Air India’s merger with its sister airline Vistara has been on the Tata Group’s agenda since the conglomerate took over in October 2021. However, the sheer scale of the resulting product has now gained increased attention from the government, which aims to keep the playing field level.
Campbell Wilson, Air India’s Chief Executive Officer (CEO), and Sidharth Sharma, Tata Group’s General Counsel, met with Ravenet Kaur, the Chief of the Competition Commission of India (CCI), to discuss the ongoing merger process and its potential impact the merger will have on India’s airline industry.
The lay of the land
As it currently stands, the Tata Group owns Air India, AirAsia India, and Air India Express outright. The Tata Group also has a 51% stake in Vistara, with Singapore Airlines holding the remaining 49%.
In 2022, IndiGo ferried 56.2% of India’s domestic passengers, while Tata’s Air India and Air India Express accounted for 9.6%, Vistara managed 9.2%, and AirAsia India flew 6.2%. SpiceJet handled the remaining 18.9%, Go First, and Akasa Air.
If the merger is to go through, the two airlines will have control over 80% of India’s domestic market. This result would be disastrous to smaller airlines.
The commission’s concerns
Concerns about a potential duopoly by the post-merger Air India and IndiGo have piqued the CCI’s interest in the case.
Furthermore, the merger will result in the Tata Group’s market share exceeding 50% in at least seven domestic markets. The Air India-Vistara combination will also have a hold on various domestic and international routes.
In June, the CCI notified the airlines about why the process should be fast-tracked and why it should not investigate the merger further. Air India’s CEO met with the Chief of the CCI to address the watchdog’s concerns about the merger.
The airline is yet to make an official response to the CCI. Once a reply has been sent, the CCI will review it and make a decision on the merger. If the CCI is unsure of the proposal, it can order a broader, more detailed review. However, Vistara’s Chief Executive Officer, Vinod Kannan, stated that regulatory approvals for the merger will be sorted by April 2024.
The added scrutiny is nothing new and shouldn’t be viewed as a potential roadblock to the merger. The Tata Group said the process might take longer if an inquisition occurs, but the result will be unchanged.
The Air India and Vistara merger is part of the former airline’s five-year plan, Vihaan.AI. The plan is meant to transform Air India into an airline that can go toe to toe with the industry giants globally.
Singapore Airlines and the Tata Group announced the merger at a press junket in September 2022 and presented the plan to the CCI in April.
Should the merger occur, Singapore Airlines will hold a 25% stake in Air India, and Vistara will cease to exist.
Source : Simple Flying