Tata Owned Air India All Set To Acquire AirAsia; Mega Consolidation Expected In Aviation!

Air India is expected to buy the remaining 16.33% stake.

Tata Group’s Air India intends to buy AirAsia India’s entire stake and has filed a notice with the CCI for the same.

The Deal

Both airlines are run by Tata Sons, with Air India as a wholly owned subsidiary and AirAsia India with Malaysia’s AirAsia.

Tata Sons owns 83.67% stake in AirAsia India with the remaining belonging to AirAsia Investment Ltd (AAIL), part of Malaysia’s AirAsia Group.

Air India is expected to buy the remaining 16.33% stake for Rs 139 crore and take full ownership of the airline.

Why CCI Is Involved

Beyond a certain threshold, deals require the approval of CCI, the regulator that curbs anti-competitive practices. 

According to the notice, the proposed integration will not result in any change in the competitive landscape or have any ill effect on competition in India.

However, it will lead to overlaps in operations in certain markets, with overlapping verticals at Bengaluru, Hyderabad, Delhi, Thiruvananthapuram and Mangaluru airports.

Importance To Tata

The deal will finally consolidate Tata Group’s airline businesses and bring them under one roof.

It should also help the company improve the standing of its aviation stable, which comprises three unprofitable carriers including Vistara.

When the sale is made, the combined entities would take over 15.7% share in the domestic passenger market.

Currently, Indigo is the market leader with a share of almost 54%.

What Next?

The conglomerate itself operates the full-service airline Vistara in a joint venture with Singapore Airlines. 

It owns 51% stake and Singapore Airlines holds the remaining 49%.

There are speculations that Tata Group has already begun the process of consolidating its airline businesses — Air India, Air India Express, Vistara, AirAsia India and AI SATS (ground-handling firm) — into one entity.

A New Home

These aviation companies are expected to be housed in the same corporate office in Gurgaon.

A memo sent to the top management of these entities by the Tata Group notes that they all would move together into a complex in Gurgaon, in order to “optimise resources, increase team work and have higher synergies at work”.

It is also looking to relocate to a new 70,000 square feet office space on NH-8.

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