Tata Sons to acquire 32.67% stake in AirAsia

On Tuesday, in a stock exchange filing, Malaysian budget airline AirAsia Group informed about its plans to sell 32.67% of its share in its Indian operations to Tata Sons for $37.7 million. As part of a joint venture with Tata Sons, previously the airline owned 49 per cent of AirAsia India. It said that amid the repercussions of the Covid-19 pandemic on travel, the sale would let the company focus on its recovery in its main southeast Asian markets. The airline informed the directors have discussed the rationale behind the move. They came to a conclusion that the transaction is in the best interest of AirAsia and its shareholders.

Before this, AirAsia had shut its operations in Japan two months back on account of challenging conditions amid the pandemic. As the group continues facing financial difficulties, it has been cutting back its investment in AirAsia India. In 2014, AirAsia India started operations in India with Bangalore as its main hub. The airline is a joint venture with Tata Sons owning 83.67% stake in the airline. On the other hand, AirAsia Investment Limited (Malaysia) holds 16.33% stake. AirAsia is the first foreign airline to establish a subsidiary in India. Apart from this, the joint venture marked the Tata group’s return to the aviation industry after 60 years, having relinquished Air India in 1946.

With the Tata group owning 49 per cent, AirAsia India first began flying in 2014. The association with Tata provided the airline with funding and strong name recognition in India. In spite of this, the airline struggled to make its mark in the Indian market. It faced tough competition from established players like IndiGo, GoAir and SpiceJet. The airline only had a market share of 6.6% as of November 2020.

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