Saturday, October 09, 2021

Three flights up, merger on cards?

Mumbai: Tata Sons chairman N Chandrasekaran had told TOI in 2019 that he would not run a third airline in addition to Vistara and AirAsia India, unless they merged. Which means that an amalgamation of aviation interests is on the cards. But a person familiar with Tata Sons’s thinking said that the integration of multiple aviation units will be possible only after the chairman spruces up the business.

Moreover, the Air India acquisition comes with a provision restricting the new owner from transferring its shares directly or indirectly to any person for one year from the date of closing the transaction. A merger is, however, allowed provided the new owner holds more than 51% during the one-year lock-in period.

Tata Sons threw its hat into the Air India bidding ring because it had been looking for a solution for its sub-scale aviation business. In the same 2019 interview, Chandrasekaran said he wanted to scale up the aviation business and needed “to find a solution” for it.

Since then, the dynamics at Tata Sons’s aviation business have changed. It had bought Malaysian partner’s 33% share in AirAsia India, increasing its holdings to 84%. Tata Sons now has the option to buy AirAsia’s remaining 16% by next year. Once the share-purchase happens and the brand-licensing agreement with AirAsia ends, the company will be offering a “white-label service”, which could then be combined with Air India or Vistara, said a different person.

The Air India acquisition has, however, put the spotlight on Vistara and its co-promoter Singapore Airlines.

Singapore Airlines cancelled the non-compete clause in Vistara’s contract, allowing Tata Sons to participate in the Air India auction. But the island city-state is unsure of consolidation. “Singapore would like to wait and see how Tata Sons’s aviation business pans out,” said a source. Tata Sonswill have five brands — Air India, Air India Express, Indian Airlines, AirAsia India and Vistara — after the acquisition. Consulting firm Arthur D Little’s managing partner Thomas Kuruvilla feels the company could have multiple brands for different segments.

09/10/21 Reeba Zachariah/Times of India


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