The Tatas have begun the task of consolidating their airlines’ businesses through a proposed merger — of AirAsia India Pvt Ltd (AAIPL) with Air India (AI) — and bringing together all these entities under one roof at a mega office in Gurgaon.
Air India has notified the Competition Commission of India (CCI) about its plan to merge AAIPL into it, thereby beginning the legal process of this consolidation. AAIPL started operating in 2014, a year before the second Tata JV Vistara and still does not have the right to fly abroad.
Air India Limited, along with its wholly-owned subsidiary, Air India Express Limited (AIXL), is primarily engaged in the business of providing- domestic scheduled air passenger transport services; international scheduled air passenger transport services; air cargo transport services in India, and charter flight services in India.
“The proposed combination relates to the acquisition of the entire equity share capital of AAIPL by Air India, an indirect wholly-owned subsidiary of Tata Sons Private Limited (TSPL). At present, TSPL holds 83.67% of the equity share capital of AAIPL. The proposed combination is notifiable under… the Competition Act, 2002.”Competition Commission of India (CCI)
AAIPL is a joint venture in which Tatas have an 83.67% stake and the remaining 16.33% switch to AirAsia. “The Proposed Combination will not lead to any change in the competitive landscape or cause any appreciable adverse effect on competition in India, irrespective of how the relevant markets are defined,” it adds.
As per the notification, Air India has submitted the relevant markets, concerning horizontal overlaps. These are the market for domestic passenger air transport services in India, the market for the provision of domestic air cargo transportation services in India, and the market for the provision of charter flight services in India.
It has also additionally submitted the relevant markets involving vertical overlaps. These are:
- The upstream market for ground handling services, and downstream market for passenger air transport services (including charter flight services) at the Bengaluru, Hyderabad, Delhi, Thiruvananthapuram and Mangalore airports; and the upstream market for cargo handling services at Bengaluru airport.
- The upstream market for cargo handling services, and the downstream markets for air cargo transportation services and charter fight services at Bengaluru airport.
- The upstream market for in-flight catering services, and the downstream market for passenger air transport services (including charter flight services) in India.
Tata-owned all the 4 airlines coming under one roof
Additionally, the Tata Group has begun to move to have greater synergy between its four airlines by shifting them to one mega office in Delhi’s suburb of Gurgaon. It has identified an office space of up to 70,000 square feet which can be leased “immediately”.
Working with Tata Realty, the group is now finalising its office requirement and plans to start the transition at the earliest.
Considering the existing 4 (airlines) and one JV (AI-SATS) as part of the Tata fold, it has been decided that to optimise resources, increase teamwork and have higher synergies at work, the various entities will move together into a complex in Gurgaon to start with as far as possible in a phased manner.
“New office space on NH8 has already been identified where we have an option to lease up to 700,000 sq ft immediately,” a communication sent to the heads of these five Tata aviation entities says.
“We now need to finalise our exact space requirement and start planning the transition to this new space immediately. We are targeting to move in the next 2-3 months. For this purpose, to develop the strategic plan, the task has been entrusted to Harpreet A De Singh, ED headquarters, along with the Consultants from Ernst and Young,” it adds.
The entities have been asked to give information about their required office space to this team “promptly, to facilitate this strategic transformation and consolidation at the earliest.”
A team from Tata Realty – the group’s real estate firm is working on the project led by its Managing Director and CEO Sanjay Dutt. Consultancy firm EY has also been roped in for the project.
Air India currently has its headquarters at Airlines House situated in Central Delhi where it shifted from the iconic Nariman Point Building in Mumbai in 2013. The airline’s low-cost subsidiary Air India Express is based out of Kochi.
Tata Group-owned AirAsia India is based out of Bengaluru while Vistara, its joint venture with Singapore Airlines is based out of Gurgaon.
This shift will consolidate Gurgaon’s pre-eminence in Indian aviation as it already houses IndiGo and SpiceJet. Mumbai, one the hub of airline headquarters, now houses a few relatively big airlines like GoAir.
The Tata Group had taken over Air India and Air India Express this January-end. It is yet to spell out the consolidation among the four airlines.
The options are – a low cost by merging Air India Express and AirAsia India, Air India and Vistara; one full service and a low cost; Air India (merging all three) and Vistara till the latter’s 49% stakeholder Singapore Airlines agrees to a merger with AI. The group is trying to get a CEO for its airline business to finalise the future course of action.