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PETALING JAYA: AirAsia Group Bhd’s wholly owned subsidiary AirAsia Investment Ltd is disposing of a 32.67% stake in AirAsia (India) Ltd (AAI) to its joint venture partner Tata Sons Pte Ltd for US$37.66 million (RM152.58 million).
According to its Bursa filing, the transaction includes a call option for the group’s remaining 16.33% stake in AAI, exercisable by Tata at any time after the disposal is completed, for US$18.83 million (RM76.29 million). The deal includes a put option exercisable by AirAsia in two tranches, March 1 to May 30, 2022 and Oct 1 to Dec 31, 2022.
The budget airline said the proceeds from the disposal will be used as working capital for first-quarter 2021.
Since the start of the Covid-19 pandemic, the aviation industry has been one of the hardest hit industries and AAI has not been spared. The directors expect further capital requirements for AAI.
“As India is a non-core market for AirAsia (being a non-Asean country), the company will continue to regularly reassess its business strategies and dispose of non-core investments to augment its liquidity. This transaction will reduce cash burn of the company in the short term and allow AirAsia to concentrate on recovery of its key Asean markets in Malaysia, Thailand, Indonesia and the Philippines in the long run,” AirAsia said.
AirAsia group president (airlines) Bo Lingam said this transaction is in line with its initiatives towards reducing cash utilisation for the group and will allow it to use cash to grow market share in its core markets in Asean, particularly in Malaysia, Thailand, Indonesia and the Philippines as well as for its future expansion into Cambodia, Myanmar and Vietnam.
“AirAsia group has been reviewing its forward business strategy regularly, including its investment in AAI. This transaction will ensure strict cost containment for AirAsia group in the short term, and strengthen our presence in Asean while continuing our market dominance for travel from Asean to India and North Asia.
“India will remain an important market for AirAsia. Tata Sons has been an excellent partner and we look forward to continue working closely together in other areas of growth.”
Headquartered in Bengaluru, AAI flies to 19 domestic destinations using 30 Airbus A320 aircraft.
Meanwhile, international services to India from Malaysia and Thailand will resume in the future after travel restrictions are lifted and borders with India are reopened. AirAsia operates over 100 weekly flights from Malaysia and Thailand to nine destinations in India.
AirAsia Group has transformed itself into a digital travel and lifestyle platform with airasia.com as well as digital ventures in logistics, e-commerce, fintech and fast-food chain, among others. AirAsia also operates a regional technology centre in Bengaluru.
In another development, AirAsia’s food delivery platform Airasia Food aims to make a difference for merchants as it offers the option of flat rates and a 10% commission model.
Launched during the movement control order period in May, it has no hidden fees to join and has an extended delivery range of 60km compared with 15-20km offered by other food delivery platforms.
AirAsia Group CEO Tan Sri Tony Fernandes said it wanted to democratise the food delivery business, especially for the merchants, as the other players are “charging an arm and a leg” with high commission rates.
“With AirAsia Food, our flat rates are equivalent to only a 10% commission rate, enabling merchants to earn more while having full control over their menu, pricing and also have easy access to data aside from being able to communicate directly with their customers,” he said in a statement.
Fernandes pointed out that its flat rates are by far the lowest in the food delivery industry, and hopes this would offer some sort of liberation for the restaurants.
He elaborated that it has changed to an environment where food delivery is no longer complementary but is becoming one of the primary sales channels for restaurants and home kitchen businesses everywhere.
One of AirAsia Food’s merchants, JoshiJosh, grew its sales by 500 times within three months.
AirAsia Food is slated to be launched in Singapore by end-January 2021 and will be expanding to other Asean cities next year.
