Ever since Tata Group has taken over Air India, reports have surfaced that the country’s oldest multinational conglomerate might merge the debt-ridden airline with Vistara.
Tata Sons, which is the principal holding company of the Tata Group, founded Vistara as a joint venture with Singapore Airlines (SIA) in 2013. But the carrier commenced operation on January 9, 2015. Tata Group owns 51% shares in the joint venture.
Whereas the Tata Group took control of Air India and its subsidiary Air India Express on January 27 after successfully winning the bid for the airlines on October 8 last year.
The Tata Group has 83.67% shares in AirAsia India whereas the remaining stake in the airline is with Malaysian carrier AirAsia Berhad.
However, according to Philip Goh, Regional Vice President for Asia Pacific of the International Air Transport Association (IATA), there are a lot of issues to overcome for Tata Groupo before finalising the Air India-Vistara merger.
Goh said, “Both (Vistara and Air India) are full-service carriers. Vistara is still quite small and although they have been in business for 5-6 years, they are still loss-making. It is not easy to turn a profit in India. A lot of issues to overcome.”
Goh said he is sure that some sort of discussion must be happening between the Tata Group and Singapore Airlines on the merger of Air India and Vistara.
“I think Tata’s initiative (to merge AirAsia India with Air India) within their own group is sensible. I think that if you have four vehicles within the same group, you have to find some ways to rationalise the synergies within the group,” Goh said.
If Tatas form a strategy correctly, Air India could become a very powerful player in the Indian international market, he noted.
Air India can certainly be strengthened and if anybody could do it, it is Tatas that could do it, he said.
The senior IATA official also said that it is not easy for an airline to turn a profit in India and a lot of issues such as fare caps and high taxes on aviation turbine fuel (ATF) have to be resolved.
Any measures that are taken by the government that increase costs for airlines are bad for the economics of the aviation sector, he said.
The civil aviation ministry had imposed lower and upper limits on domestic airfares based on flight duration when services were resumed on May 25, 2020, after a two-month lockdown due to the pandemic. For example, airlines currently cannot charge a passenger less than ₹2,900 (excluding GST) and more than ₹8,800 (excluding GST) on flights with a duration of fewer than 40 minutes.