Winning the bid only start of a long journey for Tatas' aviation ambition: Experts

The homecoming of Air India to the Tatas is a mixed bag of opportunities and challenges for the Indian conglomerate, according to industry experts.

All the industry experts BusinessLine spoke to said that it is not only a great opportunity for the Tatas but the Indian aviation industry. The Government on Friday announced Tata Sons as the winner after a bidding process where EY were the consultants.

Ashish Shah - Sr. Research Analyst - Centrum Broking Limited said that Air India has the assets, slots and the routes that Vistara can benefit from, especially on the international front. Whereas, Air India, which has the creme international slots, can benefit from Vistara and AirAsia’s domestic slots. Together, both these airlines can manage to fill the void Jet Airways left.

Siddharth Narkhede, airline analyst at aviation advisory firm, Ishka added the Tatas will have access to both the full-service network and the low-cost-carrier network.

“As an emerging market with a price-sensitive customer base, low-cost airlines remain better positioned to capture most of the traffic growth. But a market the size of India and one with one of the world’s largest diaspora populations, there is also huge potential for a full-service long-haul network airline. The combined entity would allow TATA to cater to the various market segments,” he explained.

Along with this, for the Tatas, Air India brings with itself a lot of positives in the form of its brand legacy, peak slots at major airports worldwide, large talent base of pilots and engineers, Koushik Jagathalaprathaban, Partner at AT-TV.

Fleet expansion

With this, Tatas have the opportunity to expand its fleet in one shot. According to sources close to the negotiations between the Government and the bidders, Vistara has a relatively smaller fleet compared to Indigo. By adding the 140 aircraft of Air India to its fleet, the Tata airlines will have a massive fleet in one go to compete with IndiGo. And to conquer IndiGo means to triumph over the Indian skies, the source said.

But aviation industry watchers believe that the return of the Maharaja back to its original owners is a battle half won, and the Tatas will have a long journey and hard journey ahead.

Shah said that to expect a change in one day from them is impossible. “The Tatas will take a fair amount of time to get Air India back to its glory and to make up for all the lost market share over the past several years and the performance,” he explained.

While Vistara continues to enjoy the tag of a premium airline in terms of its food and crew services, Air India has lost its Midas touch over the past few decades. All these airlines may have overlapping routes and slots, the next task for the Tatas will be to rationalize them

Another big challenge for the Tatas would be the culture difference that all these airlines, especially Vistara and Air India have. Over the next one or two years, according to experts, The Tatas will have to unclog the huge employee base that Air India has.

Whenever it comes to issuing pink slips, it brings a lot of legal challenges with itself. Anjan Dasgupta - Partner - DSK Legal said that these legal challenges can never be avoided. “So there could be potential litigation, however, the question is, will these challenges be upheld by the courts. In my view, the process run by DIPAM is quite robust and chances of the courts interfering is remote. We have to remember that DIPAM has been successfully running the disinvestment programme of the government for sometime now.”

Another challenge that Tatas will face is the increasing competition in the airlines space. Today, IndiGo remains to be the market leader with more than 50 per cent of the market share. On other hand, there are two new airlines - Jet Airways and Rakesh Jhunjhunwala-backed Akasa. It could be a while before the Tatas can rule the skies once again.

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