Tata Sons is likely to merge its existing airline business with Air India in a bid to create the second-largest airline in the country.
According to sources, Tata Sons has been working on a plan to combine Vistara, Air India, and AirAsia under a common umbrella. “About 150 executives have been working on this project for the last 18 months. Air India brings the scale which the Tatas were looking for in their aviation business,” said a source close to the Tata group.
Analysts said that Tata Group’s acquisition of Air India is likely to result in a consolidation in the domestic civil aviation market.
Second-largest
Suman Chowdhury, Chief Analytical Officer, Acuité Ratings and Research, said, “With Air India, Vistara, and Air Asia having a current combined market share of 26.9 per cent, the Tata Group will emerge as the second-largest domestic airline after IndiGo once the consolidation of the operations of all three airlines is completed.”
“Given the strong financial flexibility, availability of a larger fleet and multiple brands catering to different customer segments, the Group is likely to have a competitive advantage over the other players. However, the ability to optimise costs, and streamline operations will be a formidable challenge and the key to profitability in the group’s airline operations,” Chowdhury said.
Koushik Jagathalaprathaban, Partner at AT-TV, said, the sale will help Tatas consolidate the space under one company (probably 2 brands) and work on something unique.
“Hopefully they get a free hand to implement their vision with no unions or courts trying to weigh in, into a private company which will be Air India shortly,” Jagathalaprathaban added.