Monday, December 14, 2020

Tatas need Air India. Can they revive it and their aviation fortunes?

In February, N Chandrasekaran will complete four years as the Chairman of Tata Sons, the holding company of the salt-to-steel conglomerate. From the many unfinished businesses - and he has some - that he has his eyes on, Group's aviation interest will be right at the top of his priority.

Going by reports and the industry buzz with many executives affirming the same with Moneycontrol, it looks like a surety that Tata Sons will be submitting its interest in Air India, the state airline that the government is eager to lose control of.

"In many ways, Chandrasekaran needs Air India to salvage the Group's aviation business. There was a chance to do with Jet Airways, but that didn't happen," says a senior executive from the industry with experience in Indian and multinational airlines.

When he took over in 2017, the Tata Sons Chairman had said that he wanted each company in the group to be 'top performers' in the respective sector. But in aviation, the group's two interests - Vistara with Singapore Airlines and AirAsia India with AirAsia Berhad- continue to lag near the bottom of the industry.

From a combined market share of 7.2 percent at the end of 2017, Vistara and AirAsia India have increased their pie size to 13.2 percent by October 2020. While one could argue that the two have managed to nearly double their share, industry leader IndiGo has performed better when one looks at the percentage point improvement - from 39.6 percent in 2017, to a market share of 51 percent in October 2020.

"With Air India (which has 11 percent of the domestic market), that market share zooms to nearly a quarter of the whole pie. That brings in scale," says the senior executive quoted above. The scale will bring in the ability to better manage fixed costs, he added.

The more juicy opportunity will be the possible dominance on international routes. "There is no Jet Airways, at least not yet. IndiGo doesn't seem to be keen on the long haul and others are just experimenting. With Air India, and its slots, flying rights and offices, the Tatas will get to dominate international travel, from and to India," said an executive from an international airline.

Air India, along with its low-cost unit Air India Express that flies majorly to the Middle-East destinations, has a fleet of nearly 90 aircraft. The airline flies to over 40 international destinations. Air India Express will also be sold along with its parent.

But what about Vistara, a full service airline, and AirAsia India, a low-cost carrier?

"It will make sense to merge Vistara with Air India, and AirAsia India with Air India Express," the above executive added.

14/12/20 Prince Mathews Thomas/

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