Air India acquires AirAsia and has to cover the loss of the Company

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    Recent sources state that the Competition Commission of India (CCI) authorised Air India’s bid to fully purchase the equity share capital of low-cost carrier AirAsia India in June of this year. In addition, it is rumoured that Tata Sons will likely set aside Rs. 2,600 crores to cover the airline’s accrued losses. In addition to merging with Air India Express, the business also wants to incorporate AirAsia India.

    Additionally, this comes in the wake of an auditor’s assessment stating that AirAsia India’s net worth has been completely depleted and that its obligations exceed its present assets, raising concerns about the airline’s ability to continue operating.

    However, the Tatas are aiming to combine AirAsia India with Air India and merge Air India Express without any gimmicks.

    In addition, it is important to keep in mind that Tata Sons simply owns the majority of AirAsia India with a shareholder of roughly 83.67 percent, and that AirAsia Investment ltd, a subsidiary of Malaysia’s AirAsia Group, holds the remaining stake in the low-cost airline.

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    Air India
    credit: techstory

    The Covid Pandemic added to the carrier’s already heavy burden of losses as it caused more burns. Officials added that no decision has yet been made regarding whether the write-off will appear on Tata Sons’ or Air India’s financial sheet.

    “In mergers between two group companies – AirAsia India with Air India Express – if one of the group companies’ liabilities exceeds its assets, the group has to make provisions for impairment in the value of investments if it’s permanent, as per applicable accounting standards,” said Uday Ved, partner at global tax practice group KNAV.

    “In the case of the AirAsia India merger, additional impairment provisions, if any, will be restricted to the extent of the impairment provisions not already accounted for in the latest reported standalone financial statements of Tata Sons.”

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    Be aware that while Air India, a full-service airline, offers both domestic and international service, Air India Express is renowned to handle short-haul international operations, particularly from South India and other locations to the Middle East.

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