AirAsia India has received letters from its shareholders that they will make efforts, including injecting additional capital, if necessary, to help meet the airline’s financial liabilities at least until March 2021.
The airline now operates as a subsidiary of Tata Sons instead of being a joint venture. Tata Sons owns a 51% stake in the cash-strapped airline while the remainder is held by Malaysian company AirAsia Bhd.
Although there have been reports that the Malaysian partner may leave the company, the auditor of Tata Sons said in the company’s annual report for FY20: “The subsidiary has received letters from its partners. shareholders indicating that they would make reasonable efforts, including the injection of additional capital, if necessary, in accordance with the approval of their board of directors, to help meet its financial commitments for the period at least until 12 months from the balance sheet date. In view of the above, management is confident that the company will continue to generate cash flow from its operations and will receive operational and financial support from its shareholders to finance its operating needs and capital expenditures in the foreseeable future.
Therefore, the airline is considered to be an operating business which contemplates the realization of assets and the settlement of liabilities in the ordinary course of business.
As of March 31, 2020, Air Asia had accumulated losses of 2,149.77 crore, against share capital of ₹ 1,500 crore. As of that date, its current liabilities exceeded its current assets by 1,208.89 crore. “These conditions and other elements indicate the existence of significant uncertainties which may cast significant doubt on the ability of the company to continue as a going concern. Management continues to take various initiatives to improve its operating cost structure and operational efficiency in order to achieve profitability, including negotiating with lessors / suppliers for better business conditions and better credit facilities ”, said declared the auditor.