AI seeks CCI nod to merge Airasia India with itself

Tata Sons-owned Air India has approached anti-trust regulator Competition Commission of India (CCI) for a merger of its low-cost carrier Airasia India with itself.

“The proposed combination relates to the acquisition of the entire equity share capital of Airasia India Private Limited by Air India — an indirect wholly-owned subsidiary of Tata Sons Private Limited (TSPL). At present, TSPL holds 83.67 per cent of equity share capital of Airasia India,” the filed notice with CCI said.

The combined entity will have a 15.7 per cent share of India’s domestic air passenger market. Air India Express — a subsidiary of Air India — doesn’t operate in the domestic market and flies only between India and Gulf routes.

Tatas raised their stake in Airasia India to 83.67 per cent in December 2020. The group is likely to complete acquisition of the remaining 16 per cent from Malaysian airline group Airasia Berhad by the end of this month. The 16 per cent stake has been valued at $18.8 million.

People aware of the development said the merger process will take almost a year to complete as CCI takes around two months to approve a scheme of merger. Following that, it will also have to be approved by the National Company Law Tribunal (NCLT).

Legal experts said that CCI will check if the merger would lead to any adverse effect on competition based on the point of origin and destination. “For instance, Mumbai to Delhi would constitute a separate market. CCI will determine, post merger, whether the combined entity faces enough competition on such routes or not.

If the CCI thinks that there can be adverse effects on competition due to the merger, then it will have the ability to prescribe certain remedial steps. This is to ensure that entry by new airlines is made possible,” said Milind Jha, partner at law firm Link Legal.

Tata group intends to compete in both low-cost and fullservice segments as it feels that there is a vacuum in the premium-end after the closure of Jet Airways.

In the no-frills segment, it will merge Airasia India and Air India Express operations.

However, an integration of Vistara’s business with Air India is going to take a longer time. This is because negotiations are still under way with Singapore Airlines, which owns 49 per cent in the joint venture.

Tata Sons, which assumed management control of Air India in January, has started the process of integrating the four airlines under its belt.

As part of this process, all the four airlines — Air India, Air India Express, Vistara and Airasia India as well as ground handling firm AISATS — will move into a single office.

Sources said that the Tatas have identified an office space in Gurugram where it will lease office space of 70,000 square feet.

“To optimise resources, increase team work and have higher synergies at work, it has been decided to shift the various entities under a single roof in Gurugram in a phased manner,” a person aware of the development said.

A team from Tata Realty — the group’s real estate firm — is working on the project led by its managing director and chief executive officer Sanjay Dutt. Consultancy firm EY has also been roped in for the project.

Air India currently has its headquarters at Airlines House in Central Delhi after it shifted from the iconic Nariman Point Building in Mumbai in 2013. The airline’s low-cost subsidiary Air India Express is based out of Kochi.

Airasia India is based out of Bengaluru while Vistara, its joint venture with Singapore Airlines, is based out of Gurugram.