Tata Sons working on a merger between AirAsia India and Air India Express

Tata Sons Ltd—the holding company for India’s largest conglomerate—has reportedly started work on the merger of budget carrier AirAsia India with Air India’s low-cost airline Air India Express in a bid to attain synergies and reduce operational costs.

Worth mentioning here is that this first move to consolidate its control and form a single company in such a short duration as Tatas took control of AirAsia India by increasing its stake to 84% from 51%. Tata is yet to conclude negotiations with Singapore Airlines (SIA) on combining the schedules of Vistara and Air India, people with knowledge of the matter told The Economic Times. Tata has a 51% stake in Vistara and SIA holds the rest.

The financial daily quoted one of the persons as saying, “This is the most logical move at this stage and with Tata owning a majority in Air Asia, the integration is easier. With many experts on deck, this integration will help the group swiftly set up the single airline structure it has been planning for a while.” 

More importantly, the Mumbai-based cars-to-coffee conglomerate had roped in integration experts to create a single aviation company, given the complexities involved in combining multiple organisational structures.

In October this year, Tata Sons regained control of Air India—the airline it founded nearly 90 years back—as the Centre accepted its winning bid of INR 18,000 crore to acquire 100% of the ailing national carrier. Air India Express is a wholly-owned subsidiary of Air India.

(Image Courtesy – Business Insider India)

Of late, Tata Sons held several rounds of talks with the top management of AirAsia India and Air India to discuss the integration of staff, and aircraft quality and safety checks, among other issues. Also, external integration experts were part of these meetings. 

“There is a sense of urgency to quickly get operations seamlessly off the ground and ensure no disruptions at customer-facing points,” the daily cited one of them as saying.

In April 2005, Air India Express was launched as a low-cost carrier to provide convenient connectivity to short/medium-haul international routes in the Gulf and southeast Asia at affordable fares, according to the company website.

According to the publication, Tata Sons has asked global head hunters to create the top management structure for its aviation entity as it is poised to establish one aviation holding company to bring the entire airline business under one umbrella. Malaysian budget airline AirAsia Group Bhd, the minority stakeholder in AirAsia India, will cease Indian operations by the end of this fiscal year and the brand won’t be part of the venture.

Tata plans to first integrate Vistara’s network with Air India and will at a later date look at a closer union. Air India has a fleet of 121 planes and a staff count of more than 12,000.

Cover Image – NewsBytes