New Delhi | Reuters: Tata Group-owned Air India has proposed to buy the entire equity share capital of low-cost carrier AirAsia India, in which Tata has a majority stake, to merge into a single airline, according to an application with India's competition commission.
The autos-to-steel conglomerate bought state-run carrier Air India in a USD 2.4 billion equity-and-debt deal, regaining ownership of what used to be India's flagship carrier after nearly 70 years.
Tata Sons has an 83.67 per cent stake in AirAsia India.
"This was on expected lines as it makes no sense for the Tata Group to own stakes in separate airlines," said Vinamra Longani, head of operations at Sarin & Co, a law firm specialising in aircraft leasing and finance.
"The Tata Group has embarked on what will go down in history as possibly one of the most challenging airline realignment or turnarounds."
While Air India has lucrative landing slots, Tata faces an uphill task to upgrade the airline's aging fleet and turn around its financials and service levels.
"The proposed combination will not lead to any change in the competitive landscape or cause any appreciable adverse effect on competition in India," according to the application with the Competition Commission of India (CCI).
The CCI application is the first move by Tata to integrate its airline businesses, which also include Vistara, a joint venture with Singapore Airlines (SIAL.SI), and AirAsia India, which it operates with Malaysia's AirAsia X Bhd (AIRX.KL).
Deals beyond a certain threshold require the approval of CCI, which works to foster competition as well as curb anti-competitive practices in the market place.
AirAsia India, which started flying in June 2014, offers scheduled air passenger transport, air cargo transport and charter flight services in the country. It does not have international operations.
According to the notice, 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 the manner in which the relevant markets are defined.
Tatas took over Air India and Air India Express in January this year. In October 2021, Tatas emerged has the winning bidder for loss-making Air India. It offered a bid of Rs 18,000 crore, comprising cash payment of Rs 2,700 crore and taking over the carrier's debt worth Rs 15,300 crore.
Posted By: Subhasish Dutta