Entrepreneurs

Tony Fernandes’s AirAsia Cuts Stake In India Joint Venture With $38 Million Sale To Tata Sons

Malaysian tycoon Tony Fernandes’s budget carrier AirAsia Group is selling a 32.7% stake in its India venture to its partner Tata Sons.

Tata, which already controls a 51% stake in AirAsia India, will purchase the additional stake for about $ 37.7 million, according to a filing to the Kuala Lumpur Stock Exchange. AirAsia Group will continue to hold a 16.3% stake in the carrier.

“This transaction will reduce cash burn of the Company in the short term and allow AirAsia to concentrate on recovery of its key ASEAN markets in Malaysia, Thailand, Indonesia and the Philippines in the long run,” the filing said.

Launched in 2014, AirAsia India promised to become profitable within four months, but the carrier never turned a profit.

The global airline industry has been hit hard by the coronavirus pandemic, with fleets of planes grounded as travel restrictions all but wiped out passenger traffic. Cash-strapped carriers like AsiaAsia have been scrambling to restructure amid mounting debts. “I probably win the prize for most affected [by the pandemic],” said Fernandes at the Forbes Asia CEO Webinar on December 2.

Fernandes pioneered low-cost travel in Asia after famously buying his airline in 2001 for just 1 Malaysian ringgit, or $ 0.26. The former music executive transformed Asia-Pacific air travel by introducing the no-frills airline concept and pushing countries to free up their airline markets. AirAsia estimated that up to half its passengers are first-time fliers.

This year, Fernandes has been raising capital and restructuring his AirAsia group to allow the company to focus on recovering in its key Southeast Asian markets. “We’ve let people go who haven’t done anything wrong,” he said at the Forbes Asia CEO Webinar. “That was very tough. My number one role now is to protect as many jobs as possible.” AirAsia lost $ 238 million in the second quarter, and its share price has fallen 47% in 2020.

Fernandes said the loss of revenue due to the pandemic forced AirAsia to seek support from Malaysia’s government for the first time. Although the details of the financing have not been disclosed, Fernandes struck a note of optimism when he told Bloomberg TV earlier this month that he expects air travel to return to pre-pandemic levels in the next six to 12 months.

For Tata, the transaction strengthens the Indian conglomerate’s portfolio of assets in the aviation industry. Tata is currently bidding to acquire flag carrier Air India, and already owns a majority stake in Vistara, another full-service carrier in India.

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Forbes – Entrepreneurs

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