Air India Will Buy Low-Cost Air Asia India

Air India has sought to purchase low-cost airline AirAsia India in what will be its first M&A under new owner Tata Sons (CCI).
Air India Will Buy Low-Cost Air Asia India
Air India

According to an application filed with the Competition Commission of India, Air India has sought to purchase low-cost airline AirAsia India in what will be its first M&A under new owner Tata Sons (CCI). Malaysia's AirAsia will abandon the airline business nine years after it entered India with great aspirations.

AirAsia Holds 16.3 Percent of the India Subsidiary

AirAsia

AirAsia holds 16.3 percent of the India subsidiary, and the shareholders' agreement between the airline and Tata Sons states that the latter may buy the former's investment directly or through an associate. Because Air India is now a subsidiary of Tata Sons, the acquisition of AirAsia's stock was handled through it, according to sources.

Air India would pay Rs 139 crore for AirAsia's 16.3 percent interest in the airline partnership. Tata Sons have the remaining 83.7 percent interest in AirAsia India. Air India will also acquire this. On January 27, this year, Tata Sons purchased Air India in an Rs 18,000-crore equity and debt acquisition through its 100 percent subsidiary Palace.

Air India's Proposed Acquisition of AirAsia India

Air India's Proposed Acquisition

Tata Sons' CCI application is the first stage toward integrating its aviation operations, which includes low-cost airline Air India Express. According to the CCI proposal, Air India's proposed acquisition of AirAsia India "would not result in any change in the competitive landscape or produce any noticeable negative effect on competition in India."

Tata Sons' airline brands, which include Air India, AirAsia India, and Vistara (a joint venture with Singapore Airlines), have a domestic market share of 25%, although IndiGo retains the market leader with a share of about 54%.

AirAsia India Began Operations in 2014

Air India Express is primarily a low-cost international airline that connects southern India to the Gulf and Southeast Asia. Even though AirAsia India began operations in 2014, a year before Vistara, it still lacks the license to fly internationally.

Vistara, on the other hand, travels to several overseas destinations, including the United Kingdom, Europe, the Gulf, and Southeast Asia. With AirAsia about to quit AirAsia India, Tata Sons would be forced to rebrand the company under one of its current airline identities.

Tata Sons are Consolidating its Aviation Operations Under One Roof in Gurgaon

Tata Sons are Consolidating its Aviation Operations

Meanwhile, Tata Sons are consolidating its aviation operations under one roof in Gurgaon, where it will lease a 70,000-square-foot office building. AirAsia India and Vistara now have offices in Gurgaon, whereas Air India operates from Delhi and Air India Express from Kochi. This move would further cement Gurgaon's dominance in Indian aviation since it already houses IndiGo and SpiceJet. GoAir's headquarters remain in Mumbai.

"Considering the existing four airlines and one JV (AI-SATS) as part of the Tata (Sons) fold, it has been decided that the various entities will move together into a complex in Gurgaon to optimize resources, increase teamwork, and have higher synergies at work," according to a communication sent to the heads of these five Tata aviation entities.

Air India Will Buy Low-Cost Air Asia India
Tata Steel Shutdowns It's Business with Russia

Related Stories

No stories found.