AirAsia offloads stake in India business to Tata for $38m

Indian conglomerate already owns 51% majority stake but will add a further 32.7%

Baggage is loaded onto AirAsia Airbus airplanes at the Low Cost Carrier Terminal in Kuala Lumpur, Malaysia, on Thursday, Oct. 4, 2007. AirAsia Bhd. is in talks with private equity funds to sell a 20 pShow more

AirAsia Group, hit by the coronavirus pandemic that has severely dented passenger demand, is selling its 32.7 per cent stake in AirAsia India to its partner Tata Sons for about $38 million.

The Malaysian low-cost carrier entered into an agreement with Tata Sons, which already owns 51 per cent of the venture, according to an exchange filing on Tuesday.

AirAsia Group last month said it was reviewing investment in its cash-strapped Indian affiliate, hours after its Japan unit filed for bankruptcy. The group has also stopped funding AirAsia India leaving the future of the company largely dependent on India’s Tata Group.

Chief executive Tony Fernandes this month said AirAsia is evaluating its venture with the Tata Group, while the two expand their relationship in the digital business.

“At the right time we will make the announcements, but definitely our strength is Southeast Asia and that’s where most of our expansion is going to be over the next two to three years,” he said in a December 7 interview with Bloomberg.

AirAsia India started flying in 2014 with a promise to break even in four months. But it’s never made money in what is one of the world’s most difficult markets, where high fuel taxes and cut-throat fares often make operations unprofitable.

“The AirAsia Brand in India, unlike AirAsia operations in Thailand, Indonesia, Malaysia and Philippines, wasn’t able to capture significant market share and repeatedly suffered from constant blows from the competition,” said Mark Martin, chief executive officer of Martin Consulting. “Tata’s strategic takeover should bring in much-needed stability.”