2 min read.Updated: 17 Nov 2020, 10:06 PM ISTRhik Kundu
After shutting down operations in Japan, Malaysian firm evaluates investment in Indian budget airline that has never reported an annual net profit
AirAsia’s losses widened to ₹332 crore in the June quarter mainly due to the lockdown
NEW DELHI :
Malaysia’s AirAsia Bhd on Tuesday said it is evaluating its loss-making budget airline joint venture in India with Tata Sons Ltd in the wake of the financial distress due to the coronavirus pandemic.
“Our businesses in Japan and India have been draining cash, causing the group much financial stress. 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," the airline said in a statement on Tuesday.
“A detailed network and fleet optimization strategy has been implemented across the network, putting the right foundations in place for a sustainable and viable future. We continually review our network to ensure we fly the most popular and profitable routes," AirAsia Bhd said, adding that the airline would focus on the Asean region, where its operations are the strongest.
Spokespersons at AirAsia India and Tata Sons declined to comment. Tata Sons, the holding company of the Tata group, has a 51% stake in AirAsia India. AirAsia Group owns the remaining 49%.
Credit Suisse had in June cited AirAsia Bhd chief executive officer Tony Fernandes as saying that the carrier could exit its partnership with the Tatas. The Asean region is a core market for AirAsia, while India and Japan are peripheral markets, Fernandes had said. “Thus, he shared that while currently growing and committed, we would never say that we would never exit India," Credit Suisse cited Fernandes as saying during a global call.
Mint reported in July that AirAsia had in June approached the Tata group to sell its stake, as mandated by the terms of the joint venture under which Tata Sons has the right of first refusal.
The airline, which began operations in 2014, has never reported an annual net profit despite being very conservative with its growth plans.
AirAsia’s losses widened to ₹332 crore in the June quarter mainly due to the lockdown and travel curbs to contain the pandemic, sharply increasing from the ₹15.11 crore loss it had reported in the same period last year.
According to the latest data from the Directorate General of Civil Aviation, AirAsia India reported a 58.4% load factor and 6% market share in September, making it the sixth among six major commercial carriers in India in terms of passengers carried. It carried 0.24 million passengers during the period.
In comparison, market leader IndiGo, which had a 57.5% market share in September, recorded a 65.4% load factor, carrying 2.27 million passengers during the month.
Load factor, or passenger load factor, is an aviation industry metric that measures an airline’s passenger-carrying capacity.
Indian airlines have been among the worst-affected by the pandemic, which has led to muted demand amid travel restrictions, especially on international sectors.
According to industry lobby group International Air Transport Association (IATA), airlines in the Asia-Pacific region, including India and Malaysia, are the hardest hit by the pandemic with losses expected to be around $29 billion this year.
This is more than a third of the $84.3 billion industry losses expected globally.