Tata Sons tries to end Air Asia turbulence: The inside story

Tata Sons will have more control at Air Asia India after CEO Amar Abrol’s resignation on Wednesday. While the official reason given was Abrol’s intention to spend more time with family at Malaysia, sources suggest that the process of removal had started months back after Tata Sons expressed reservation over his way of functioning. Air Asia India is a joint venture of Tata Sons and Air Asia in which the Tatas hold a majority stake.

“Tatas are not happy, the airline is losing money despite being a low-cost carrier, though he had the support of Tony, it did not work,” said a person aware of the development. According to the Article of Association, Tata Sons has the right to appoint CEO of the company. However, both CEOs of the airline has been appointed by Tony Fernandes- group head of Air Asia

In a board meeting to be held soon, Air Asia India is likely to select its new CEO. Eash Sundaram, Chief Technology Officer of American airline JetBlue is one of the probable candidates. Sundaram has closely worked with Tata Consultancy Services (TCS) — a Tata Sons affiliate on JetBlue’s digital initiatives.

Tata Sons and Air Asia India refused to comment on specific queries regarding reasons on Abrol’s resignation.

Amar Abrol’s tenure at Air Asia India was never stable. While the airline managed to increase its fleet size and launch new routes — inability to break even, poor man management skills and losing the trust of Tatas ultimately resulted in his removal.

During the inception of the airline, Air Asia group head Tony Fernandes had said that the airline would break even in 12 months. According to numbers of FY 17, the airline clocked a loss Rs 1.4 billion. It earned Rs 2.90 per seat whereas low-cost major IndiGo earns Rs 3.40

Problem aggravated mid last year after five senior executives raised objections regarding Abrol’s way of functioning  I R Srinivas (head of human resources) Navdeep Lamba (head of security), Vidhu Nair (head of ancillary and cargo), Nantha Kumar (head of engineering) and G Sampath (director of engineering) ultimately resigned but not before forcing an enquiry into the matter. “Top honchos of Tata Sons including were involved in the enquiry,” the person said. 
 

Sources, however, said that Abrol, was strongly backed by Air Asia Berhad promoter Tony Fernandes. Abrol in his previous role as CEO of Tune Money — a Fernandes owned financial services company.

Problems reached a stage where Tatas refused to invest money in the form of equity if things are not changed. According to regulatory filings, the promoters invested Rs 1 billion only in March — 18 months after the last round of funding. In this period, Tata Sons invested more than Rs 6 billion in its other airline venture Vistara.

In the past too there have been differences among the AirAsia India board members over the choice of senior-level executives, a former official said. Exchange of e-mails shows that in 2015, Bharat Vasani, chief legal counsel of Tata Sons and a former director at the AirAsia India board, raised objections about the selection of at least two senior executives. The objection was on the ground that executives were being hired without sufficient corporate experience.

“Tatas will now put a man with sufficient global experience in aviation to handle things at Air Asia, hope things would turn around,” he said.