Tata Sons wants to fly out of joint venture with AirAsia

Tata Sons wants to fly out of joint venture with AirAsia

Mumbai, Nov 16: Tata Sons is looking to end its partnership with AirAsia Bhd as it only wants to be engaged in one airline business, Vistara, the joint venture with Singapore Airlines (SIA), according to several people aware of the matter.
Initial discussions to this end have begun, even as the conglomerate inches closer to a separate deal to acquire ownership stake in India’s second-biggest airline Jet Airways from its founder Naresh Goyal.
The Tata Group holding company is proposing to “exit AirAsia India and run the only full-service private airline in India, which is Vistara-plus-Jet,” said one of the people. Tata Sons owns 51% of AirAsia India with the rest held by Malaysia-based AirAsia Bhd.
Tata Sons, AirAsia and Singapore Airlines declined to comment on what they said was speculation.
Finding a buyer for the Tata stake won’t be easy given AirAsia India’s small size and snail-paced expansion, losses and, most importantly, a Central Bureau of Investigation (CBI) investigation into alleged lobbying and irregular transactions by AirAsia Bhd CEO Tony Fernandes and other AirAsia executives. Alternatively, Fernandes may look to sell, said one of the people.
“With the cases against him, it is getting increasingly difficult for Tony to do business in India,” said one of the people. “But he won’t leave without getting a good value for his airline’s stake.”
One of the options being considered involves having a full-service brand — Vistara merged with Jet — and an equivalent of SIA’s low-cost carrier Scoot, which last year absorbed budget carrier Tigerair. Still, fully acquiring AirAsia India may not make too much sense for the Tatas.
“That may be an unviable proposition for the Tatas,” said a person close to the development. “It would get very little in the airline except the licence and slots as the reservation systems, infrastructure, accounting etc are all owned and managed from Malaysia by AirAsia Berhad or its companies.” Another option may be to shut the airline but that’s seen only as a remote possibility, said the people cited above.
AirAsia India’s planes have been leased from a company that used to be a subsidiary of AirAsia Bhd. Its operations have been sold to firms managed by BBAM Ltd, one of the largest aircraft portfolio managers in the world, in a staggered deal that will see the transfer of ownership of 182 jets. AirAsia India operates a leased fleet of 19 Airbus A320 planes. It couldn’t be ascertained whether the planes will be transferred to BBAM and whether lease agreements can be retained or renewed.
Tata Sons announced both ventures in 2013. AirAsia India started with an initial capital infusion of $30 million while Vistara started with $100 million.