsia would only hold a 13% stake, the official amount is now 16.3%. This would mean the Malaysia-based group is no longer a joint-venture partner in the airline.
AirAsia estimates that the sale will be complete by March 2021, according to Reuters. However, this doesn’t mean the AirAsia livery is going anywhere, as operations and branding will likely remain the same even with the sale. Instead, we could see smaller changes at the airline in the coming months.
One major change that is being discussed is a new booking platform for AirAsia India. Currently, all bookings for the subsidiary occur on the AirAsia group website, the norm for all subsidiary airlines. However, Tata is considering decoupling the website and setting up a new one for AirAsia India exclusively, along with a new crew scheduling system.
Part of a broader strategy
For Tata, the purchase of AirAsia India is likely part of a broader strategy in the aviation industry. The conglomerate recently placed its bid for Air India after months of deliberations and discussions. If successful, Tata would control two full-service and one low-cost carrier, giving it a significant foothold in the market.
The group does look like the favorite to take control of Air India, although nothing is formally decided yet. Tata may choose to merge all three carriers and reduce the number of brands in the future. For now, it is slowly increasing its stake in the aviation industry.
AirAsia’s tough year
AirAsia Group’s partial exit from India marks the third subsidiary it has closed or exited this year. AirAsia Japan and AirAsia X Indonesia were both axed this October as a part of the broader restructuring. Speaking to Reuters, CEO Tony Fernandes has said the group is looking to consolidate and grow operations in Southeast Asia alone. This comes after the airline lost $238 million in the second quarter.
Airbus revealed that AirAsia X, the group’s long-haul subsidiary, is looking to ax orders worth up to $5 billion. The carrier has been losing money rapidly, with a loss of $271 million in Q3, and stands at the risk of liquidation.
Despite most of Southeast Asia’s success with controlling the virus, countries have strict controls on who can enter. This has meant traffic remains almost exclusively domestic, causing airlines heavy losses.
What do you think about Tata’s decision to expand its stake in AirAsia India? Let us know in the comments below!
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