After successfully taking over the managerial control of Air India, conglomerate Tata Group has emerged as one of the largest aviation player globally.
It now has over 200 aircraft and over 80 domestic and international destinations.
Notably, the group has two full-service carriers — Vistara and Air India — along with two low-cost airlines — Air India Express and AirAsia India — and a ground and cargo handling company, AISATS.
According to sources, it plans to pilot synergies between all its airlines to compete in various market segments.
On Thursday, a new Board which included Tata’s nominees took-charge of Air India.
Accordingly, with the new board in place, Air India’s strategic disinvestment was completed.
In the process, the Centre received a consideration of Rs 2,700 crore from the ‘Strategic Partner’ — Talace — which is a wholly owned subsidiary of Tata Sons.
Besides the upfront payment, Talace will retain a debt of Rs 15,300 crore.
Notably, the transaction covered three entities — Air India, Air India Express and AI SATS.
Post the transaction, plans are afoot to run all these brands as independent entities under one vertical for sometime.
Nonetheless, the group intends to drive-in major synergies between the airlines in terms of fleet management, route deployment, flight timings and airport slot planning.
In terms of USPs, Vistara is expected to retain the premium services tag, while Air India will predominantly focus on key international and metro routes.
The domestic feeder traffic is expected to be driven by AirAsia India which may get few aircraft from Air India’s fleet.
Furthermore, mergers will depend on profitability, performance and market situation apart from each airline’s unique culture and suitability of brand.
All in all, Tata Sons’ subsidiary Talace will, among other assets such as human resources, get more 140 aircraft as well as 8 logos.
In terms of fleet, Tatas will get Air India’s 117 wide-body and narrow body aircrafts and Air India Express’s 24.
A significant number of these aircrafts are owned by Air India.
It will also operate these aircraft on over 4,000 domestic and 1,800 international routes.
Additionally, it will get access to Air India’s frequent flyer programme which has more than three million members.
Furthermore, eight brand logos would be transferable to the Tatas which they have to retail for a period of five years.
In terms of financials, Tatas will need to take care of the Rs 20 crore loss per day that the company suffers.
There is also a three-year business continuity clause in the agreement. Tatas would also need to maintain 51 per cent stake in the airline for atleast one-year.
Nonetheless, Tatas will be given full operational control of the divested entities.
On the other hand, the transaction does not include non-core assets including land and building, valued at Rs 14,718 crore, which are to be transferred to GoI’s Air India Asset Holding Limited (AIAHL).
(Rohit Vaid can be contacted at email@example.com)