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Air India Sale: On the back of Maharaja's Wings, How Tata Sons Plans to Rule Sky

Tata Sons has been selected as the winning bidder to take over Air India. (File photo/News18)

Tata Sons has been selected as the winning bidder to take over Air India. (File photo/News18)

Tata Sons is thinking of bringing Air Asia budget airline under the Air India after the bid for taking over India is officially accepted. In 2020, Tata group went onto increase its stake in the Air Asia India.

After a gap of 68 years, the Tata group is finally get to board Air India. “Talace Pvt Ltd won the bid to own 100% of government stake in Air India,” Tuhin Kant Pandey, secretary, department of investment and public asset management (DIPAM) announced today. Tata Group will pay Rs 18,000 crore to acquire Air India from the government — of the total money 15 per cent would go to the government and the rest will go in clearing debt.

With this win, the Tata group will have to handle four brands: Air India, Air India Express, Vistara and AirAsia India.  Air India and Vistara are full-service carriers while AirAsia India are low-cost carriers.

The holding company of Tata Group, Tata Sons is thinking of bringing Air Asia budget airline under the Air India after the bid for taking over India is officially accepted. In 2020, Tata group went onto increase its stake in the Air Asia India. In addition to this, eventually brining Vistara, a joint venture between Tata Sons and Singapore Airlines is also on the cards if everything goes right.

AirAsia Group Bhd, which owns about 16 per cent stake in AirAsia India, has decided to exit India by March 2022, offloading its remaining stake for $18 million. Tata Sons owns close to 84 per cent of AirAsia India. Late last year, it bought an additional 32.67 per cent in the budget carrier, from 51 per cent. According to the agreement, Tata has a call option on the remaining 16.33 per cent of AirAsia India.

With Tata Sons winning the bid for Air India, the company will get a debt of Rs 23,000 in his hands. The remaining debt of the company will be taken up by the government-owned Air India Asset Holdings Ltd (AIAHL) — which is a new entity that will hold the carrier’s assets, such as the Air India building in Mumbai, Airlines House in Delhi, etc.

Tata Sons have roped in Bain and Company and Seabury Group to carry out due diligence on divestment-bound Air India and its subsidiary Air India. As per the report, Tata Group has reached out to SIA about its plan to include their joint venture Vistara as a part of the combined airline entity to make operations more efficient. For working out on all this ambitious integration, Tata Group is exploring to hire integration specialist to create airline entity as the integration would pose the fair share of challenges owing to organisational structure.  According to data from the Directorate General of Civil Aviation (DGCA)  AirAsia India, Vistara and Air India together  commands a 26 per cent share of the domestic aviation market. Three airlines together command lowed than Indigo that constitutes a market share of 57 per cent.

There has been a lot of talks on employee integration but to run airlines, systemic integration of IT system is also crucial. The IT systems include the technology used for planning, revenue management, operations control, crew rostering, as well as complex reservation systems. The Tatas need to rationalise the routes too to avoid overlaps. So internal as well as external co-ordination is needed to sort out these challenges ahead of Tata Sons.

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first published:October 08, 2021, 16:57 IST