Vistara-AI merger: Tatas' another step to consolidate airline biz

New Delhi: With the merger of Vistara and Air India, Tata group is taking another step to consolidate its sprawling airline business into full service and low cost operation segments.

Currently, Vistara and Air India are the country's second and third largest domestic carriers, respectively. Together, their market share stood at 18.3 per cent in October. If AirAsia India is also included, the cumulative market share of Tata group-owned airlines in the domestic market will be 25.9 per cent. Individually, AirAsia India's domestic market share was at 7.6 per cent.

Tata group also owns Air India Express, which is focused on international low-cost operations.

While announcing the Vistara Air India merger on Tuesday, Tata group said that Air India will become the country's largest international carrier and second largest domestic carrier.

Vistara, which is jointly owned by Tata group and Singapore Airlines, is the country's second largest domestic airline after IndiGo, which had a market share of 56.7 per cent in October.

"With this consolidation, Air India shall be India's leading domestic and international carrier with a combined fleet of 218 aircraft," Tata group said in a statement.

As on September, Air India group and Vistara had 165 planes and 53 planes, respectively, according to a regulatory filing by Singapore Airlines (SIA) on Tuesday.

Air India group was flying to 51 domestic destinations while Vistara was operating to 31 local destinations.

In terms of international destinations, Air India group was flying to 38 places whereas Vistara was operating to 10 places.

At the end of September, together they had a domestic market share of 23 per cent while the international market pie was also at 23 per cent, as per the filing.

On October 18, Air India chief Campbell Wilson said the airline aims to have a 30 per cent share in domestic and international markets in the next five years.

In October, among the scheduled carriers, SpiceJet's market share stood at 7.3 per cent, Go First at 7 per cent and Akasa Air at 1.4 per cent, according to official data.

On November 2, Air India said an operational review process was underway to integrate AirAsia India with Air India Express and the merger was likely by the end of 2023.

The merger is aimed at having a single low-cost carrier for the Air India group. Post-merger, the entity will be branded as Air India Express.

Tatas has a long association with the airlines industry dating back to the 1930s. Tata Group founder JRD Tata had originally launched Air India in 1932 as the nation's first carrier, flying mail between Karachi in then-undivided, British-ruled India and Bombay.

Jehangir Ratanji Dadabhoy (JRD) Tata founded the airline in 1932 and named it Tata Airlines. In 1946, the aviation division of Tata Sons was listed as Air India, and in 1948, Air India International was launched with flights to Europe.

The international service was among the first public-private partnerships in India, with the government holding 49 per cent, the Tatas keeping 25 per cent and the public owning the rest. In 1953, Air India was nationalised.

Back in 1994, Tata group and Singapore Airlines made efforts to set up a joint venture airline in India. Six years later, they again tried to enter the country's aviation market, this time by teaming up to acquire stakes in Air India. Both the attempts did not take off.

Finally, they realised their dream as Vistara took to the Indian skies in January 2015.

Earlier this year, Tata group took control of Air India and Air India Express.