Tata Sons will soon be in the pilot’s seat of AirAsia India, holding 51 per cent stake in the low-cost airline.
At present, it has 41.06 per cent. It will acquire 7.94 per cent from Arun Bhatia-controlled Telestra Tradeplace. The remaining two per cent of Telestra’s stake will be acquired by Tata veterans and AirAsia board members S Ramadorai (0.5 per cent) and R Venkataramanan (1.5 per cent).
The share sale is expected to be completed next month, resulting in Bhatia’s exit from the airline. With its nominees on the board, Tata Sons will have the controlling stake of 51 per cent in AirAsia
AirAsia is a Malaysian low-cost airline, with its headquarters in Kuala Lumpur; it was a sponsor for the football club Manchester United.
Its India operations began in 2013, with Tata Sons holding 30 per cent stake, Delhi-based Arun Bhatia 21 per cent and the parent company 49 per cent in the joint venture. Its first flight was between Bengaluru and Goa on June 12, 2014.
Now, the Tatas are likely to have a greater say in its operations, including key decisions in the airline’s future and appointments.
Mark Martin, founder of Martin Consulting LLC, called the investment a “win-win” for buyer and seller and said it will initiate a period of rapid expansion for AirAsia India. It plans to increase weekly capacity to 280 flights a week from 168.
“While the details aren’t out, Bhatia would have got a sweet exit for sure. The Tata investment is great news of course. AirAsia has been slow in finding its feet, with rapid management changes and unsure moves. All that will now change. We should see the airline scaling up fast from here on,” he said.
The move will see the departure of a shareholder whose relationship with his partners appeared to have soured. Bhatia had accused the Malaysian parent of controlling the carrier in contravention of the law, ET reported in December, citing him. He also blamed the carrier’s disappointing performance on poor management and third-party agreements with companies affiliated to Fernandes.
At the time, he had said he may move court or approach the authorities. Tata Sons has rejected accusations that AirAsia India is not under the effective control of the Indian management. Bhatia is a Delhi-based businessman whose son married ArcelorMittal CEO LN Mittal’s daughter in 2004.
The Tata Sons investment comes as the aviation business is looking up, thanks to lower fuel prices and growing demand. Sydney-based consultant CAPA-Centre for Aviation said India’s airlines will, in the current financial year, cut losses by 72 per cent to $350 million (Rs 2,332 crore). AirAsia India doubled its loss to Rs 38.2 crore in the October-December quarter from the year earlier.
Martin said Bhatia’s exit was expected and that his presence had been a surprise in the airline, “nor was it much of a value add”.
Tatas take pilot seat in AirAsia India