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AirAsia India Took Over $75 Million Loans To Deal With Cash Shortage

AirAsia India has reportedly taken short-term loans in the last 6 months to deal with a cash shortage. The airline, which is in the process of merging with Air India Express, has never turned a profit since it began operations in 2014, and the last two years have really impacted its overall financial health.

Short-term loans

Budget carrier AirAsia India has been relying on short-term loans in the last 6 months, amounting to around $77 million. Business Standard claims to have reviewed documents stating that the airline took loans three times in the last six months and also availed of an overdraft facility.

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AirAsia India Airbus A320

The airline has reportedly taken 3 short-term loans in the last 6 months. Photo: Airbus

The report says that Standard Chartered Bank had given around $24.5 million short-term loan and $3.6 million overdraft facility last month, while IndusInd Bank gave $24.5 million to the airline in a short-term loan in June. Tata Capital, too, gave a short-term loan of $24.5 million to AirAsia India in April this year.

So far, there have been no official statements from any of the financial institutions regarding the matter.

Still not profitable

AirAsia India was launched in 2014 as a joint venture between the Tata Group and AirAsia Investment Limited. The Tatas began with a 51% equity share in the company, which was further raised to 83.67% in 2020.

The airline has had a rough couple of years due to the pandemic, with its loss increasing by 42% on a year-on-year basis to almost $275 million. Its revenue grew by nearly 39% to $238 million, but a 67% hike in aviation turbine fuel and a weakening Indian rupee against the US dollar impacted the overall numbers.

AirAsia India Airbus A320

Last year, AirAsia India posted an annual loss of $193 million, almost double the previous year, and a revenue of $171 million.

It has been shrinking its operations and returned seven Airbus A320 planes to AirAsia Berhad, and currently has a fleet of 26 active A320s, per ch-aviation.

Merger

The proposed merger of the airline with Air India Express is reportedly being worked upon and, if all goes well, could be complete in about a year. The hope is that a consolidated entity following the merger, together with the combined fleet and network strength of both airlines, will give it a major revenue boost over the years.

Air India Express Boeing 737

Air India Express will likely merge with AirAsia India soon. Photo: Getty Images

However, the Tatas will first have to deal with the accumulated loss of AirAsia India before that. It was previously reported that an auditor’s report has “cast doubts” on AirAsia India as a “going concern” as its net worth has been wiped off, and its liabilities exceed current assets.

It is speculated that the Tatas may write off the losses before the planned merger, although there has been no confirmation regarding that.

What are your views on this? Please leave a comment below.

Source: Business Standard



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