by TMR / pic by MUHD AMIN NAHARUL
AIRASIA Group Bhd has announced the cessation of its Japanese operations with immediate effect due to highly challenging operating conditions there.
According to the low-cost carrier’s filing to Bursa Malaysia yesterday, the decision would reduce the cash burn of AirAsia Japan Co Ltd which has been aggravated by the Covid-19 pandemic.
AirAsia Japan is a joint venture (JV) between AirAsia and e-commerce player Rakuten, Octave Japan Infrastructure Fund, cosmetics maker Noevir Holdings Co Ltd and sports equipment manufacturer Alpen.
AirAsia holds 66.91% equity in AirAsia Japan with voting rights of 33%.
Meanwhile, Bloomberg reported that AirAsia is also closing its affiliate operations in India, the local aviation minister said over the weekend, a comment his office later suggested was taken out of context.
“AirAsia’s shop is anyway shutting down,” Hardeep Singh Puri said in televised comments that were widely circulated on social media. “Their parent company has problems.”
A spokesman for AirAsia India, which is majority owned by Indian conglomerate Tata Group, declined to comment. A spokesman for the Civil Aviation Ministry said Puri’s comments were taken out of context and he had immediately clarified them.
AirAsia, once the poster child of a low-cost airline revolution in Asia, is seeking to raise as much as RM2.5 billion by the end of the year as the coronavirus disrupts travel globally.
The budget carrier posted its biggest-ever quarterly loss in August and has said it is evaluating its operations in Japan.
A Reuters report earlier this year flagged its Indian operations may also be under review.
AirAsia India started flying in 2014 with a promise to break even in four months.
But it’s never made money in what is one of the world’s most difficult markets, where high fuel taxes and cut-throat fares often make operations unprofitable. The carrier, which has a market share of 6.8%, employs more than 3,000 people in the country.
Tata Sons Pte Ltd is reviewing the JV with AirAsia, and is in talks to buy out the 49% stake the Malaysian firm holds in the Indian affiliate, the Times of India newspaper separately reported yesterday, citing an unnamed source.
AirAsia isn’t keen on infusing more funds into the venture and instead wants it to take on debt, according to the report.
India’s aviation regulator suspended two senior executives at AirAsia India in August after a pilot claimed there were safety lapses at the airline.
Indian officials are also investigating AirAsia’s CEO Tan Sri Dr Tony Fernandes and other officials for allegedly paying bribes to influence local policy.