The Tata Group recently set the ball rolling on perhaps one of the biggest consolidation moves in Indian aviation. They completed the acquisition of Air India in January 2022. Earlier on, they had taken the majority stake in AirAsia India (they currently hold 83.67% of AirAsia India with the rest held by AirAsia Bhd). Tata Sons were initially supposed to complete the 100% acquisition of AirAsia India’s equity in 2022.
Air India proposes acquisition of AirAsia India.
Air India has filed with the Competition Commission of India, requesting approval for the proposed combination of acquiring the entire equity share capital of AirAsia India by Air India. At present, Tatas holds 83.67% of the equity of AirAsia India.
The proposal notes that,
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.
For legal provisions, the filing notes that the overlap of the two airlines combining is,
- the market for domestic passenger air transport services in India
- the market for the provision of domestic air cargo transportation services in India
- the market for the provision of charter flight services in India.
Air India also notes that there are some vertical overlaps, implying the various airports where the two airlines’ operations overlap. These are indicated as:
Interestingly, Air India has approached the CCI to combine AirAsia India with itself. In contrast, common market wisdom earlier expected that AirAsia would combine with Air India Express, given the no-frill operation on both sides of the business. There was no overlap given AirAsia India has not started international operations, while Air India Express almost exclusively operates international flights. Also, Air India Express operates an all Boeing 737 fleet, while AirAsia India is an all A320 operator.
The change of heart might have happened because this move immediately gives Air India even more heft and scale in the domestic market, making the combined market share of both airlines at 15.7% on domestic routes. Also, there is fleet commonality, with AirAsia India operating an A320ceo/neo fleet of 33 aircraft and Air India operating an A320family fleet as well, which includes:
- A320 Classic: 1
- A320ceo: 4
- A320ceo (single configuration): 5
- A320neo: 27
- A319 (single configuration): 3
- A319: 19
- A321: 20
Please note that the Air India numbers have many grounded aircraft or have left the fleet, but Air India has not officially excluded them from the fleet yet.
Of course, the aircraft will have to be repainted and maybe even reconfigured. Still, this move immediately reduces operations costs and gives heft to the combined entity of Air India Limited.
Air India has initiated acquiring the complete operations of AirAsia India and absorbing the entity into its operations. The combined operator will immediately get a market share of close to 16% in the Indian market and operate an all A320 fleet.
What do you think of this move by Air India to combine AirAsia India with itself rather than Air India Express?
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