The Tata Group aims to turn Air India around without hurting the operations of Vistara and any talk of an eventual merger of the carriers is premature.
“Vistara will continue to focus on good customer experiences and to say anything beyond that will be speculation. “To say anything beyond that will be speculation. Should Air India and Vistara merge is not an answer I can give. Merger is a strategic subject and best resolved between JV partners” said Bhaskar Bhat, chairman of Tata SIA Airlines, which owns Vistara.
Tata formally took over Air India last week, completing the privatisation process. Tata owns 51% of Vistara and Singapore Airlines (SIA) holds the rest.
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The Tata Group is focused on making Air India a success but not at the cost of Vistara and vice versa, he said. Air India’s revival will be a matter of celebration for the aviation sector since that means growth opportunities for everyone, he said. A successful industry attracts good talent and top investors besides influencing policy, he said.
While Air India as a structure will be untouched for a year, the Tata Group is said to have a long-term plan to create a unified aviation entity that will be efficient in terms of operational structure to compete well in the marketplace.
‘Focus on Cash Conservation’
The government transferred Air India last week to wholly owned Tata subsidiary Talace Pvt Ltd along with management control. Bhat is also a director of group holding company Tata Sons. “We have to run Vistara efficiently and coexist with Air India like any other airline,” Bhat said. “We too will grab opportunities and continue to do what we have to do. We cannot get confused in our focus till we are a separate entity.”
The Tata Group has maintained that it cannot have multiple cost structures in the competitive aviation sector, which has thin margins. For starters, the group is planning to club its AirAsia India unit under Air India’s budget unit Air India Express. Efforts are said to be on to convince SIA to integrate Vistara’s network with that of Air India to ensure synergies and eliminate duplication.
“Everyone is happy about Air India and there may be an opportunity for Vistara in the future,” Bhat said. “We have 5,000 employees and 51 aircraft and Vistara and Air India will operate within the framework of laws. But we cannot take our eye off the ball because Air India has happened. For now, all are concerned about profitability and our everyday focus continues to be cash conservation. We see Air India as a big opportunity for the sector and (the acquisition) has been one of the biggest events in the industry.”
Air India has 12,000 employees.
The Tata Group is giving SIA time to warm up to the idea of a single aviation entity strategy in the future, said people with knowledge of the matter.
The Singapore carrier had waived the no-compete clause, allowing Tata to go ahead with a solo bid for the stricken carrier. However, its reluctance to consider a unified entity is the long-term funding that will be needed for Air India. SIA had posted a record $1.86 billion operating loss last year, battered by the impact of the Covid-19 pandemic. “Air India with the Tatas is a good development for the aviation sector,” Bhat said. “Air India is not a new player in aviation, it has always been there for the longest period and comparatively Vistara is a new kid on the block.”
Source: Economic Times