AirAsia To Shut Down India Operations As Aviation Sector Continue To Suffer Losses Amidst Extended Travel Restriction, Reports Highest Ever Quarterly Loss In August

AirAsia

Comment from the local aviation minister suggests that AirAsia might shut down its operations within the country. The local aviation minister Hardeep Singh Puri said this on television over the weekend. He said, “Air Asia’s shop is anyway shutting down. Their parent company has problems.” However, later his office suggested that the comments of the local aviation minister was taken out of context.

Air Asia India’s majority is owned by Indian conglomerate Tata Sons. The spokesperson of the company declined to comment on this very issue. However, a spokesperson for the civil aviation ministry had said that the comments were taken out of context and had also immediately clarified them.

Coronavirus pandemic has affected several sectors and businesses. However, not many sectors has been hurt as bad as the aviation sector. Imposed travel restrictions around the globe meant that flights stayed grounded for months. AirAsia which was once a shining light in the global aviation sector and a had once brought about low-cost airline revolution in Asia is now struggling to keep themselves afloat. The company is looking to raise a substantial amount, as much as $ 600 million by the end of the year to recover from the disruptions that the pandemic has laid.

The company has reported its highest ever quarterly loss in August. The Malaysian based air carrier has also said that they are evaluating its operations in Japan. Their operations in Japan is on the verge of closing down. An earlier Reuters report also suggests that the carrier’s Indian operations are also under evaluation.

AirAsia is leaving Japan and shutting down its operations there as they struggle to get out of grapples with pandemic-related restrictions on global travel according to local media reports. Chief Executive Officer Tony Fernandes had also confirmed that the company leaving Japan is a real possibility.

The Malaysian company started operations in India back in 2014. The company could not back money in the tough Indian market and struggled to keep up with high fuel rates and unprofitable fare rates that put the company into more loss.

Two senior executives of AirAsia India were suspended by India’s aviation regulator after a pilot claimed several safety lapses at the airline. The Indian aviation regulator are also investigating Fernandes and other officials for allegedly paying bribes to influence local policy.

Tata Sons to acquire AirAsia India’s operations

Indian conglomerate Tata Sons is reviewing AirAsia operations as the company faces financial challenges post COVID-19 pandemic led lockdown and are struggling to keep afloat.

Tata Sons already own 51 percent of the low-cost air carrier. They are also opting to buy out the rest of the 49 percent of the company. Tata Sons also has the first right of refusal for the minority stake owned by AirAsia in the Indian venture. The source that reported this also said to the news agency Times of India, “AirAsia, because of its financial difficulties, is not keen on infusing capital into the India JV. It wants the JV to take on debt to run the operations. Tata Sons are forced to consider buying out AirAsia.”

The low-cost airline had been unprofitable since its launch. Tata Sons during the FY20 report stated that the airline’s net worth is completely eroded. Tata Sons had also induced ₹ 490 crores in AirAsia India in FY20. Whereas during the same time period JV reports of a loss of ₹ 317 crores. Times of India reported another source who said, “The environment (Fernandes’ financial scenario) will influence Tata Sons’ decision on the JV and determine the exit price for AirAsia.”