Is conglomerate, Tata Sons, preparing to buy out AirAsia Investments’ share of joint venture LCC, AirAsia India? As India’s airlines continue their industry-wide struggle to stay in the air, AirAsia India in particular, appears vulnerable to a change in ownership – at a bargain price for the buyer.
The LCC, held by Tata Sons (51%) and Malaysian partner, AirAsia Investments (49%), is reported to be disintegrating at leadership level.
According to sources in the Tata stable, discussions about a buy-out, at a far lower valuation than pre-COVID times, may happen because the two partners have grown weary of each other.
If a deal is struck to dissolve the partnership, it remains to be seen what Tata will do with the LCC. Will it continue to keep it flying or package it and sell it? It is believed the Tata view is that at least the “reins will be firmly in their hands” with AirAsia is out of the picture.
Auditors for AirAsia India parent, AirAsia Investments, have raised doubts about its status as a going concern because its liabilities, before the COVID-19 crisis, exceeded its assets by US$430 million.
Similar concerns about the local joint venture’s financial standing have been raised by its India auditors. Pre-pandemic, they said, accumulated losses at the LCC were higher than its share capital and current liabilities exceeded current assets.
According to sources, the AirAsia parent team is “fed up of India and its ways”. Running a business in India is never a piece of cake, but the joint venture has faced more than its share of problems from the word go.
Since 2018, after Tata Sons brought in their own man to run the airline and then upped their equity to 51% in April last year, AirAsia Group CEO, Tony Fernandes, has been steadily distancing himself from carrier.
“In the early days, he was sitting in the cockpit and running the airline from afar”, said a Tata source associated with the airline from 2014. But the love affair is over, he said.
Can the two partners strike a compromise? AirAsia Investments feels the airline took a lot of its time, effort, attention and finances from 2014 to 2018.
In late 2019, a senior level Tata team went to Malaysia to discuss the way forward with Fernandes, but a watertight article of association between the two partners made exit for either of them difficult.
Almost two years on, the pandemic may provide a way out of the joint venture both parties – the final nail in the coffin of a long and unhappy marriage.