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Air India merger with Vistara, Airasia

airindai-merger

Air India airline was founded in 1932 by Jehangir Ratanji Dadabhoy Tata ‘JRD,’ who piloted the inaugural flight between Karachi and Bombay. Tata Airlines was the name at the time. The GOI bought minority stake in the airline in 1948, and then nationalised it with the passage of the Air Corporations Act in 1953. Even after handing over its airline to the government , Tata has continued to make inroads in aviation through various partnerships and joint ventures. Tata has always strived for the skies, forming strategic alliances with AirAsia Berhad and Singapore Airlines (SIA) for AirAsia India and Vistara. The two joint venture airlines operate independently, each with its business model.

Tata took over the airline in January of this year, 69 years after the government nationalised it. The airline had outstanding liabilities of Rs 61,562 cr as of August 31, 2021. For taking over Air India, Tata Sons paid Rs 2,700 cr in cash in addition to taking over debt of Rs 15,300 cr, with the government absorbing the remaining through a special purpose vehicle. The airline grew to become India’s flagship international airline, serving the Middle East, Parts of Asia, Europe, Africa, the United States, and Canada in addition to domestic routes.

With four carriers – Air India, Air India Express, Vistara, and AirAsia India – Tata found itself with over 221 planes of various capacity. Air India and its subsidiary Air India Express are currently 100% owned by the group, 100% of AirAsia India (through Air India), and 51% of Vistara. The Tata Group plans to start consolidating its airline companies under the Air India brand, starting with the transfer of ownership from AirAsia India to Air India and ending with the consolidation of its entire airline business under a single umbrella no later than 2024.

In the last seven months, Air India has lost its market share. According to data from the Directorate General of Civil Aviation (DGCA), it had a market share of 10.2% in January, which fell to 8.4% in July. Air Asia India and Vistara have 4.6 percent and 10.4 percent, respectively. Tata faces a challenge in that both Vistara and AirAsia India have yet to turn a profit. Vistara lost Rs 2,031 crore in fiscal year 22. AirAsia’s losses increased to Rs 2,178 in FY22.

Vihaan.AI (Sanskrit for “new era”) is a comprehensive plan unveiled by Air India focusing on rapidly expanding both its network and fleet, as well as developing and establishing itself as a global airline. The plan aims to improve reliability and on-time performance, while assuming leadership in technology and innovation. They strive to enhance their domestic share to at least 30% over the next 5 years while significantly expanding their international flights from their current market share. As said by Air India MD and CEO Campbell Wilson in a statement “This is the beginning of a historic transformation for Air India and the dawn of a new era. We are laying the foundation for a brave new Air India, with a renewed sense of purpose and incredible momentum.”

Air India is considering ordering nearly 300 narrow-body jets. According to people familiar with the situation, a deal could be worth $40.5 billion at the tag price. With the addition of Jet Airways and Akasa Air, things will only become more complicated and crowded in the skies. Both airlines are desperate for passengers and have big plans for the future.

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