The process of transferring Air India to the Tata group was completed on Thursday, January 27. Soon after, the group issued a statement to the BSE, announcing the completion of the purchase of Air India from the government of India.
“Best wishes to the new owners,” Minister of Civil Aviation Jyotiraditya M. Scindia tweeted. “I am confident that the airline will bloom under their wings, and pave the way for a thriving & robust civil aviation industry in India.”
The question that arises now is whether Singapore Airlines (SIA), which holds a 49 per cent stake in Vistara, the other Tata-owned airline, will also come on board Air India. The Tatas also have a stake in AirAsia India.
According to industry watchers, SIA has already lost a great opportunity by not being a part of the Tata group’s bid for AI. “India is a great source market for outbound traffic and only a small percentage of the market has been tapped by existing airlines. If SIA was invested with the Tatas in the successful bid for AI it could have been in the driver’s seat in setting policy, getting in people to run the airline, aligning aircraft and routes so that SIA and AI offer more choices to passengers in the Indian and global market,” a veteran with four decades of experience in aviation said.
He added that SIA not being on board AI right now perhaps has to do with the fact that it is running in losses and like airlines across the world has been hit by the COVID-19 pandemic. He, however, maintains that it is only a question of time before SIA comes on board AI.
An industry watcher says SIA tying up with AI is a natural progression. For Vistara and AI to continue as two full fledged FSCs in India they will fight and compete with each other. The unmistakable logic for SQ is that a privatized AI with all its traffic rights and same owners as Vistara is a better party to ally itself to than stay tied in with Vistara and compete with AI. Keeping both Vistara and AI may be practical in the short term till AIs messes are sorted but eventually for Tatas it becomes a case of fighting a war with a split force which is not exactly desirable. AI is also star alliance which is another step closer to synergies with SQ.
Even otherwise, conditions are conducive for SIA to enter the Indian market. The International Air Transport Association (IATA) has said that international passenger traffic should return to the 2019 levels by about 2024. India is a huge market for outbound travel and close to 1.05 crore foreign tourists arrived in India during 2018, according to a Ministry of Tourism document, registering an annual growth rate of over 5 per cent.
Besides this, India is an origin and destination market and when international traffic returns to pre-Covid levels, flyers will prefer non-stop flights to international destinations like the US and Canada, and London, Frankfurt and Paris.
27/01/22 Ashwini Phadnis/Moneycontrol
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