Folding four airlines into two is a tough task even for Tatas

 Both Air India and Vistara brands are expected to be around till next year as the group integrates the front end. (Photo: ANI)
Both Air India and Vistara brands are expected to be around till next year as the group integrates the front end. (Photo: ANI)

Summary

  • The merger of Air India and Vistara is a complex process, CEO and MD Campbell Wilson said

New Delhi/Mumbai: More than two years since the Tata group acquired Air India, the integration of multiple airlines under its fold is a work in progress.

The Tata group plans to merge its full-service airlines Air India and Vistara into one, and combine low-fare carriers Air India Express and AIX Connect (formerly Air Asia India) into another. Both Air India and Vistara brands are expected to be around till next year as the group integrates the front end; meanwhile, the low-cost airlines have streamlined their check-in process and boarding passes, while working on their financials, aviation codes, and back-end software.

The merger of Air India and Vistara is a complex process, CEO and MD Campbell Wilson said.

"Behind-the-scenes planning is underway. The regulatory and legal (approvals) are in process. The customer-facing elements will take some time and we are not rushing it," Wilson said at an industry event.

The Tatas acquired both Air India and subsidiary Air India Express in January 2022. In November 2022, it announced the merger of Air India with Vistara and AIX Connect with Air India Express. As a part of the transaction, AirAsia Bhd sold its 16.67% stake in the airline to Tatas for 155.65 crore.

Vistara is currently a 51:49 joint venture of Tata Sons and Singapore Airlines. After the merger, Singapore Airlines will hold a 25.1% stake in the merged entity.

"We have been very clear that Vistara, in the long term will become Air India. The Air India brand is 92 years old. It is recognized around the world. Now, Vistara has a very, very strong reputation and awareness in India. But, no so much globally," Wilson said at an inndustry event. "A lot of the things that we are doing are modelled on what Vistara does, but we will eventually be collapsing the two, as I say, we won't be rushing. It will probably be sometime next year," he added.

Meanwhile, the merger of Air India Express with AIX Connect may miss the original deadline of FY24 by four to five months, three people aware of the matter said.

The National Company Law Tribunal (NCLT) is is expected to take up the merger application in a week, one of them said. "We are expecting it (NCLT approval) come in by August ," the person said on condition of anonymity.

Air India Express and AIX Connect already have a common branding in boarding passes and airport check-in. The combination is also rationalizing networks. Air India Express has a wider international network from Kerala to feed traffic into each other's network. After their merger, both airlines will fly under a single air operator certificate and the common International Air Transport Association code of IX. Currently, AIX Connect operates with the I5 code.

"Firstly, there is no urgency as the transition has been taking time, but is running smoothly. There are some approvals pending from department of telecommunication, excise, customs and bureau of immigration," the person cited above added.

The company currently has a fleet size of 64 aircraft including 28 Airbus A320, it is set to increase substantially over the next one year as the airline is set to induct at least 50 out of the 190-Boeing 737 MAX aircraft that Air India ordered in Feb 2023. Under a planned delivery programme, the airline is inducting an aircraft every 10 days and expects to complete the induction of the 50 aircraft by the end of 2024 and a total fleet size of 180 aircraft by the end of five years.

"The merger is also pushing the airline to hire more pilots. The company is hiring pilots from Latin American firms along with those from Europe," a second executive said.

"The merger between Air India Express and AIX Connect continues to have comparatively seamless transition as compared to the ongoing merger between parent company Air India and Vistara, broadly on account of matters related to human resources. There is a decent rate of acceptance among staff for the options they are getting under the growing Air India Express," the third executive added.

The Competition and Consumer Commission of Singapore (CCCS) gave a conditional approval to merger of Vistara with Air India recently, six months after the Competition Commission of India cleared the merger of Vistara and Air India. This will allow the two airlines to efficiently plan their routes and codeshare network.

Air India, which flies over 12% of international air traffic to and from India, is also seeing an opportunity in the medium-haul and long-haul international market. The airline said that the 470-aircraft order that it had placed in February 2023 will help it cater to this capacity shortage for a market as big as India. The aircraft procurement from the new order for the Air India group is under way at a rate of an aircraft every six days with three A350s and over 15 Boeing 737 MAX inducted so far.

"India can be home to at least three hubs and in addition to those three hubs, there are plenty of point-to-point services. If you take continental Europe or North America, that's probably a similar sort of market. North India has a good east-west flow, southern India has a good Asia-Africa or even Australasia-Europe flow," Wilson said on Wednesday.

The sentiment towards formation of multiple hubs in India is shared by the broader industry as well as the civil aviation in ministry. The government is working on a National Aviation Hub policy which will encourage more non-stop flights from international destinations to Indian metro cities and establish hubs in India to the likes of Singapore, Dubai, Doha among others.

"The international opportunity is staring everyone in the face. In (some hubs) cases, upwards of 70-90% of people are not going to that place. They are going through that place. I think if we get the basics right, be credible, we are going to get the time-sensitive, the discerning, the premium traveller who values the experience that we are going to provide," he added.

Meanwhile, for the summer schedule starting from the end of March, Air India Express will operate over 360 daily departures, with a 25% increase in domestic and over 20% in international flights. This translates to an additional 55 domestic flights and 19 international flights, bringing the total to 259 domestic and 109 international departures.

The Tata Group-backed airline, which plans to double its market share on domestic and short-haul international air travel segments over a period of five years, will be increasing its frequencies to international and domestic destinations such as Abu Dhabi, Dammam, Jeddah, Sharjah, Ayodhya, Bengaluru, Hyderabad, Kannur, Kolkata, Kochi, Mangalore, Thiruvananthapuram, and Varanasi.

As per February data from Directorate General of Civil Aviation, Air India Express was the most punctual airline with an on-time performance of 73.5% and a domestic market share of 6.1% and registered a share of 7% in international air traffic to and from India for the December quarter.

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