The Tata Group is set to commence the process of consolidating its airline companies under the Air India brand, starting with transferring its ownership in AirAsia India to Air India shortly and with an indicative time limit of wrapping up the consolidation of its entire airline business under a single umbrella latest by 2024.
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As part of the plan, being discussed at multiple levels within the group, the consolidation process is likely to start with the merger of AirAsia India into Air India Express, to be completed over the next 12 months. Post this, the group is likely to look at an option of merging its full-service carrier Vistara into Air India, with the likelihood of Singapore Airlines (SIA) — an equity partner in Vistara — eventually partnering with the Tata Group to become part-owners of Air India as well.
The Plan
Consolidation process is likely to start with the merger of AirAsia India into Air India Express, to be completed over the next 12 months
“The process of transfer will happen anytime soon that will make AirAsia India the subsidiary of Air India; soon after, AirAsia will be merged with Air India Express. The integration process of the two airlines is expected to take at least 12 months from the start date,” a source in the know told The Indian Express. At present, AirAsia India is majority owned by Tata Sons, the holding company for Tata Group companies. The group, however, would want to keep AirAsia India’s flying licence active since approvals to the airline have been challenged in courts by former BJP MP Subramanian Swamy.
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The Tata Group won a bid to own 100 per cent in Air India by paying Rs 18,000 crore to the Union government in October last year. The airline was transferred by the government to the Tata Group in January this year. Along with Air India, the group also got Air India Express, a fully-owned low-cost subsidiary of Air India that operates in the short-haul international space, and 50 per cent stake in ground handling company AISATS.
The Tata Group’s airline portfolio comprises 83.67 per cent ownership in AirAsia India and a majority 51 per cent holding in Vistara, with Malaysia-based AirAsia Berhad owning 16.33 per cent in the former and SIA owning 49 per cent in the latter.
As part of the consolidation of its airline portfolio, the group has decided to fully acquire AirAsia India by buying out AirAsia Berhad’s stake for $30 million.
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On the merger of Air India Express with AirAsia India, official sources in the know said it will start with integration of information technology and passenger booking system. The AI Express system is likely to be moved to the AirAsia India’s system that is better in all aspects.
“Issues like cabin crew dress, branding (likely to be called Air India Express or something similar) are still being discussed at various levels. There are complexities since both airlines are different in terms of service, crew attire, etc,” the source said.
As part of the plan, the airline will operate two types of aircraft: Air India Express’ Boeing 737 and AirAsia’s Airbus 320. Sources said one of the plans being discussed is to shift all aircraft with AirAsia India to Air India Express.
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“Due to cases, there could also be a requirement to keep the AOP (flying permit) valid till a decision is taken; one plan also is to keep the AOP of AirAsia India alive by operating a cargo aircraft,” the source quoted above said. Vistara and Singapore Airlines refused to comment on the issue. Air India and the Tata Group did not reply till print time. Going ahead, the Tata Group plans to have one Air India brand with AI Express as its low-cost subsidiary that will operate in low-cost domestic and international space. The source said the AI Express top management (mainly the CEO) has already started operating out of the Air India head office in New Delhi.
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A decision on stake swap with SIA will be taken at a later date, official sources said. “SIA would have been part of the AI deal by the Tata Group, were SIA’s finances not impacted by Covid-19. Eventually, Vistara will likely be merged with Air India and the form (in terms of equity for SIA etc) will only be decided only at a later date, most likely in 2024,” the official said.
Air India, under its new CEO Campbell Wilson, has outlined a five-year roadmap aimed at re-establishing itself as a world–class carrier while achieving a market share of 30 per cent in the domestic market. The airline, which had last week announced plans to induct 30 new wide-body and narrow-body aircraft, said the plan is code-named Vihaan.AI, which in Sanskrit means dawn of a new era.
“A target to reach 30 per cent is substantial considering the market is going to grow and the competition will also expand during the time,” the source quoted above said. He said the bigger plan is to make Air India a network that operates out of hubs in India and, along with SIA, becomes one of the preferred carriers in the region and, eventually, a global airline of choice.
