The government-owned airline, Air India, has been struggling to stay afloat, which led the government to put it up for sale again with some modifications. Sources familiar with the matter are suggesting that Tata Sons will bid on Air India, which will also include a proposed merger of AirAsia India as well as Air India Express, which is AI’s budget subsidiary.
AirAsia India is a joint venture between Tata (51%) and Malaysian entrepreneur Tony Fernandes (49%) of the Tune Group. However, the rules of the agreement between Tata and AirAsia stipulate that Tata cannot own more than 10% in another airline unless it seeks to make modifications to the original agreement.
It is said that representatives from Tata have already met AirAsia officials to lock this deal. AirAsia India is a budget airline based off of Malaysian airline AirAsia, and flies to multiple key cities of the country, while the airline is still awaiting permission to fly overseas, it is said. Air India Express is a subsidiary of Air India and travels to 20 Indian cities and 13 international destinations.
Tata also owns 51% of Vistara in partnership with Singapore Airlines (49%), so if it plans to merge with Air India, Tata will effectively enjoy a monopoly in the full-service airline space. AirAsia’s Tony Fernandes was recently named in the Airbus bribery probe, as well as money laundering cases, which led to the entrepreneur stepping down from the company earlier today.
R Venkataramanan, who was a nominee on AirAsia’s board during the time was also named in criminal conspiracy and money laundering charges along with a few others. Despite this, the officials will be well aware that Air India’s budget subsidiary will be run by the Tatas as well as AirAsia India.
Keeping these things in mind, Fernandes is unlikely to be part of the negotiations regarding the acquisition and potential merger of AirAsia India and AI Express. The government has set March 17 as the last date for the submission of interest in Air India.
Prior to being nationalized, Air India was operated by the Tatas, so this certainly won’t be new for the company. However, questions may be potentially raised about the monopoly this could create in the highly competitive airline industry.
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