Tata Increases Stake in AirAsia India
Case Code: CLBS170
Case Length: 4 Pages
Pub Date: 2021
Teaching Note: Available
Organization: AirAsia India
Industry: Aerospace & Defense
Themes: Joint Ventures, Business Models, Strategic Alliances, Investment Decisions
After a long hiatus, the Tata Group (Tata) entered the civil aviation industry in India through a joint venture partnership with Malaysia-based Airline Group Air Asia Berhad (AAB) after Foreign Direct Investment (FDI) norms were eased in India in the year 2013. The joint venture partnership was formed under the name Air Asia India (AAI) in the year 2014. Though it was considered to be an ambitious project for both entities, AAI remained unprofitable. In 2020, with the global aviation industry heavily impacted by the Covid-19 pandemic, AAB decided to sell its stake to its partner Tata and exit the joint venture. However, for Tata, the decision to purchase a stake in AAI remained a matter of strategic choice. The present case study can be used to discuss the concepts of joint ventures, their benefits and limitations, and the reasons for the failure of joint ventures.
- Joint ventures and features of joint ventures.
- Advantages and disadvantages of joint ventures.
- Reasons for the failure of joint ventures.
AirAsia India (AAI), a joint venture between Malaysia-based AirAsia Berhad (AAB) and Indian conglomerate Tata Sons (Tata), started operations in 2014. However, on finding that the project was not financially viable, AAB decided sell its share in the joint venture partnership in November 2020, and requested Tata to purchase the stake, so that it could exit the Indian operations.
The CEO of AAB was reportedly keen on scaling back operations post-Covid, and was also looking at reducing cash burn after AirAsia Japan filed for bankruptcy. Experts believed that where Tata was concerned, the acquisition of a stake in AAI would place it in a stronger position in its plan to bid for the state-owned, carrier Air India.
AirAsia India; TATA Group;AirAsia Behad; Civil Aviation Industry; Low-cost no-frills airliner; AirAsia Japan; Tony Fernandes; cost available per seat kilometer (CASK); low-cost terminals; fuel efficient aircraft; AirAsia Red Carpet; Vistara Airlines; Aviation Industry; Joint Venture
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