AirAsia Group: India and Japan businesses have been draining cash, causing much financial stress

AirAsia’s businesses in India and Japan have been draining cash, and causing the Group much financial stress, revealed Bo Lingam, president of airlines at AirAsia Group. He said the cost containment and reducing cash burns remain key priorities and is evident by the recent closure of AirAsia Japan, and an ongoing review of the company’s investment in India.

The airline’s official statement said that it has filed for bankruptcy with the Tokyo District Court. The Malaysian low-cost carrier had last month announced that it would cease operations in Japan because the COVID-19 pandemic had severely hit global travel. “Given Japan’s AirAsia current financial position, we regret to inform that the company is currently unable to settle the outstanding refunds,” the statement said. “We sincerely apologise for any inconvenience caused to customers who have used or booked AirAsia Japan flights.” The company, as per various reports, had cancelled all flights. However, its services operated to Japan by the company’s other carriers in countries like Philippines and Thailand will not be affected. It said international services to Japan from Malaysia, Thailand and Philippines will resume as travel restrictions have been eased.

Lingam said air travel is essential for the world’s economy. He pointed out that the airlines is already seeing strong signs of recovery in its key domestic markets where there is much pent-up demand. “AirAsia’s domestic services in Thailand, for example, are already at close to 100 per cent of pre-COVID capacity levels, and there are similar strong positive signs from across the Group including in Malaysia, Indonesia and Philippines, indicating that forward bookings for future travel are already on the rebound in the major markets.”

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However, the Group has stopped funding its business in India. According to Bloomberg, this has left the future of the company largely dependent on its 51 per cent shareholder – Tata Group. According to the Center for Aviation, the company was already carrying a relatively large debt burden when the year (2020) began, notedly, the grounding of a large part of its fleet in early April 2020, and closure of international borders left the airline with a high cost burden and reduced its opportunity to generate revenues.

AirAsia was launched in 2003, an era which was dominated by nationally owned and controlled flag carriers, with governments having a strong vested interest in securing the interests of the airline. Over the years, the company expanded its horizons through cross-border joint ventures.