India’s Tata Sons have made their first consolidation move with the intention to merge Air India with AirAsia India. The move has come to light on April 27 when Air India filed a request for approval with India’s anti-trust regulator, the Competition Commission of India. Â
In January, Tata Sons completed the acquisition of Air India and Air India Express, adding the airlines to its existing tie-ups with Singapore Airlines, which operates under the brand Vistara, and AirAsia, which operates under the brand AirAsia India. With this move, the Tata Group now has an economic interest in four airlines, and it has now started the process of consolidating all their airlines.Â
The Tata Group took a majority stake in AirAsia India in December 2020. Tatas currently own 83.67 percent of AirAsia India, and AirAsia International Limited owns the rest. The acquisition of the remaining stake of 16.33 percent was expected to be completed in 2022, although no transaction closure date has been indicated so far. While Air India is a full-service carrier and AirAsia India is a no-frills operator, this transaction has many reasons to go through.
For its domestic operations, Air India works with an all A320 family fleet. However, many aircraft have been grounded for a while, restricting the airline from scaling up operations to take on behemoth IndiGo in the Indian market. At last count, six aircraft (five A321s and one A319) were handed over to the Indian Government’s Defense Research outfits for conversion into airborne early warning & control (AEW&C) aircraft for the Indian defence establishment. Air India did incorporate 27 A320neo aircraft on a leased basis a few years ago. However, no further aircraft orders are outstanding for Air India. Additionally, another four A321s and thirteen A319s have been grounded, apart from various 787 and 777 aircraft of Air India.
Air India could absorb 33 Airbus aircraft
With this move, Air India will be able to absorb 33 A320ceo/neo aircraft, along with a trained workforce and engineers who keep them fit to fly. Air India’s engineering wing, AIESL, has not been sold, and Air India needs to pay AIESL to access MRO services from AIESL. The combined entity will immediately bulk up to be India’s number two domestic airline with a 15.7 percent market share. However, it remains to be seen if Air India will go for a reconfiguration of these aircraft or continue as is with them (in a single-class configuration).
Air India notes in its filing that there is no change of consequence in the competitive landscape or causes any appreciable adverse effect on competition in India, irrespective of the manner in which the relevant markets are defined. “The Proposed Combination will not lead to any change in the competitive landscape or cause any appreciable adverse effect on competition in India, irrespective of the manner in which the relevant markets are defined”, the filing states. However, there is some “vertical overlap” of ground handling and passenger services at Bangalore, Hyderabad, Delhi, Thiruvananthapuram, and Mangalore.Â
Media reports also state that Tata Group is driving other synergies amongst the four airlines under its ownership (full or part). The conglomerate is planning to bring together all four airlines under the same roof in the satellite town of Gurugram, next to Delhi, along with ground handling unit AI-SATS, which it owns 50 percent along with Singapore Airlines holding the rest.Â
