Tata Group, India’s largest conglomerate, is reportedly planning to merge four airline brands, i.e., Air India, Air India Express, Vistara, and AirAsia India-under, a sole entity. As per the new report, the Indian multinational conglomerate is considering consolidating all its airlines into the Air India brand. The merger may spell the disappearance of the Vistara brand, which currently operates as a Tata-SIA joint venture. Let’s dig deeper.
Merging four airlines under the Air India brand
It’s been less than a year since Air India, the flag carrier of India, returned to its founders Tata Group. Under the new management, the flagship airline will likely step up its aviation presence with the merger of all Tata airline brands under the umbrella of Air India Limited. Tata Group is preparing to integrate Air India, its regional subsidiary Air India Express, low-cost carrier AirAsia India, and Vistara to operate them as a single entity.
The restructuring plan comes amid Tata’s strategy to simplify its airline holdings and rebuild its aviation business. Tata Group will likely initiate the merger process with the ownership transfer of AirAsia India to Air India within a year or so. Earlier this month, the conglomerate gained 100% ownership of AirAsia India by agreeing to purchase its remaining 16.33%stake. Previously, AirAsia India operated as a joint venture with 83.67% ownership of Tata Sons and 16.33% of AirAsia Bhd. Tata Sons entered into a share purchase agreement with the Malaysian carrier to become the sole owner of the no-frills airline.
Scrapping Vistara brand?
The planned restructuring also involves bringing Vistara, the Tata-Singapore Airlines joint venture, into the Air India brand. Since the mission is to get all Tata-owned airlines on one platform, the conglomerate might scrap the Vistara brand. Tata Group owns 51% of the stake in Vistara and has negotiated with Singapore Airlines Group to integrate Vistara into the Indian flag carrier. Singapore Airlines will hold a certain stake in the combined entity and become co-owners alongside Tata Group. While the size of stake SIA Group will take over is still in the discussion stage, it will surely pick up some seats on the Air India board.
The Steel-to-salt business conglomerate will commence the Air India-Vistara consolidation after finishing the merger of two low-cost carriers. The entire integration of Tata’s airline business is estimated to complete by 2024 at most.
Rebuilding the aviation empire
Ever since Tata Group took over the ownership and control of the debt-laden national carrier, it has been moving full steam ahead to bring the glory days of Air India and grab the majority of the Indian market share. Making Air India the sole airline brand will allow Tatas to share infrastructures across the carriers and save costs. It will simplify the structure of Tata’s airline holdings and make the joint carrier more competitive.
Changing Indian aviation scenario
The potential integration of all Tata Group airlines will make the combined entity, i.e., Air India, the second-largest carrier in India. The Gurgaon-based low-cost IndiGo is the largest Indian carrier with over 50% domestic market share. The budget carrier has dominated Indian skies by operating a tight fleet of over 270 aircraft to major domestic and international destinations.
The consolidated Air India will have a total fleet of 217 aircraft and a market share of 18%. While the merger makes its market share twice its rivals like Go First and SpiceJet, IndiGo is still several knots away. Presently, Air India has a minimal domestic market share of 8%, but it seeks to increase it to 30% in the next five years.
In line with Tata’s ‘Vihaan.AI,’ a revival plan for the loss-making national carrier, the conglomerate seeks to triple Air India’s fleet in the next five years. The plan is to order 300 narrowbody jets, making it the largest aircraft transaction in history. In the next fifteen months, the Indian flag carrier is set to lease 20 Airbus +Boeing aircraft, including 21 Airbus A320neos, 4 Airbus A321neos, and 5 Boeing B777-200LRs.
Currently, Air India retains a narrow and widebody fleet of 70 and 43 aircraft, respectively. The Kochi-based low-cost subsidiary Air India Express flies 24 jets, all Boeing 737-800s. The full-service carrier Vistara is a proud operator of over 50 jets comprising both Airbus and Boeing units. The Tata-SIA joint venture is often touted as India’s best carrier due to premium passenger service and superior onboard products.