The low-cost airline AirAsia Group of the Malaysian tycoon Tony Fernandes is selling a 32.7% stake in its Indian company to its partner Tata Sons.
Tata, which already controls a 51% stake in AirAsia India, will acquire the additional stake for approximately $ 37.7 million, according to a report on the Kuala Lumpur Stock Exchange. The AirAsia Group will continue to hold a 16.3% stake in the airline.
“This transaction will reduce the company’s cash burn in the short term and allow AirAsia to focus on the long-term recovery of its key ASEAN markets in Malaysia, Thailand, Indonesia and the Philippines,” the file said.
AirAsia India was launched in 2014 and promised to become profitable within four months, but the airline never made a profit.
The global aviation industry has been hard hit by the coronavirus pandemic. Aircraft fleets classified as travel restrictions virtually wiped out passenger traffic. Cash-in-transit companies like AsiaAsia have looked to restructure in the face of rising debt. “I will probably win the award for most of the victims [by the pandemic]”Said Fernandes at the Forbes Asia CEO webinar on December 2nd.
Fernandes pioneered low-cost travel in Asia after buying his airline in 2001 for just a Malaysian ringgit, or $ 0.26. The former music manager transformed Asia-Pacific air travel by introducing the no-frills airline concept and urging countries to open their airline markets. AirAsia estimates that up to half of the passengers are first-time flyers.
This year Fernandes raised capital and restructured its AirAsia group to allow the company to focus on the recovery in its key Southeast Asian markets. “We’re letting go of people who haven’t done anything wrong,” he said at the Forbes Asia CEO webinar. “That was very difficult. My top priority now is to protect as many jobs as possible. “AirAsia lost $ 238 million in the second quarter and its share price is down 47% in 2020.
Fernandes said the loss of revenue due to the pandemic forced AirAsia to seek assistance from the Malaysian government for the first time. Though the details of the funding were not disclosed, Fernandes was optimistic when he told Bloomberg TV earlier this month that he expects air traffic to return to pre-pandemic levels in the next six to 12 months.
For Tata, the transaction strengthens the Indian conglomerate’s asset portfolio in the aviation industry. Tata is currently offering the takeover of Air India and already has a majority stake in Vistara, another full-service airline in India.