Tata Group-owned Air India has proposed to buy the entire share capital of low-cost airline AirAsia India, in which Tata holds a majority stake, with a view to merging it into a single airline, according to a filing with India’s Competition Commission.
The car-to-steel conglomerate bought state-owned airline Air India in a $2.4 billion equity deal, regaining ownership of what was once India’s flagship airline after nearly 70 years.
Tata Sons owns 83.67% of AirAsia India.
“This was in line with expectations as it makes no sense for the Tata Group to own stakes in separate airlines,” said Vinamra Longani, operations director at Sarin & Co, a law firm specializing in aircraft leasing and financing.
“The Tata Group has embarked on what will go down in history as possibly one of the most difficult airline realignments or turnarounds.”
While Air India has lucrative landing spots, Tata faces a difficult task to modernize the airline’s aging fleet and improve its finances and service levels.
“The proposed merger will not change the competitive landscape or have any significant negative impact on competition in India,” the filing with the Competition Commission of India (CCI) reads.
The CCI application is Tata’s first step in integrating its airline business, which also includes Vistara, a joint venture with Singapore Airlines, and AirAsia India, which it operates with Malaysia’s AirAsia X Bhd.