It has been a while coming. In April 2022, Air India filed a request with the Competition Commission of India (CCI), India’s anti-trust regulator, to acquire the entire shareholding in AirAsia India. The Tata Group raised their stake in AirAsia India to 83.67% in December 2020. After this approval, they were on track to acquire the rest from AirAsia Berhad to become the 100% owner.

Air India Group concludes the buyback of the remaining stake in AirAsia India.

In a stock exchange filing made with the Malaysian Stock Exchange Bursa on November 2, 2022, AirAsia Bhd, now known as Capital A, announced that it had signed a share purchase agreement to sell the remaining 16.33% equity it owned in AirAsia India to Air India Limited.

AirAsia/Capital A would receive USD 18.83 million for their stake sale. Their previous sale of 32.67% equity to Tata Sons in 2020/2021 netted them USD 37.66 million. This is apart from all the revenue made from AirAsia India for leasing out planes to them.

AirAsia India will continue to use the brand for up to 12 months, and the Brand License and Technical Services Agreement will be terminated after 12 months.

AirAsia India to be merged with Air India Express.

In a press note, Air India mentioned it would make AirAsia India a subsidiary of Air India, so more is coming. Tata Sons hold a stake of 83.67% in AirAsia India, and they most likely would transfer this to Air India Limited at some point in time. Right now, AirAsia India has an 83.67% shareholding by Tata Sons and 16.33% by Air India Limited (owned by its subsidiary Talace Limited).

Further, Air India stated that an operational review process is underway to fully integrate AirAsia India with Air India Express. Consolidation of these two airlines, both of which operate as low-cost carriers, will be undertaken as part of the restructuring roadmap that is being envisioned for the Tata group’s airline business and is expected to bring customer, revenue, cost and operational benefits.

A working group has been formed to evaluate and execute the integration of the AI Group’s low-cost operations, which will be co-led by Sunil Bhaskaran, CEO & MD of AirAsia India and Aloke Singh, CEO of Air India Express. The working group will report to a committee chaired by Air India MD & CEO Campbell Wilson.

The assessment and implementation of the entire integration process of AAI and AIXL, through a possible merger scheme or otherwise, is expected to take approximately 12 months, with network and other synergies to be realised progressively during that period. This is going to be a complicated affair because:

1. Air India Express is based in Kerala, and AirAsia India is based in Karnataka. However, both are in the process of moving to Gurugram.
2. Air India Express operates a full Boeing 737 fleet and operates internationally. AirAsia India operates an A320/320Neo fleet and operates domestically. So we are talking about the transition to a mixed-fleet model for the eventual airline.
3. The routes don’t overlap, but will Air India keep it for domestic operations or seek more international skies? Time will tell.

Commenting on the development, Mr Campbell Wilson, CEO & MD of Air India, said,

We are excited to initiate the creation of a single Air India Group low-cost carrier. This is a key step in the rationalisation and transformation of the Group, and we will be working closely with the management teams and staff throughout the process. We also look forward to the many new opportunities a stronger AI Group low-cost carrier will bring for customers and staff alike.

Bottomline

AirAsia India is now a 100% Tata (Group) owned airline, and will be moved to the status of an Air India subsidiary at some point in the next 12 months. Tata Group will also start the merger process to consolidate Air Asia India and Air India Express, and by November 2023, we should see one consolidated airline called Air India Express.

What do you think of this move by the Tata Group to consolidate their Aviation businesses?

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