Will Air Asia India survive this turbulance
Thread Starter
Join Date: Feb 2013
Location: dubai
Age: 35
Posts: 29
Likes: 0
Received 0 Likes
on
0 Posts
Will Air Asia India survive this turbulance
Shareholder Arun Bhatia unhappy with the way airline is managed but chairman disagrees with his views
Differences among shareholders in AirAsia India has spilled into the open and raised questions on the future funding plans of the airline’s operations in that country.
Arun Bhatia, a shareholder with about 10% equity in AirAsia India, claims he is unhappy with the way the airline was managed.
He has alleged that the airline is effectively controlled by AirAsia Bhd and that is in contravention of India’s investment laws. He is bent on taking the airline to task.
A New Delhi-based businessman, Bhatia is one of the three co-founders of the airline which began 18 months ago and AirAsia India now controls about 2% of the highly competitive India’s domestic air market.
Ironically, Bhatia’s son, Amit, who is married to London steel magnet Lakshmi Mittal’s daughter, sits on the board of AirAsia Bhd as its non-executive director.
Amit is also a partner with AirAsia group chief executive officer Tan Sri Tony Fernandes in English football club Queens Park Rangers.
India’s Economic Times reported this week that “a bitter boardroom battle has erupted in AirAsia India.’’
The report, quoting Bhatia, says that India airline’s slow growth and mounting losses were due to poor management and costly third-party agreements entered into with companies affiliated to Fernandes.
“If you ask the CEO (of AirAsia India) what is happening, he says, sir what can I do? I don’t have any information, everything is controlled by Malaysia, that is the situation today. I am quite unhappy with whatever is happening,’’ Bhatia was quoted saying in the report.
On Wednesday, Bhatia opposed a decision by the board to invest US$22mil more in the airline, which has been hobbled by a severe cash crunch.
“I will neither invest further nor use the right of first refusal this time until the airline improves its performance and I am given details of all the matters I have raised,’’ he said in the report.
The report, quoting two people with knowledge of the matter, added that the airline has burnt all the US$30mil put in by the shareholders and is surviving only by advance sale of tickets.
Kapil Kaul, CEO (South Asia) at aviation consultancy Capa India quoted in the report said that US$30mil was inadequate, for such a market structure and more than US$100mil was necessary to start an airline in India.
Bhatia claims that AirAsia India continues to make losses while others are making profits amid a sharp fall in jet fuel prices.
He claims that he has loss all the money put into the airline.
“If I have a profit, maybe (I can offload my entire stake),” he was quoted by the paper.
Bhatia claims that he was promised the airline will make profits a year after the launch.
Bhatia’s outburst stems from the need to invest more money into the airline and if he does not, investments from others will see his stake being diluted further to perhaps only 5% and he may lose his board seat.
Bhatia, along with a company linked to one of India’s biggest conglomerates Tata, are investors in AirAsia India.
Initially, Bhatia has a 21% equity stake held via his unit, Telestra, and Tata has 30% while the balance was held by AirAsia Bhd.
But at a board meeting in August, Bhatia refused to invest further – he has the right to first refusal when equity subscription comes up – citing the poor performance of the airline, the paper said.
Instead, the Tatas invested, causing a change in the shareholding pattern. If Bhatia refuses to inject more money and his stake drops to below 5%, he will lose his board seat. He, therefore, sees the cash infusion as a ruse by other shareholders to push him out of the airline, the report said.
Fernandes did not comment on the issue when contacted by StarBizWeek, but those in the know claimed that some changes can be expected early next year.
Whether it would be Bhatia’s exit and the entry of a new investor or the Tatas raising their stake remains to be seen.
The report said that publicly, AirAsia has blamed the controversial 5/20 rule, which prevents new entrants like itself and Vistara (another airline in India) from flying lucrative international routes until they are five years old and have at least 20 planes, as an obstacle to its success and the reason for not committing more money. The airline is also challenging Bhatia’s contention.
The airline’s chairman S. Ramadorai, in a report, says it was incorrect to state that AirAsia is being controlled by the Malaysian shareholder.
“Partners have cordial relations and are committed to the joint venture,” said Ramadorai, a Tata veteran and the former boss of TCS.
AirAsia Bhd recently reported a net profit of RM160.4mil for its third quarter of 2015 on the back of RM2.8bil revenue.
AirAsia India was a contributor, but its losses have tripled to RS65 crore in the September quarter versus the same period a year ago.
Traffic on AirAsia India was at 502 million revenue-passenger-kilometres for the quarter while capacity was at 663 million available-seat-kilometres and its passenger load factor came in at 75.7%.
For now, AirAsia India is still a small player in the crowded Indian market. It operates six A320-200s on flights to 13 destinations across India.
