Friday, June 07, 2019

The skies are getting clearer for the Tata group’s aviation business

After years of caution, India’s Tata group is now expanding its two airlines in the country.

The salt-to-software conglomerate, which pioneered commercial flights in India in the 1930s, re-entered the sector in 2014 with Air Asia India, a joint venture (JV) with Malaysia’s AirAsia Berhad. It now holds a 51% stake in this JV. Tata Sons, the group’s holding company, also owns Vistara, a 51-49 JV with Singapore Airlines (SIA) launched in 2015.

However, it is only now that the storied business group is thinking of a bigger role in Indian aviation, adding more aircraft and making overseas plans.
After years of caution, India’s Tata group is now expanding its two airlines in the country.

The salt-to-software conglomerate, which pioneered commercial flights in India in the 1930s, re-entered the sector in 2014 with Air Asia India, a joint venture (JV) with Malaysia’s AirAsia Berhad. It now holds a 51% stake in this JV. Tata Sons, the group’s holding company, also owns Vistara, a 51-49 JV with Singapore Airlines (SIA) launched in 2015.

However, it is only now that the storied business group is thinking of a bigger role in Indian aviation, adding more aircraft and making overseas plans.
In the January-March 2019 quarter, the domestic market share of AirAsia and Vistara stood at 5.5% and 4%, respectively, trailing IndiGo (44%), SpiceJet (13.6%), and even GoAir (9.2%), data from sector regulator, the directorate general of civil aviation (DGCA) show.

In AirAsia’s case, some of the blame can be traced to an unstable top deck. Its first CEO, Mittu Chandilya, left the airline abruptly in 2016. Two years later, his successor Amar Abrol quit, returning to the Air Asia Group’s headquarters in Malaysia.

Vistara, too, had turbulent initial years.

Analysts say the airline was not able to create a unique identity for itself. “Vistara does not have its own USP. Unlike IndiGo, which boasts of on-time schedules, or GoAir, which claims to provide extra legroom, Vistara isn’t sure about what experience it needs to give to the flyers,” Mark Martin, founder and CEO of the aviation firm Martin Consulting, told Quartz.

There’s also the fact that the Tatas haven’t been aggressive on expansion. AirAsia has a modest fleet of only 21 aircraft, while Vistara has 22 planes. “They aren’t creating a lot of inventory, compared to rivals, as it may boomerang later,” said Ashish Nainan, aviation analyst at CARE Ratings.
07/06/19 Niharika Sharma/Quartz

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