AirAsia Reduces Stake In Indian Subsidiary

AirAsia is scaling back its investment in AirAsia India as the group continues to face financial difficulties. The group will reportedly cut its stake to just 13%, giving the Tata Group significantly more stake in the airline. The change in ownership is unlikely to affect the AirAsia India brand but could see the airline separate from AirAsia’s operations.

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The Tata Group now controls 87% of AirAsia India. Photo: Getty Images

Tata takes over

Questions over the future of AirAsia India have been swirling for a few months now, with both Tata and AirAsia considering an exit. Eventually, the AirAsia group stopped funding the airline and left Tata to decide the carrier’s future.

According to a report in the Times of India, Tata has bought out most of AirAsia’s stake, leaving the group with only 13% of the airline. This means Tata now owns 87% of the carrier, making AirAsia more of an investor than a joint-venture partner. While the “AirAsia India” brand will survive, Tata is making some changes to the company.

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Tata is planning to make some changes to the airlines with its added stake. Photo: Getty Images

Tata is reportedly working on a new booking website for AirAsia India, which is currently integrated into the AirAsia group’s website. Additionally, a new crew scheduling software will also be put in place for the airline. While there are unlikely to be many changes on the surface, the Tata Group does have big plans for Indian aviation at large.

Struggling airline

AirAsia India first began flying in 2014, with 51% owned by Tata and 49% by AirAsia. The carrier hoped to capture the fast-growing low-cost market in India, similar to the model AirAsia had replicated in other regions. The partnership with Tata provided the airline with funding and strong name recognition in India.

However, the airline struggled to make its mark in the Indian market, facing stiff competition from established players like IndiGo, SpiceJet, and GoAir. As of November 2020, the airline only has a market share of 6.6%. This places AirAsia India second-last on the list of major domestic airlines. The carrier currently operates a fleet of 33 aircraft, consisting of 30 A320-200s and three A320neo aircraft.

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AirAsia entered the market hoping to replicate its success in other Asian markets. Photo: Getty Images

All of this has resulted in AirAsia India being a loss-making airline for nearly all of its existence. Following a relatively better 2019, the pandemic has once again pushed AirAsia India deep into the red. The airline reported a 69% drop in revenue during the second fiscal quarter and losses of nearly $45 million in the first, according to Mint.

AirAsia’s tough year

This isn’t the first subsidiary AirAsia is exiting this year, with both its Indonesia and Japan arms being axed. The carrier has faced significant financial concerns this year, as flight traffic across Asia remains low.

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AirAsia has struggled in 2020 as most Asian countries closed their borders to international flights. Photo: Getty Images

While traffic has been picking up slightly recently, the group continues to face existential crises as the pandemic drags on.

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