Differences among shareholders in AirAsia India has spilled into the open and raised questions on the future funding plans of the airline’s operations in that country.
Arun Bhatia, a shareholder with about 10% equity in AirAsia India, claims he is unhappy with the way the airline was managed.
He has alleged that the airline is effectively controlled by AirAsia Bhd and that is in contravention of India’s investment laws. He is bent on taking the airline to task.
A New Delhi-based businessman, Bhatia is one of the three co-founders of the airline which began 18 months ago and AirAsia India now controls about 2% of the highly competitive India’s domestic air market.
Ironically, Bhatia’s son, Amit, who is married to London steel magnet Lakshmi Mittal’s daughter, sits on the board of AirAsia Bhd as its non-executive director.
Amit is also a partner with AirAsia group chief executive officer Tan Sri Tony Fernandes in English football club Queens Park Rangers.
India’s Economic Times reported this week that “a bitter boardroom battle has erupted in AirAsia India.’’
The report, quoting Bhatia, says that India airline’s slow growth and mounting losses were due to poor management and costly third-party agreements entered into with companies affiliated to Fernandes.
“If you ask the CEO (of AirAsia India) what is happening, he says, sir what can I do? I don’t have any information, everything is controlled by Malaysia, that is the situation today. I am quite unhappy with whatever is happening,’’ Bhatia was quoted saying in the report.
On Wednesday, Bhatia opposed a decision by the board to invest US$22mil more in the airline, which has been hobbled by a severe cash crunch.
“I will neither invest further nor use the right of first refusal this time until the airline improves its performance and I am given details of all the matters I have raised,’’ he said in the report.
The report, quoting two people with knowledge of the matter, added that the airline has burnt all the US$30mil put in by the shareholders and is surviving only by advance sale of tickets.
Kapil Kaul, CEO (South Asia) at aviation consultancy Capa India quoted in the report said that US$30mil was inadequate, for such a market structure and more than US$100mil was necessary to start an airline in India.
Bhatia claims that AirAsia India continues to make losses while others are making profits amid a sharp fall in jet fuel prices.
He claims that he has loss all the money put into the airline.
“If I have a profit, maybe (I can offload my entire stake),” he was quoted by the paper.
Bhatia claims that he was promised the airline will make profits a year after the launch.
Bhatia’s outburst stems from the need to invest more money into the airline and if he does not, investments from others will see his stake being diluted further to perhaps only 5% and he may lose his board seat.
Bhatia, along with a company linked to one of India’s biggest conglomerates Tata, are investors in AirAsia India.
Initially, Bhatia has a 21% equity stake held via his unit, Telestra, and Tata has 30% while the balance was held by AirAsia Bhd.
But at a board meeting in August, Bhatia refused to invest further – he has the right to first refusal when equity subscription comes up – citing the poor performance of the airline, the paper said.
Instead, the Tatas invested, causing a change in the shareholding pattern. If Bhatia refuses to inject more money and his stake drops to below 5%, he will lose his board seat. He, therefore, sees the cash infusion as a ruse by other shareholders to push him out of the airline, the report said.
Fernandes did not comment on the issue when contacted by StarBizWeek, but those in the know claimed that some changes can be expected early next year.
Whether it would be Bhatia’s exit and the entry of a new investor or the Tatas raising their stake remains to be seen.
The report said that publicly, AirAsia has blamed the controversial 5/20 rule, which prevents new entrants like itself and Vistara (another airline in India) from flying lucrative international routes until they are five years old and have at least 20 planes, as an obstacle to its success and the reason for not committing more money. The airline is also challenging Bhatia’s contention.
The airline’s chairman S. Ramadorai, in a report, says it was incorrect to state that AirAsia is being controlled by the Malaysian shareholder.
“Partners have cordial relations and are committed to the joint venture,” said Ramadorai, a Tata veteran and the former boss of TCS.
AirAsia Bhd recently reported a net profit of RM160.4mil for its third quarter of 2015 on the back of RM2.8bil revenue.
AirAsia India was a contributor, but its losses have tripled to RS65 crore in the September quarter versus the same period a year ago.
Traffic on AirAsia India was at 502 million revenue-passenger-kilometres for the quarter while capacity was at 663 million available-seat-kilometres and its passenger load factor came in at 75.7%.
For now, AirAsia India is still a small player in the crowded Indian market. It operates six A320-200s on flights to 13 destinations across India.
Join Date: Nov 2005
Location: Well thats a big volcano...
Posts: 369
Likes: 0
Received 0 Likes
on
0 Posts
crap, but as per others who are "in the know" there is a hiring boom and aviation going to explode in India...what are you saying... http://www.pprune.org/south-asia-far...next-boom.html
