Tata may bring low-fare airline AirAsia India under the Air India umbrella if its bid for the latter succeeds.
Malaysia’s flagship budget airline AirAsia Bhd, which owns about 16% of AirAsia India, will leave by March 2022 after selling its remaining stake for $18 million.
Taking In Vistara Too
Later on, even Vistara may be brought under the aegis if Singapore Airlines (SIA), its 49% shareholder, comes on board.
Vistara is a joint venture between Tata Sons and Singapore Airlines (SIA).
Tata group has also reached out to SIA about its plan.
Grouping Vistara under a single airline entity would make way for consolidation, eliminate duplication and bettering its presence in one of the world’s fastest-growing aviation markets.
To turn its plans into reality, Tata will hire integration specialists.
They will help the company navigate the complications involved in combining multiple organisational structures.
Merger After Acquisition
Tata had made it clear that upon acquiring Air India, it will club its entities into one.
This would help them scale and become the top player in the space.
Given that Air Asia is now a Tata company, the merger should be relatively easier.
It also makes sense operationally since it is not sensible to have multiple cost structures in a thin-margin competitive sector.
The Indian Aviation Industry
Presently Air India, AirAsia India and Vistara collectively have 26% share of the domestic air passenger market.
Market leader IndiGo has a 57% share.
Tata Sons owns close to 84% of AirAsia India.
It holds 51% of Vistara and SIA has the rest.