The airline industry suffered heavy losses due to the coronavirus pandemic. Nevertheless, investors are willing to invest in this business. For example, Tata Group increased its stake in AirAsia India, as the Indian multinational conglomerate looks to increase its share of India’s airline industry. This week, Tata Group made an important announcement.
According to the announcement, Tata would boost its holdings in the Indian-based joint venture with AirAsia from 51% to 84%. As a reminder, AirAsia has been scaling back its operations during the Covid pandemic. Interestingly, Malaysian tycoon Tony Fernandes is the owner of AirAsia.
This is not the end of the story, as last week Tata Group also put a bid for the country’s national carrier Air India. As a reminder, Air India is struggling to cope with problems.
It is worth mentioning that, Tata Group is paying AirAsia around $38 million for the increased stake in AirAsia India joint venture which began in 2014. Interestingly, the deal puts the Indian conglomerate firmly in command of AirAsia India.
People should take into account that, AirAsia is trying to reduce its cash-burn, and its Japan unit filed for bankruptcy last month. It was quite hard for AirAsia India to make money in a market considered to be one of the world’s toughest due to high fuel taxes as well as fierce competition.
The company wants to focus on recovery in its key markets in Malaysia, Thailand, Indonesia as well as the Philippines. Thanks to the deal AirAsia will be able to pursue this goal, without the need to spend a lot of money on AirAsia India.
Tata Group and plans for the future
Based on the information aviation experts, the acquisition could give Tata Group a stronger position in the sector, and help secure Air India. As a reminder, the Indian conglomerate also owns Jaguar Land Rover. Interestingly, Tata Group founded the airline in 1932 but sold its stake to the government in the 1950s.
The Indian conglomerate also operates the Vistara airline in partnership with Singapore Airlines. Importantly, the deal also marks the return of Tata Group to the aviation market in full force, displaying a stronger commitment to deploy capital and resources, as Tata wants to reach good results. Importantly, AirAsia India at the moment has under 7% market share. As can be seen from the information stated above, Tata Group is willing to invest millions of dollars to strengthen its position in the local market.
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