Covid-hit AirAsia Berhad mulls India exit: Another airline shutdown coming?

The AirAsia Group had pointed out that its Japan and India businesses have been 'draining cash'

Covid-hit AirAsia Berhad mulls India exit: Another airline shutdown coming?
An Airbus A320 of AirAsia India. Image courtesy: Wikimedia Commons/Arjun Sarup

There seems to be more turbulence in the aviation sector as Malaysia’s AirAsia Berhad has given a clear hint of exiting India due to financial stress, especially during the Covid-19 lockdown.

Interestingly, the move came months after civil aviation minister Hardeep Singh Puri, in an event in October, said, “AirAsia ki dukaan band ho rahi hai.” He observed that AirAsia is downing its shutters... There are problems in the parent company.

AirAsia, once the poster boy of a low-cost airline revolution in Asia, started its operations in India in 2014. The business was founded as a joint venture between AirAsia Investment Ltd and Tata Sons, which then promised to breakeven in four months. But that never happened. In fact, the company kept draining cash.

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After closing its operations in Japan last month, AirAsia has also flagged its concerns about its businesses in India. Its businesses in Japan and India have been “draining cash, causing the group much financial stress,” the airline's president Bo Lingam said in a statement on November 17.

“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 statement added.

The Indian aviation sector, which is considered to be one of the world’s most difficult markets, is already reeling under financial distress faced by stakeholders due to the pandemic. It has seen many prominent airlines like Jet Airways, JetKonnect, JetLite and Kingfisher Airlines folding their wings in the past decade, and has players like Spicejet, GoAir and even the national carrier Air India floundering. Now, the exit of AirAsia will come as another blow to the struggling sector.

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Directorate General of Civil Aviation (DGCA) data shows that AirAsia India operated with a 58.4% load factor and had a 6% share in the domestic air passenger market during September.

A leading newspaper earlier reported that Tata Sons is reviewing the joint venture with AirAsia, and is in talks to buy out the 49% stake the Malaysian firm holds in the Indian affiliate.

However, the AirAsia group is optimistic as it said that it remains confident of returning stronger, more robust and faster than many competitors, given strong signs of recovery in its key domestic markets due to pent up demand and numerous Covid-19 vaccines in near-final stages of testing.

“The general outlook is that air travel will be bouncing back real soon; we expect to get back to pre-pandemic levels on many routes across the group by mid-2021, if not earlier,” Lingam said.

When contacted, an AirAsia India spokesperson said, "We decline to comment." A Tata Sons spokesperson also did not offer any comments.

Headquartered in Bengaluru, AirAsia India flies to 19 destinations across India with 31 Airbus A320 aircraft in its fleet.

(Cover image courtesy: Wikimedia Commons/Arjun Sarup)