After Mittu Chandilya’s rumoured exit from AirAsia India, promoter Arun Bhatia may be next to go

As the buzz of budget carrier AirAsia India CEO Mittu Chandilya’s exit gripped the aviation market, sources told dna that next to walk out could be the third promoter of the airline – Telestra Tradeplace’s Arun Bhatia, who currently owns 10% stake.

“Next (after Chandilya), Arun Bhatia could move out. They (other promoters) are in the process of negotiating (buying out his stake) with him,” a source who did not want to be named, claimed. Calls to Bhatia were unanswered.

On Friday, the market was abuzz with rumours that the hand-picked chief of the joint venture low-fare airline of Tatas, Malaysia’s AirAsia Bhd and Telestra Tradeplace Pvt Ltd would not be renewing his contract that expires in March.

Though, there was no official confirmation on the same. Chandilya’s mobile phone was unreachable when dna tried to contact him. A text message sent to his phone was unanswered.

The company’s spokesperson also said they would not “deny or confirm” the speculation that has gripped the aviation market.

“We have no official information on it (Chandilya’s exit). I’m neither denying nor confirming it,” she said.

On being further probed about Chandilya’s availability, she said, “He is in the office and is in middle of meetings”.

For long, there have been differences between Bhatia and other promoters over control of AirAsia India with the former accusing that the Malaysian partner was calling the shots in its Indian JV.

According to those, who have been watching the developments at AirAsia India, Chandilya has been made the fall guy in the whole situation, when everyone from management to promoters were equally responsible for its financial and operational underperformance.

“He (Chandilya) was the right guy at the wrong place. He lacked aviation experience but it’s was not entirely his fault that the airline did not do well. He has been made the fall guy in all this,” said the source.

Interestingly, dna had reported on displeasure or disillusionment of the promoters with Chandilya on April 13, last year, in a report titled – ‘Unhappy AirAsia promoters put pressure on management to deliver’.

This was stiffly denied by Chandilya. We had written: As the low-fare carrier AirAsia India moves from one missed milestone to another, the management headed by CEO Mittu Chandilya faces immense pressure to deliver, sources in the know told dna.

dna had quoted an anonymous source saying: “There is a lot of introspection being done on why the airline has not been able to reach its milestones in time”.

AirAsia India, which has yet to breakeven after over one-and-a-half years of starting operations, is in need of recapitalisation to expand. The source said the airline is looking to raise funds and Tatas, who currently own 41% stake in it, will “slowly increase it’s shareholding to 51%”. AirAsia Bhd owns 49%.

India’s foreign direct investment (FDI) norm for aviation sector permits foreign airlines to own 49% stake in domestic carriers and mandates the control of the airline has to be with the Indian promoters.

An analysts, who spoke on condition of anonymity, said once the cash-flow is ensured, the airline will start making money. And if the 5/20 rule, which allows only domestic airlines with five year experience and 20 aircraft to fly overseas, is scrapped in the new national aviation policy then the flight to profitability would be faster.

“Tatas are long-term players. My sense is that once the cash-flow is streamlined then in another 4-5 years, they (AirAsia) will start making money,” he said.

Bangalore-based aviation analyst Pankaj Pandit said, “I always felt they lacked focus and consistency from the beginning. They are going wrong very often in their network planning and their overall strategy of keeping away from the five metros will not work in the long run”.

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According to him, the airline has adopted a very different flightpath from its rivals; “They (AirAsia) are trying to create demand by going to a market while others are going where there is demand.”