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AirAsia, which reported its largest loss on record in the second quarter ended June 30, has been under immense pressure this year as Covid-19 roils the aviation industry. (Mint)
AirAsia, which reported its largest loss on record in the second quarter ended June 30, has been under immense pressure this year as Covid-19 roils the aviation industry. (Mint)

AirAsia flags cash drain in India after Japan unit goes bust

AirAsia Japan Co. filed for bankruptcy with the Tokyo District Court earlier Tuesday

Malaysian low-cost carrier AirAsia Group Bhd. is reviewing investment in its cash-starved Indian affiliate, hours after its Japan unit filed for bankruptcy.

“Our businesses in Japan and India have been draining cash, causing the Group much financial stress," Bo Lingam, president of airlines at AirAsia Group, said in a statement on its website. “Cost containment and reducing cash burns remain key priorities evident by the recent closure of AirAsia Japan and an ongoing review of our investment in AirAsia India."

AirAsia Japan Co. filed for bankruptcy with the Tokyo District Court earlier Tuesday, after flagging last month it would cease operations in the country as the coronavirus pandemic that’s wiped out travel globally took its toll. Airasia Japan received a provisional administration order from the court Tuesday, it said in a statement.

The group has also stopped funding AirAsia India Ltd., Bloomberg News reported last month, leaving the future of the company largely dependent on its 51% shareholder, Indian conglomerate Tata Group. Long-haul budget arm, AirAsia X Bhd., isn’t faring much better, earlier this month submitting a new debt restructuring proposal to creditors.

Representatives for Tata and AirAsia India declined to comment.

AirAsia, which reported its largest loss on record in the second quarter ended June 30, has been under immense pressure this year as Covid-19 roils the aviation industry. Airlines globally have been plunged into crisis, with many cutting thousands of jobs and trying to secure funds for survival. Some, pushed to the brink, have gone out of business.

AirAsia Japan had already canceled all flights, including one between Nagoya and Taipei. Services operated to Japan by AirAsia’s other carriers in places like Thailand and the Philippines won’t be affected. International services to Japan from Malaysia, Thailand and the Philippines will resume as travel restrictions are eased and borders reopen, the airline said Tuesday.

“Given AirAsia Japan’s current financial position, we regret to inform that AirAsia Japan is currently unable to settle the outstanding refunds," according to another statement. “We sincerely apologize for any inconvenience caused to customers who have used or booked AirAsia Japan flights."

Customers who have booked AirAsia Japan flights can apply for a refund, which should be available from April next year, or they will receive a credit that can be used on any other AirAsia-operated flight.

AirAsia India predicted it would break even in four months when it began flying in 2014. In reality, it has yet to make money in a market where high fuel taxes and cut-throat fares can make even dominant players unprofitable. The carrier has a market share of 6% and employs more than 3,000 people.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.

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