Tatas worried about AirAsia India growth; unlikely to bid for AI

K Giriprakash / Vinay Kamath Bengaluru | Updated on September 13, 2019

Tata Sons owns 51 per cent each in Vistara, a full service carrier, and AirAsia India, a low-cost airline

Group to focus on Vistara, expects it to be the only full-service carrier in a few years

Tata Sons is unlikely to bid for Air India as it believes that it will not add any heft to its airline business.

Sources close to the salt-to-steel conglomerate told BusinessLine that there is still no clarity on the huge debt pile that Air India is burdened with and the high employee-to-aircraft ratio. It, however, would be interested in some of the key slots at various airports, sources said.

Tata Sons owns 51 per cent each in Vistara, a full service carrier and low-cost airline, and AirAsia India.

The group is also said to be considering a rethink on its way forward with AirAsia India. The airline’s slow growth has been a source of concern for the group coupled with court cases that have stalled the launch of international operations.

The group, which runs Vistara in a joint venture partnership with Singapore Airlines, has already drawn up a roadmap to expand its operations, including having direct flights to some destinations to the US and Europe.

Sources in the group told BusinessLine that Air Asia India has not grown to an extent that it can pose a challenge to other low-cost carriers such as IndiGo and SpiceJet. “It is a good airline. But its role is still unclear,” one of the sources said.

Sooner rather than later, the group may take a call on whether it should stick with the current roadmap of AirAsia India. “Strategically, we don’t know what role it (Air Asia) is playing,” said a source.

AirAsia India commenced its operations in June 2014. While Tata Sons hold 51 per cent, AirAsia Berhad owns the rest. It has 22 Airbus A320s.

Fleet expansion

AirAsia India, according to unnamed officials, plans to double its fleet size in the next 12-15 months. It also plans to launch international operations with flights to South-East Asian countries.

Ever since its launch, AirAsia India has been involved in one controversy or the other. BJP MP Subramaniam Swamy has repeatedly told the Central government not to give AirAsia India a licence to operate international flights as, he said, it has violated foreign direct investment norms and has a pending court case.

Vistara, a full-service carrier, the only one in the private sector, has been growing steadily since it launched operations in 2015. It has a total of 31 aircraft and will add 50-plus aircraft over the next few years.

Sources said Tata Sons wants to focus on Vistara’s growth as it believes that in a few years, it will be the only full-service carrier left in the country. Tata Sons holds a 51 per cent stake in Vistara while the rest is held by Singapore Airlines.

Published on September 13, 2019

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