Tatas announce ‘4-airline consolidation strategy’ as Air India buys Air Asia India

NEW DELHI / MUMBAI: According to an application filed with the Competition Commission of India, Air India has planned to acquire low-cost airline AirAsia India in its maiden M&A under new owner Tata Sons (CCI). Malaysia’s AirAsia will abandon the airline endeavor nine years after it first arrived in India with great aspirations.

AirAsia holds 16.33 percent of the Indian subsidiary, and the shareholder’s agreement between the firm and Tata Sons states that the latter may buy the former’s investment directly or through an associate. According to reports, because Air India is now a subsidiary of Tatas, the acquisition of AirAsia’s stock was handled through it.

Air India will pay Rs 139 crore for AirAsia’s 16.3 percent stake in the airline. Tata Sons owns the remainder of AirAsia India, accounting for 83.7 percent of the company. Air India will also acquire this. On January 27, this year, Tata Sons purchased Air India in an Rs 18,000 crore equity and debt acquisition through its 100 percent subsidiary Talace.

Tata Sons’ CCI application is the first stage toward integrating its aviation company, which also includes low-cost airline Air India Express. The planned acquisition of AirAsia India by Air India ‘would not result in any change in the competitive environment or have any noticeable adverse effect on competition in India,’ according to the CCI proposal.

Tata Sons’ airline brands, which include Air India, AirAsia India, and Vistara (a joint venture with Singapore Airlines), have a domestic market share of 25%, but IndiGo remains the industry leader with a share of about 54%. Air India Express is primarily a low-cost international airline that connects southern India to the Gulf and Southeast Asia.

Despite the fact that AirAsia India began operations in 2014, a year before Vistara, it still lacks the licence to fly internationally. Vistara, on the other hand, travels to a number of overseas destinations, including the United Kingdom, Europe, the Gulf, and Southeast Asia. With AirAsia preparing to quit AirAsia India, Tata Sons would be forced to consolidate the operation under a single brand. Meanwhile, Tata Sons are consolidating its aviation operations under one roof in Gurgaon, where it will lease 70,000 square feet of office space.