AirAsia To Sell 32.67% Stake In Indian Operations To Tata Sons

Kuala Lumpur: Malaysian budget airline AirAsia Group Bhd said in an stock exchange filing on Tuesday it plans to sell 32.67 per cent of its stake in its Indian operations to Tata Sons for $37.7 million.

The airline, which previously owned 49 per cent of AirAsia India as part of a joint venture with Tata Sons, said the sale would allow the company to focus on its recovery in its key southeast Asian markets amid the impact of the COVID-19 pandemic on travel.

“The directors having considered the rationale for the transaction and after careful consideration, are of the opinion unanimously that the transaction is in the best interest of AirAsia and its shareholders,” it said.

The announcement comes two months after AirAsia shut its operations in Japan, citing highly challenging conditions amid the pandemic.

AirAsia has been cutting back its investment in AirAsia India as the group continues to face financial difficulties.

The airline is a joint venture with Tata Sons owning 83.67 per cent stake in the airline and AirAsia Investment Limited (Malaysia) holding 16.33 per cent stake. AirAsia India started operations in India in 2014 with Bangalore as its primary hub.

AirAsia is the first foreign airline to set up a subsidiary in India and the company marked the Tata group's return to the aviation industry after 60 years, having ceded Air India in 1946. AirAsia India first began flying in 2014, with the Tata group owning 49 per cent. 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.

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