NEW DELHI, 6 Oct 2020:
The Indian aviation minister’s remark over the weekend that AirAsia India’s “shop is shutting down” highlights the six-year-old budget airline’s problems in the country.
There have been reports in the Indian media that AirAsia India, a joint venture (JV) between Malaysia’s AirAsia Bhd and Indian conglomerate Tata Sons, is facing a funding crunch.
Responding to a question about the airline, Civil Aviation Minister Hardeep Singh Puri said its “shop is anyway shutting down”.
“Their parent company has problems”
According to a Times of India news report, Tata Sons – which owns 51% of the venture – is looking to buy AirAsia Group Bhd’s 49% stake. This may be linked to another airline venture in India by Tata Sons – having a 51% stake in Vistara while Singapore Airlines owns 49%.
“AirAsia, because of its financial difficulties, is not keen on infusing capital into the India JV. It wants the JV to take on debt to run the operations. Tata Sons is forced to consider buying out AirAsia,” said an unnamed source cited in the report.
Aviation is among the hardest-hit businesses in India during the Covid-19 pandemic turmoil.
AirAsia Group yesterday announced that it was halting its Japanese operations due to the tough operating conditions as a result of Covid-19.
Meanwhile, AirAsia X Bhd has come up with a restructuring plan that will enable the airline to be fully operational again amid global travel restrictions caused by the Covid-19 pandemic.
Chief executive officer Benyamin Ismail said AirAsia X and other airlines are struggling to survive in the pandemic period.
“It has been difficult for the airline during this period as we had to ground all scheduled flights, implement salary cuts and retrenchments for the first time in the company’s history as a consequence of the pandemic.
“However, we remain committed to our guests, Allstars, business partners and shareholders to ensure we build a viable and sustainable airline for the long-haul. For the survival of this airline, the proposed restructuring plan is our only option,” he said in a statement today.
Similar exercises were likely to continue during the restructuring process, he added, but the focus is to ensure a successful restructuring to keep as many jobs as possible.
“We have a low-cost base, we are in the right part of the market and many of our key markets are in green zones which are likely to reopen first.
“We have a robust recovery strategy in place, and with the continued support from our stakeholders, we will overcome all challenges and come out stronger,” Benyamin said.
The long-haul budget airline, which is a sister company of AirAsia Group Bhd, said the restructuring exercise would include the appointment of Datuk Lim Kian Onn as deputy chairman to lead the restructuring initiative and facilitating fresh equity injection.
Lim, a chartered accountant, was an investment banker before he became a board member of AirAsia X in 2012.
AirAsia X, which incurred a net loss of RM650.32 million for the financial year ended 31 Dec 2019, posted an unaudited loss of RM854.94 million in the first half of this year.
The airline said it was facing severe liquidity constraints and an imminent default of contractual commitments would precipitate a potential liquidation of the airline.
“A major debt restructuring and renegotiation of its financial obligations are pre-requisites for any raising of fresh equity required to restart the airline.”
The proposed restructuring plan which, if approved, would secure the airline’s aviation survival, AirAsia X added.
“The proposed restructuring plan and establishment of new contracts, agreements and/or arrangements are aimed to right-size the group’s level of operations and financial obligations, which is crucial to the group’s continued existence in the aviation landscape.”
The company added that it had had extensive discussions with all major creditors in the last two months, and all of them had expressed strong support for a continuation of the airline business.
For 13 years, AirAsia X has delivered affordable flights and created jobs for the airline, related travel and tourism industries, as well as contributing to Malaysia’s gross domestic product growth.
– Bernama