Air India, the airline owned by the Tata Group, has proposed to buy the entire share capital of the low-cost AirAsia India – in which it already has a majority stake – and unify operations in a single company.
According to Money Control, AirAsia India is currently owned by the Tata Sons Group, which holds 83.67%, and AirAsia, which owns the remaining 16.33%.
AirAsia India was founded in March 2013 and in its business plan set a goal of breaking even in just one year of operations. At its inception, the airline was split between AirAsia, Tata Group, and Telestra. Over the years, Tata acquired a majority stake in the airline, first displacing Telestra and then acquiring about 30% of AirAsia’s shareholding.
The airline never made a profit in eight years of operations. In 2020, the Tata group eventually took control of the company and appointed staff from its group companies to key positions, most without any industry experience.
Acquisition of the entire airline
Now, as ch-aviation reports, the Tata group has sought approval from the Indian antitrust authority to merge AirAsia India with Air India, also owned by it. In the proposal, the company proposes that the flag carrier acquire 100% of the low-cost airline. Tata in January bought 100% of state-owned Air India in a $2.4 billion deal.
“The proposed merger relates to the acquisition of the entire share capital of AirAsia by Air India,” the filing with the Competition Commission of India (CCI) on April 27 said. “The proposed combination will not result in any change in the competitive landscape or cause any appreciable adverse effect on competition in the country.”
“This is in line with expectations. It makes no sense for the Tata Group to own stakes in several airlines when it can unify everything into one,” Vinamra Longani, head of operations at Sarin & Co – a law firm specializing in aircraft leasing and financing – told Reuters.
Air India has valuable slots at the country’s major airports. However, the group faces the arduous -and costly- task of renewing the airline’s aging fleet.
Future of the business
While the ICC filing mentions that it will be Air India that will acquire AirAsia India, the operation will be carried out jointly with Air India Express, the flag carrier’s low-cost subsidiary. This will unify the operation into a single low-cost airline, which will operate mainly to domestic destinations.
The challenge will be to operate a mixed fleet: AirAsia India has 28 Airbus A320ceo and 5 Airbus A320neo aircraft, while Air India Express has 24 Boeing 737-800 aircraft.
Air India operates 45 A320ceo family aircraft (21 A319, 9 A320, and 15 A321), 27 Airbus A320neo, 16 Boeing 777 (3 -200LR and 13 -300ER), and 27 Boeing 787-8. Its hub is located at Indira Gandhi Airport in New Delhi, from where it flies to around one hundred destinations in more than twenty-five countries. The airline is a Star Alliance member and has codeshare agreements with more than twenty airlines worldwide.
