Air India, Vistara to have synergy

Conglomerate Tata Group plans to pilot synergy between all its airlines to compete in various market segments.

Post the SPA transaction, Tatas will have 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.

Accordingly, plans are afoot to run all these brands as independent entities under one vertical for sometime after the SPA.

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.

Regarding the plans, a query sent to the Tata Group went unanswered.

The development assumes significance since Tata Sons' subsidiary Talace emerged as the highest bidder for the national carrier under the divestment process.

It quoted an enterprise value of Rs 18,000 crore for the 100% equity shareholding of Centre in Air India along with that of Air India Express and AISATS.

Out of Rs 18,000 crore, Talace will retain Air India's overall debt worth Rs 15,300 crore, while the rest will be paid to the Centre as the cash component.

The Centre had stipulated a reserve price of Rs 12,906 crore.

Based on the bid results, which were announced last Friday, the Centre will enter into a share purchase agreement (SPA) with Talace by December-end.

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.