The Tatas are planning a mother of mergers — the bane of Indian aviation

The Jet Airways-Jetlite merger was never completed in the true sense. Jetlite continued to be a separate entity with a separate Air Operating Permit (AOP) right till the last day of operations. While Jet Airways passengers saw the 9W code, Jetlite operations continued with the S2 code and its call sign.

Kingfisher Airlines-Air Deccan was a reverse merger, which was done so that Kingfisher could use Air Deccan’s AOP to fly international routes as it did not have the required five years of experience to fly international.

The Tata Group currently holds 100 percent of Air India and 51 percent of Vistara. However, a closer look shows that Talace, the special company formed to bid for Air India, owns Air India, while Vistara is owned by Tata Sons, the group’s parent company.

So how will the Vistara-SIA merger be engineered? Will SIA get stake in Talace, and will Vistara be purchased by Talace? Or will SIA have a stake in Air India? Time will have answers to each of these questions. What’s important is that Tata's aviation business is sitting on a lot of assets, which makes Vistara an interesting partnership for SIA.

Wide-bodied 

Air India and Vistara remain the only two carriers to operate wide body aircraft in India. Between them, they have established routes and slots at busy airports like Singapore, London, New York, and San Francisco. However, these planes cannot be inducted into the fleet quickly. SpiceJet has abandoned its wide-bodied aspirations even as IndiGo plans to induct wet-leased wide body aircraft.

Bilaterals and slots

As a government entity, Air India has traditionally benefited the most from the allocation of bilateral rights. Now a private enterprise, it has embarked upon utilising most of those rights by adding planes. Vistara has also been able to make a lot of gains after the demise of Jet Airways.

At many airports across the country, the combined Tata Group offering is bigger than IndiGo, which definitely puts pressure on the latter. Add to that the Tatas’ complimentary meals versus the revised pricing of IndiGo’s in-flight meal options, and people could tend to prefer a Tata carrier.

Challenges

Air India has a number of challenges, with human capital at the top of the list. A simple change of livery would not cut it. One of the key issues with past mergers has been the problem of multiple people in the same role. With their reputation as being employee friendly, the Tatas will have to tread this one very carefully so as not to repeat history. Not just pilots, but even the airport staff could be in excess. Even at the peak of the pandemic, the airline had not laid off staff, so it will be interesting to see how AI navigates this.

The airline will need a major route revamp. When the group took over AI, the maximum route overlap was between Air India and Vistara. The overlap has only increased since then, with Vistara launching flights to Coimbatore and Jaipur.

There is a dire need to order new planes to augment capacity and for fleet renewal. However, the upside of a miniscule order book is that it enables greater flexibility and better deals.

What next?

For the first time, Air India will offer Premium Economy services in its aircraft. Most of the Vistara fleet already offers premium economy.

The Tatas re-entered aviation in partnership with AirAsia, which has been a traditional rival of Singapore Airlines. Nearly a decade after that, SIA is turning out to be a winner in one of the most exciting markets in the world – with Vistara having edged out AirAsia nearly completely, now it may bag a chunk of a renewed Air India as well.