AirAsia stops funding Indian arm

MUMBAI, Oct 07 (The Economic Times): AirAsia Group Bhd. has stopped funding its Indian affiliate as the global travel slump leaves the Malaysian group struggling to support a sprawling empire of no-frills airlines, people familiar with the matter said.

AirAsia India Ltd.'s future may now depend on Indian conglomerate Tata Group, its majority shareholder, which has provided emergency funding but has yet to commit to a full rescue, according to the people, who asked not to be named discussing a confidential matter.

The airline isn't at any immediate risk of folding, the people said.

India's aviation minister said over the weekend that AirAsia was shutting up shop in the South Asian nation, though his office later suggested the comment was taken out of context.

AirAsia Group and AirAsia India declined to comment, as did a representative for Tata Group.

AirAsia said earlier Monday that its Japanese arm will cease flying immediately as the coronavirus outbreak continues to roil the airline industry. Once the poster child of the region's revolution in low-cost travel, the group is seeking as much as 2.5 billion ringgit ($600 million) to steer its way through the crisis.

Long-haul arm AirAsia X Bhd. has meanwhile said it needs to reach deals with major creditors to restructure debt amid "severe liquidity constraints" that threaten its ability to resume services and continue as a going concern.

AirAsia India has survived on Rs 3.0 billion (300 crore) in funding from Tata, which owns a 51 per cent stake, with another round of financing expected soon, one of the people said.

Tata is weighing its options and how much it would cost to buy out AirAsia and save the carrier, another person said. The industrial group also has a 51 per cent holding in the Vistara full-service airline venture with Singapore Airlines Ltd.

AirAsia India predicted it would break even in four months when it began flying in 2014. In reality, it has yet to make money in a market where high fuel taxes and cut-throat fares can make even dominant players unprofitable. The carrier has a market share of 6.8 per cent and employs more than 3,000 people.