New Delhi: The future of AirAsia India Ltd depends on its majority shareholder Tata Group, after AirAsia Group stopped funding its Indian branch.
There is no immediate risk of the no-frills airline’s India operations folding up, ThePrint reported citing unnamed sources.
Tata, which holds a 51 per cent stake, is reportedly considering buying out AirAsia’s Indian operations after having already injected Rs 3 billion ($41 million) into the company.
Tata also holds a 51 per cent holding in the Vistara, a full-service airline venture with Singapore Airlines Ltd.
AirAsia India, which had claimed to have broken even within just four months of entering the Indian market, is yet to make any money. High fuel taxes and cut-throat fares are reportedly blamed for making airlines unprofitable here.
The Malaysian carrier has a market share of 6.8 per cent in India and employs more than 3,000 people.
Merging AirAsia and Vistara may be an option. But it’s “tricky because Vistara is well-capitalized and merging AirAsia India’s business during a downturn may suddenly weaken the merged entity’s financials, and cause more funding requirements, increase fixed costs and so on. This may not be desirable to Singapore Airlines,” sources told The Week.
Tata Group is currently reluctant to deploy funds as it needs capital to buy out Shapoorji Pallonji Group in Tata Sons, estimated at about ₹1.6 trillion.
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