Tata Group may make AirAsia India’s dreams come true

AirAsia India has a fleet of 28 aircraft (File Image of an AirAsia India A320neo aircraft)

AirAsia India has a fleet of 28 aircraft (File Image of an AirAsia India A320neo aircraft)

Capital A, formerly known as AirAsia Group, said it is completing the sale of 16.33 percent equity it held in AirAsia India to Air India for Rs 155 crore in a no-profit, no-loss proposition. This follows transactions in December 2020 and January 2021 to sell the stake that the Malaysian group held in the airline.

Controversy courted the airline even before it started operations in India. Of the many tall claims the airline made – but never achieved – was profitability. In a predominantly low-cost market like India, the Tata Group’s other joint-venture airline Vistara walked away with a higher market share than AirAsia India.

Choppy start

Tony Fernandes, now CEO of Capital A, had taken to social media to announce a CEO for AirAsia India and subsequently, announced the name of Mittu Chandilya to head the airline. The airline was touted to break even within a year of operations, but is yet to turn profitable even after eight years of operations. Additionally, the airline had to shift its main base from Chennai to Bengaluru before it started operations.

Originally, AirAsia India had AirAsia as the largest shareholder with a 49 percent stake, while the Tata Group had 30 percent and the remaining 21 percent was with Telstra Teleservices, promoted by Arun Bhatia.

The first allegations of remote control came from Bhatia, who sold his stake in batches to Tata Sons. The Tatas ended up with a stake equivalent to AirAsia’s 49 percent, with the remaining 2 percent held by Tata Group executives and airline board members S Ramadorai and R Venkataramanan.

Lobbying gone wrong?

The airline took to the skies in 2014 and the new government in India decided to draft a National Civil Aviation Policy. In a bid to quickly go international, the airline, like many others, lobbied to do away with the 5/20 rule, which required airlines to have five years of operational experience and a minimum of 20 aircraft to fly overseas.

The choppy period saw a court case filed against the airline, alleging that it was controlled from Kuala Lumpur, a charge that was subsequently cleared by India’s aviation regulator, the Directorate General of Civil Aviation (DGCA).

But it did not end well. The Central Bureau of Investigation (CBI) booked Fernandes on corruption charges. The airline then said it had already initiated criminal proceedings against the former CEO, who was handpicked by Fernandes, for fraud. With all the controversy, the airline’s growth came to a standstill.

In 2018, the Tatas took to the cockpit and appointed Sunil Bhaskaran, a group veteran, as the airline’s CEO. He took charge in November, filling a position that had remained vacant since May, when Amar Abrol departed. Abrol had replaced Chandilya in May 2016. A Tata Group veteran also became the chief financial officer.

Wobbly presence

The Tatas had entered two joint venture airlines at about the same time – one with Singapore Airlines for full-service carrier Vistara and the other with AirAsia for low-cost carrier AirAsia India.

Vistara has a larger fleet than AirAsia India and has maintained its presence in all cities except two since inception. AirAsia, on the other hand, has vacated many routes and cities, an indication of a strategy in disarray time and again.

The course correction that could have taken place after the management change at the end of 2018 was cut short due to the COVID-19 pandemic. It changed course completely, though, with the Tata Group infusing cash to keep the airline a going concern and converting that to equity later.

All’s well that ends well

AirAsia had to vacate the Japanese market twice. It shut the long-haul arm in Indonesia and abandoned plans to launch airlines in Vietnam and China.

On the contrary, the partnership with the Tatas in India seems to have helped AirAsia make a graceful exit amid all the turmoil that took place since 2013.

AirAsia India has a fleet of 28 aircraft. At one point, the airline started registering the aircraft as per the IATA code of the city it operates to, or in some cases, its own short form like GWH (Guwahati) and KOC (Kochi).

Ironic as it may sound, the airline also pulled out of many stations including those where it had registered its aircraft, like Nagpur and Ahmedabad. The airline then opted to have international city codes, probably furthering its ambition of flying internationally, which never materialised until now.

In June this year, the Competition Commission of India (CCI) approved the merger of AirAsia India with Air India, which the Tatas acquired in January. Air India will merge AirAsia India with Air India Express, the low-cost arm that predominantly flies international.

A working group for the integration has been formed, according to the airline. The brand licence agreement with AirAsia holds good for 12 months, indicating that the process to migrate away from AirAsia branding will have to be done by November 2, 2023.

When the winter 2023 schedule starts in the last week of October, AirAsia India could be history, joining the ranks of Air Deccan and Air Sahara, which were acquired.