AirAsia India, the low-cost airline jointly owned by Tata Sons and AirAsia Berhad, is battling negative equity even as losses for the second quarter balloon to ₹44 crore.

Air Asia Berhad owns 49 per cent equity in AirAsia India while Tata Sons own 41.06 per cent in the airline. For the same period last year, the airline had posted losses of ₹69 lakh.

The parent, AirAsia Berhad, in a filing to the Malaysian Stock Exchange, said: “As the Group’s interest in AirAsia India has been reduced to zero, in accordance with MFRS128, any profits will only be recognised when a total of RM21.5 million (₹33.48 crore) of unrecognised losses have been reversed.”

AirAsia India has a negative EBITDAR (earnings before interest, tax, depreciation, amortisation and rentals) margin of 12 per cent for the June quarter of the current calendar year, compared to 10 per cent during the same period last year. The total equity was a negative ₹98.43 crore for 2Q15 compared to negative ₹22.93 crore. A negative equity indicates the airline is at risk and may be piling up debt. This also indicates requirement of fresh infusion of funds.

In a report on the airline’s performance, aviation analyst firm Centre for Asia Pacific Aviation (CAPA) said the airline’s average yield has been below domestic competitors, resulting in losses despite high load factors. “The second quarter of the calendar year is a peak travel period in India but AAI remained unprofitable even as Jet Airways and SpiceJet, both of which posted large losses in the fiscal year ending 31-Mar-2015, were in the black.”

Mittu Chandilya, the CEO of the airline who was earlier this month was also made the managing director, had said the airline will breakeven during the June quarter. Losses for the March quarter were at ₹19 crore. CAPA also said the airline’s losses are expected to increase in 3QCY2015 due to heavy discounting and intense competition. “Profitability is unlikely in the near- to medium-term unless there is a change in market conditions and government policy,” the report said.

Fierce competition

It said AAI has faced an aggressive response from its competitors and this is likely to continue to be the case on new routes.

The aviation consultancy firm also pointed out that AAI had the highest load factor among all AirAsia affiliates at 83 per cent and there was a 13 per cent reduction in unit costs and expects further reductions in unit costs as it continues to spool up.

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