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As part of its plan to bring the aviation business under a common platform, the Tata group will acquire the remaining stake in Air Asia.
In December, Tata Sons had increased its stake in AirAsia India to 83.67 per cent, from 51 per cent. Tata Sons has a call option on the remaining 16.33 per cent stake which it plans to exercise now.
AirAsia India started as a 51:49 joint venture partnership between the Tatas and the AirAsia group in 2014. However, Malaysia -based Air Asia group wants to exit the venture as its financial position has been weakened over the last few years. Tatas, on the other hand, wants to strengthen its presence in the aviation sector after acquiring Air India.
Tata Sons is likely to merge its existing airline business with Air India in a bid to create the second-largest airline in the country.
Consolidate operations
According to top sources, Tata Sons has been working on a plan to combine Vistara, Air India, and AirAsia under a common umbrella. With Air India, Vistara, and Air Asia having a combined market share of 26.9 per cent, the Tata Group will emerge as the second-largest domestic airline after Indigo once the consolidation of the operations of all three airlines is completed.
“Given the strong financial flexibility, availability of a larger fleet and multiple brands catering to different customer segments, the Group is likely to have a competitive advantage over the other players. However, the ability to optimise costs, and streamline operations will be a formidable challenge and the key to profitability in the group’s airline operations,” said an analyst.
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