AirAsia has been cutting back its investment in AirAsia India due to financial difficulties.

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AirAsia has been cutting back its investment in AirAsia India due to financial difficulties.

In a stock exchange filing on Tuesday, Malaysian budget airline AirAsia Group Bhd said it plans to sell 32.67 percent of its interest in its Indian operations to Tata Sons for $37.7 million.

The airline, which previously owned 49% of AirAsia India as part of a joint venture with Tata Sons, said the sale would enable the company, in the midst of the impact of the COVID-19 pandemic on travel, to concentrate on its recovery in its main Southeast Asian markets.

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

The announcement comes two months after AirAsia closed its Japanese activities, citing extremely difficult circumstances in the midst of the pandemic.

As the company continues to face financial difficulties, AirAsia has cut back on its investment in AirAsia India.

The airline is a joint venture with Tata Sons, which owns 83.67% of the airline’s stake, and AirAsia Investment Limited (Malaysia) holds a 16.33% stake. With Bangalore as its primary hub, AirAsia India began operations in India in 2014.

AirAsia was the first international airline to create a subsidiary in India, and after 60 years, the company marked the return of the Tata Group to the aviation industry, having ceded Air India in 1946. In 2014, AirAsia India first started operating, controlling 49 percent of the Tata group. The carrier hoped to capture India’s fast-growing, low-cost market, similar to the model replicated in other regions by AirAsia. The relationship with Tata provided funding and good name recognition in India for the airline.

Despite this, the airline faced stiff competition from existing players such as IndiGo, GoAir, and SpiceJet, struggling to make its mark on the Indian market. The airline only had a market share of 6.6 percent as of November 2020. This places AirAsia India on the list of major domestic airlines as the second-last. A fleet of 33 aircraft, consisting of 30 A320-200s and three A320neo aircraft, is currently operating at a low cost.


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