Following the acquisition of Air India, the Tata Group intends to merge all of its airlines into a single business

In case Tata Sons’ bid for Air India succeeds in that scenario the company plans to merge low-cost carrier AirAsia India with the state-owned carrier, according to top executives familiar with the plan. If Singapore Airlines (SIA), Vistara’s 49 per cent shareholder, joins the combined firm later, the full-service carrier Vistara is also expected to become a part of it.

According to one executive, Malaysia’s AirAsia Bhd, which owns roughly 16% of AirAsia India, will withdraw by March 2022, selling its remaining stock for $18 million. The Tata group has also contacted SIA regarding their eventual plan to merge their joint venture Vistara into a single airline firm to maximize synergies and avoid redundancy.

An SIA representative said, “We do not comment on any confidential discussions we may or may not be having with our partners.” AirAsia India and Vistara did not respond to requests for comment. Tata Sons remained silent as well. Tata and SpiceJet promoter Ajay Singh submitted financial offers for Air India on September 15.

It’s possible to hire integration experts:

It was previously reported that AirAsia India and Air India Express would be merged if the proposal were successful. SIA had been persuaded to integrate Vistara’s network with that of the national airline Air India.

Given the difficulties inherent in uniting several organizational systems, the Tata group is considering hiring integration professionals to form a single airline entity, according to the persons cited above.

“The group has been apparent that the aim is to have one entity if and when the Air India transaction is completed,” one of them added. “Increase the game’s difficulty and become the best player in the area. Because AirAsia is now a Tata company, merging the two companies will be easy. Additionally, having various cost structures would be inefficient in a low-margin competitive business. The intent has been communicated to SIA, and a conversation has begun.”

According to the latest Directorate General of Civil Aviation numbers, Air India, AirAsia India, and Vistara hold a 26 per cent share of the domestic air passenger market. IndiGo is the market leader with a 57 per cent market share.

AirAsia India is around 84 per cent owned by Tata Sons. It increased its stake in the budget carrier to 32.67 per cent from 51 per cent late last year. According to the agreement, Tata has a call option on the remaining 16.33 per cent of AirAsia India. Vistara is 51 per cent owned by the conglomerate, and SIA owns the rest.

Looking Ahead:

AirAsia’s brand will no longer be a part of the partnership after it leaves. AirAsia India now leases two planes from AirAsia Bhd’s former plane leasing unit. The lease term is coming to an end soon, one of the people, as mentioned earlier, said.

Tata has hired Seabury Group and Bain Capital to do due diligence before investing in Air India if the deal is successful. Talace Ltd, a new subsidiary of the firm, has made a bid for the national carrier. It’s unclear whether Talace will be the group’s sole holding company for its airline operations.

The Tata group had intended to enlist SIA’s help and submit a bid through the Vistara joint venture. On the other hand, the Singaporean carrier had waived its no-compete provision, allowing Tata to proceed with a solo offering for the ailing airline. According to an insider, the group’s airline companies, including Vistara and AirAsia, are considered minor and need growth.

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