Tata Sons will halt payments that AirAsia India (Bengaluru International) makes to AirAsia Group if the Malaysian company fails to provide funding to their joint venture by December 31, India’s Economic Times newspaper reported on December 9 citing newly-added clauses in the AirAsia India shareholder agreement.

If AirAsia Group cannot inject funds into AirAsia India by subscribing to a rights issue of at least INR3 billion rupees (USD40 million), the Indian conglomerate will start to deduct the payments due and convert them into equity in the Indian carrier.

The clauses were incorporated into the shareholder agreement five months ago, sources told the newspaper, which is when reports emerged that Tata had invested INR3 billion of its own funds into the 51/49 venture to keep it afloat.

The Economic Times reported at the time that the two sides had each agreed to inject the sum through optionally convertible debentures, as talks progressed on possible ownership changes. For months now, AirAsia Group executives have publicly expressed their intention to exit the Indian market. In contrast, Tata Sons has said it is willing to adopt full ownership of AirAsia India.

According to its most recent financial statements, covering the quarter to September 30, AirAsia India owes AirAsia Group INR4.89 billion (USD66.4 million), money it has collected from selling tickets for other AirAsia Group flights, from maintenance, and from the purchase of AirAsia products it sells on board.

Separately, meanwhile, other unnamed sources have told the Economic Times that AirAsia India has been in talks with AirAsia Group in recent months to return seven Airbus aircraft it had been leasing via the Malaysian company.

These were initially leased via the Malaysian parent through its wholly-owned subsidiary AirAsia Aviation Capital, but this was sold in March 2018 to BBAM. Under that deal, Asia Aviation Capital sold its leasing operations to BBAM-managed entities FLY Leasing, Incline B Aviation, and Nomura Babcock & Brown, most of the aircraft and engines which were then leased back to AirAsia and its affiliates.

AirAsia India currently operates thirty A320-200s and two A320-200N, according to the ch-aviation Commercial Aviation Aircraft Data module. At least thirty of these aircraft are owned by eleven lessors, among them FLY Leasing (two A320-200s) and Nomura Babcock & Brown (six A320-200s).

Tata Sons and AirAsia Group continue to negotiate their differences. As previously reported, group chief executive Tony Fernandes told Bloomberg Television on December 7 that he felt “quietly optimistic” about 2021, because “first to bounce back will be regional travel.” He acknowledged that the company was evaluating its position on AirAsia India but declined to comment further, instead emphasising: “Our strength is southeast Asia, and that’s where most of our expansion is going to be over the next two to three years. We’re in negotiations to start three new airlines in ASEAN.”