Bhaskar Bhat, chairman of Tata SIA Airlines which owns Vistara has ruled out Vistara merging with Air India for the time being.
The Tata Group which has taken over Air India plans to turn the airline around without affecting Vistara’s operations.
Tata owns 51% of Vistara and Singapore Airlines (SIA) holds the rest.
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Tata’s Long Term Vision
Tata plans to keep Air India as an untouched structure for a year and has a long term plan to create a unified aviation entity.
This entity will have an efficient operational structure which will help it compete in the marketplace.
Tata Group has expressed its intentions to do away with multiple cost structures in the competitive aviation sector which has thin margins.
Combining Identical Services
Before Air India, it had been operating AirAsia India and Vistara.
Now having acquired Air India and its budget carrier Air India Express, the Group operates four identical services competing against each other in the same market.
This is unsustainable for the company due to the slim margins under which full-service airlines operate.
Biggest Airline Post Merger
Compounding the problem are losses under which both AirAsia India and Vistara are operating.
Therefore speculations were circulating that Tata would eventually merge all the carriers under one unified entity.
This entity would become the biggest airline in terms of both fleet and passengers.
However, Bhat has ruled this out for now.
Vistara To Coexist With AI
He said that Vistara will focus on customer experiences and anything beyond that would be speculation.
He added that merger is a strategic subject which should be resolved between joint venture partners.
“We have to run Vistara efficiently and coexist with Air India like any other airline,” Bhat said.
SIA’s Reluctance
Efforts are ongoing from Tata’s side to convince SIA to integrate Vistara’s network with Air India’s to ensure synergies and avoid duplication.
SIA has been given time to consider the proposal in the future.
It is said to be hesitant because of the long-term funding that will be needed for Air India.
SIA had posted a record $1.86 billion operating loss last year due to the pandemic.
AirAsia India and Air India Express Merger
Meanwhile, a merger between AirAsia India and Air India Express is on the horizon.
Tata Group owns 84% stake in AirAsia India and AirAsia is not in a position to invest more in the budget carrier due to its own troubles.
It has been draining cash on top of its financial troubles due to the pandemic and its related travel restrictions.
Exiting India Operations
It has been mulling over leaving India after giving over the entire business to Tata.
In December 2020, AirAsia had announced the disposal of a 32.67% stake to Tata Sons for $37.7 million with a provision to sell the remaining 16.33% for $18.8 million.
In November 2021, it was reported that Tata had started working on merging AirAsia India with Air India Express.
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