Air India Express and AirAsia India start interline agreement; merger between the four Tata airlines inches forward

Taking forward the eventual merger between Air India Express and AirAsia India, the two low-cost airlines in the stable of the Tata group, the airline announced the start of interline booking between Air India Express and AirAsia India. Besides these two airlines, Tata Sons also has Air India and Vistara. The announcement will allow passengers to travel seamlessly on the two airlines' entire domestic and international network, as the interline agreement covers over 100 routes. With a combined fleet of 54 aircraft, both airlines connect 44 destinations, operating over 250 routes across India, the Middle East, and Southeast Asia. The International Air Transport Association (IATA), a global body of leading airlines, describes Interline as a relationship between airlines that allows one airline to sell services to a customer provided by another airline. “Airlines use interline to sell itineraries that they would otherwise not be able to serve alone. The IATA interline framework has been a cornerstone of the airline industry for almost as long as the industry has been operating,” IATA states. “The term has also expanded to include ancillary products and services and to intermodal transport. Interline itineraries sometimes involve connections between different airlines, but often do not,” IATA says. Integrating Air India Express and AirAsia India allows passengers to book a single itinerary across Air India Express and AirAsia India and have a single Passenger Name Recorder (PNR) on the airlines’ common website, online travel agents, and others. "Our ongoing efforts towards integrating Air India Express and AirAsia India, even as we proceed with the full merger, is now bearing fruit, with a strong, integrated network emerging. The network footprint stretches across India, the Gulf and the Middle East, and Southeast Asia and will be further strengthened with our forthcoming fleet expansion," said Aloke Singh, managing director of Air India Express and AirAsia India. The Tata Group will also introduce a fresh brand identity for Air India Express by October. Receive all boarding cards In a statement at the start of the interline agreement, it is announced that passengers traveling on connecting flights on AirAsia India and AI Express code can now check in to the final destination and receive their boarding cards for all segments at the start of the journey. For example, the statement says that under the interline arrangement, guests can book a Lucknow – Delhi – Sharjah itinerary under a single PNR and receive boarding passes for both Lucknow to Delhi and Delhi to Sharjah at the beginning of their journey in Lucknow. However, customs and immigration formalities must be done in Delhi, while baggage can be labeled up to the final destination. This is seen as another step in Tata Sons integrating its four airlines- Air India, Vistara, Air India Express, and AirAsia India- into a full-service and low-cost airline. Vistara is a joint venture between Singapore Airlines and Tata Sons, with Tata Sons holding a 51 percent shareholding. On September 1 this year, the Indian market fair play regulator, the Competition Commission of India, approved the merger of Air India and Vistara. When giving its nod, the CCI said that the acquisition of certain shareholding by Singapore Airlines in Air India was subject to compliance with voluntary commitments offered by the parties. The eventual idea of merging the four airlines with Tata Sons is to save costs, reduce duplication of routes, and make better use of assets and personnel apart from slots. The final integration, which is expected to be some years in the making, has not been specified as yet. In many ways, the integration of the airlines is the need of the hour. If one looks at outbound traffic from India, it is estimated that only 36 percent of international air traffic to India goes to Indian carriers, while over 60 percent of the revenue generated on these routes goes into foreign hands. With Air India ordering 500 new aircraft, including the Airbus A350 and the narrow-body Boeing 737 MAX, the airline should garner more outbound traffic from India. Setting clear milestones In September last year, Campbell Wilson, the newly appointed Chairman and Managing Director of Air India, announced a new plan titled Vihaan.ai, translating into the dawn of a new era. According to the plan, Air India has set clear milestones focused on growing its network and fleet, developing a completely revamped customer proposition, improving reliability and on-time performance, and taking a leadership position in technology, sustainability, and innovation while aggressively hiring industry talent. Over the next five years, the airline will also look to increase its market share to at least 30 percent in the domestic market while significantly growing the international routes. However, integrating four existing airlines will not be an easy job. Already, there are murmurs about disenchantment among the employees of the four airlines about various issues, including emoluments, designations, and future growth prospects. Besides, if one looks at Air India Express and AirAsia India, they seem to be two very different airlines. While AI Express operates an all-Boeing 737 fleet AirAsia India has a fleet of Airbus 320. Similarly, while initially Air India Express mainly connected the Middle East to India with a few domestic routes, which mostly acted as positioning flights for flying to the Middle East, AirAsia India only had a few domestically. In April last year, over 1,500 pilots of Air India wrote to Ratan Tata, the Chairman Emeritus of Tata Sons, alleging that they were not being treated with “respect and dignity” by the airline's Human Resources Department. Interestingly, as far back as 2010, when Air India and Indian Airlines were merged into Air India but were still government-owned, the then Chairman and Managing Director, Arvind Jadhav, had said harmonizing the wage structure was going to be a real challenge for the airlines, which couldn’t be achieved unless the government supported them. Commenting on the latest developments, Satyendra Pandey, Managing Partner of Aviation advisory firm AT-TV points out that any airline integration is challenging, and the Air India Express and erstwhile Air Asia India integration is no different. “What works well in this case is that the networks are complimentary. AirAsia India is focused on the domestic market with no international presence; Air India Express largely operates an international network with most flights to the Middle East. Combined, the airlines connect approx. Twelve international and ~ 20 domestic cities,” he points out, adding that the airlines are waiting for requisite approvals to join hands and operate as one. “While some systems have been integrated, the real synergies will come after integrating fleet and personnel and, by extension, processes and procedures. That is easier said than done, especially given the differences. One is an Airbus operator while the other is a Boeing operator; one is based in Bangalore while the other traces its erstwhile base to Cochin; and one is focused on the leisure market while the other is on a diaspora market,” he says, adding that the current agreement helps with take the integration one step forward, especially for schedules and frequencies. “Via the interline, both airlines can sell tickets to each other, and for the passenger, the single PNR is one less friction point. The fact that a single boarding pass can be issued adds to the offering. The combined entity also faces an uphill battle in that the offering is in direct competition with the market leader, and on some routes, it will be in competition with Air India itself.” Pandey cautions. He believes the challenge for the management will be to complete the integration while continuing to operate and ensuring costs do not creep up.

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