KUALA LUMPUR – AirAsia Group Bhd (AAGB) is in talks with partner Tata Sons to exit its India-based joint venture, The Economic Times (ET) reported yesterday.
AirAsia India is already in discussions with AAGB to return seven leased Airbus planes, a move aimed at cutting down the local airline’s exposure to its Malaysian parent, sources told ET.
Further, Tata is invoking recently added clauses in its shareholders’ agreement and has threatened to stop dues payment if AAGB fails to inject more funds into its India affiliate.
According to ET, this will see Tata deducting the dues and setting them off against equity shares in AirAsia India if AAGB, which holds 49% in the joint venture (JV), is unable to bring in funds by subscribing to a rights offer of at least 300 crore rupee (RM166 million).
“The development highlights the strain that has emerged between the business allies in recent times.
“AirAsia India, a 51:49 JV where Tata is the controlling shareholder, owes AirAsia Group 489 crore as per its latest available financial statements.
“Now, Tata Group had infused 300 crore into the budget carrier (AirAsia India) in July to keep it flying amid the Covid-19 outbreak that resulted in a two-month ban on flying from March 24. The new clauses were incorporated in the shareholder agreement at that point,” ET said, citing sources.
AirAsia India owes AAGB on account of money the former collected for selling tickets on aircraft operated by the latter. AirAsia India also uses AAGB’s services to maintain aircraft and procure consumables and in-flight magazines.
But, because of the shareholders’ agreement, these payables could be converted into equity in AirAsia India if AAGB fails to pump in funds by the end of the year. Tata and AirAsia declined to comment when contacted by ET.
At the midday break, AAGB’s shares were up 5.11% to 92 sen, giving the low-cost carrier a market capitalisation of RM3.09 billion. – The Vibes, December 9, 2020
