Tata Sons buy out most of AirAsia stake in AirAsia India

AirAsia India, which has been troubled during its six years or so of existence in India, might be getting ready to put behind its lousy run, as the two partners of the airline decide to change their roles and Tata Sons takes over the airline almost entirely. The airline was initially launched as a partnership between Tata Sons and AirAsia holding 49% each and 2% stake owned by Tata nominees. Tata Sons had recently turned the majority owner of the airline by buying out the 2% from their nominees. As recently as three months ago, AirAsia had commented that they wouldn’t be able to fund AirAsia India any further. This had led to a lot of speculation about AirAsia exiting their Indian investment.

This exit has now been finalised. AirAsia Investment Limited, the holding company for the Indian investment of AirAsia, today signed an agreement to sell 32.67% of its equity shares in AirAsia India Limited to Tata Sons Limited, to retain only 16.33% in the airline after the closure of this transaction. This transaction valued the airline at USD 115 million.

On this, President (Airlines) of AirAsia Group, Bo Lingam said, “This transaction is in line with our initiatives towards reducing cash utilisation for the Group and will allow us to use cash to grow market share in our core markets in ASEAN, particularly in Malaysia, Thailand, Indonesia and the Philippines as well as for our future expansion into Cambodia, Myanmar and Vietnam. “

As part of the Transaction, there will be a Call Option regarding AirAsia’s remaining 16.33% stake in AirAsia India, exercisable by Tata Sons at any time after the current sale is completed. Besides, there will also be a Put Option exercisable by AirAsia in  2022.

While Tatas are expected to rename the airline, it will continue to operate as AirAsia India for the time being. Group companies of the Tata group are already working on taking over functions. For instance, TCS is working on a project for crew scheduling software so that the current software from AirAsia can be discontinued.

Bottomline

AirAsia India will leave the AirAsia fold shortly and continue for an independent existence for the time being while the Tata Group works on its bid for Air India. AirAsia has sold 32.67% (2/3rd of its stake) in AirAsia India to the Tata Group.

What do you think of this transaction? Good riddance, or did it have some future?


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About Ajay

Ajay Awtaney is the Founder and Editor of Live From A Lounge (LFAL), a pioneering digital platform renowned for publishing news and views about aviation, hotels, passenger experience, loyalty programs, travel trends and frequent travel tips for the Global Indian. He is considered the Indian authority on business travel, luxury travel, frequent flyer miles, loyalty credit cards and travel for Indians around the globe. Ajay is a frequent contributor and commentator on the media as well, including ET Now, BBC, CNBC TV18, NDTV, Conde Nast Traveller and many other outlets.

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Comments

  1. I don’t believe it’s a fair assumption that Tata will rename the airline, or to state that it is leaving the AirAsia fold. The company will continue to operate as a low cost carrier separately from full service Vistara, and AirAsia perfectly fits that name. If AirAsia wanted to get completely out of India, Tata would have bought them out completely, but the name and LCC expertise is still there, while Tata is taking on a fuller role and financial backing.

    • @Jay, the name change is almost a done deal, because no royalty has been paid to Air Asia for the name for a while now. There is enough and more including, Tony’s statements that they want to get out of India due to it being a none-core market. Tata will eventually buy them out completely, that is why Tata has a call option for the remaining AA shares in the airline anytime after the transaction closes. The only reason to not allow AA to exit right now fully would be to make sure they don’t become uncooperative after the transaction closes while a transition happens in my view.

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