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Air Asia Sells Stake In Indian Subsidiary
Air Asia announced it is selling most of its stake in its Indian subsidiary, Air Asia India. The decision comes due to the airline’s need to focus on recovering in its key markets across Southeast Asia, as reported by Reuters.
The budget airline group is selling its stake to Tata Sons, which is already the majority shareholder in the Indian carrier. Tata Sons is the holding company of Tata Group, which in itself encompasses more than 100 companies including Tata Motors, Tata Consultancy Services and Tata Steel.
Prior to the deal, Air Asia owned 49% of Air Asia India, while it will now hold 16.3% of the venture as Tata becomes the full owner of more than 80% of the low-cost subsidiary. The deal involving the sale of 32.67% of Air Asia’s shares is valued at $37.6 million.
In a statement, Air Asia said that the sale comes as part of the group’s reevaluation of its strategic focus in a post-pandemic world. As COVID-19 has had a major impact on airlines’ balance sheets, Air Asia is looking to focus on the recovery of its key Southeast Asian markets in Malaysia, Thailand, Indonesia and the Philippines, while reevaluating its presence in non-core markets elsewhere. With Air Asia India losing money before COVID shuttered mobility across the world, the Kuala Lumpur-based carrier didn’t deem keeping larger participation as a priority.
In October, Air Asia shut down its Japanese venture as it filed for bankruptcy. Back then the group signaled their look to focus on core markets in which they saw demand levels recovering faster.
Tata Looks to Fly Higher
Tata Sons has been showing interest in expanding the group’s involvement in the airline industry. The Indian holding company has said it is interested in purchasing a stake in India’s bankrupt state-owned carrier, Air India, with the goal of increasing its presence in India’s aviation sector.
Tata already owns shares in Vistara — a full-service airline based in Gurgaon, India — so gaining ownership in both Air India and Air Asia India could make them a true leader in the Indian airline sector. The Air India deal looks like more complex to carry forward given the multiple parties involved and the fact that the purchaser has to absorb its almost $8 billion debt, though the condition to absorb debt can also reduce the price to pay for the airline.
According to India’s Business Today magazine, if Tata acquires Air India, their enterprises including Vistara, Air Asia India and India’s flag carrier would have almost 23% market share in India’s domestic market. Doing so, they would become India’s second-biggest airline group after IndiGo, which owns more than 50% of the domestic market share in the country.
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