Tata Sons has commenced work on the merger of low-fare airline AirAsia India with Air India’s budget carrier Air India Express, said top executives close to the development. As the Tata group takes over Air India, it’s looking to achieve synergies and cut operational costs.
With Tata owning 84% stake in AirAsia India, this first step in creating a single airline entity can be taken in a relatively short span of time, they said. Tata is yet to conclude talks with Singapore Airlines (SIA) on integrating the schedules of Vistara and Air India, the people said. Tata owns 51% of Vistara and SIA holds the rest.
“This is the most logical move at this stage and with Tata owning a majority in Air Asia, the integration is easier,” said one of the persons. “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.”
Tata Sons has held several meetings in recent weeks with the senior management of AirAsia India and Air India to discuss the integration of staff, and aircraft quality and safety checks, among other matters. External integration specialists have been part of these meetings, said the people cited above.
“There is a sense of urgency to quickly get operations seamlessly off the ground and ensure no disruptions at customer-facing points,” said one of them.
Seeking Cost Efficiency
“Duality of operations and staff redeployment are also being looked into for cost efficiencies,” said a source.
Tata Sons didn’t respond to queries. A spokesperson at AirAsia India declined to comment.
On October 8, the Tata group owned Talace Pvt Ltd won the bid to own 100% of Air India and its subsidiary Air India Express. The transaction awaits cabinet approval and the acquisition is scheduled to take effect at the end of the year.
Air India is a full-service airline operating in domestic and international markets. Air India Express focusses on short-haul international operations, especially to the Middle East.
People close to the development said Tata Sons has enlisted various global head hunters to create the best management structure for its aviation business.
The conglomerate plans to set up a single aviation holding company that will be an umbrella for all its airline businesses.
AirAsia Bhd, the minority owner of AirAsia India, will exit by the end of this fiscal year and the brand will cease to be part of the venture.
AirAsia India’s annual net loss almost doubled in FY21 and its net worth got completely eroded as the business was hit by the Covid-19 pandemic. AirAsia India posted an annual loss of Rs 1,532 crore in FY21 against Rs 782 crore loss in the previous year, according to its annual report filed with the corporate affairs ministry. Revenue dropped 63% to Rs 1,359 crore while accumulated losses grew to Rs 3,680.34 crore. Vistara narrowed its losses in FY21 from the year earlier
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.