Will Air India+Vistara+AirAsia combine for market leadership?
Tata Group has a fair chance of bagging Air India along with its subsidiary Air India Express and 50% shares in ground handling unit AISATS (Air India SATS Airport Services), according to a seasoned aviation market analyst, Deepak Talwar.
“It is not clear whether the conglomerate plans to run Air India as the third airline venture or would acquire it through Vistara or AirAsia India. But the combined presence of three airlines will give the group a great thumbs up, a great benefit,” Talwar said in a release on 6 Jan 2021.
Tata Group’s airline business between the three entities would top 22.9% in market share, overtaking Spicejet (13.4% market share) to emerge as India’s second-largest airline group after IndiGo (55.5%). Air India presently has the third-largest (9.4%) traffic share in the domestic markets. Tata Group-owned airlines – AirAsia India and Vistara, were fifth and sixth largest with 7.1% and 6.4% market share, respectively.
Although Covid-19 has upended the international segment, both Air India and Air India Express controlled over 50% of the international traffic in the Jan-March 2020 quarter.
“Now if the Tatas have submitted its bid through Vistara, which flies on international routes, the combined entity (Air India + Air India Express + Vistara) would likely lead the international aviation segment which would move Vistara up from the sixth spot in January-to-March period to No 1 position,” said Talwar.
He said that the only thing between the Tatas and Air India is the government’s nod. The government will sell the airline to whoever takes over the bigger debt burden of Air India.
Talwar said that this will sweeten the deal since the original EoI (expression of interest) said the buyer was supposed to absorb Rs.23,286.5 crore of debt, and the remaining would have been transferred to Air India Assets Holding Ltd (AIAHL), a special purpose vehicle created after the failed sale attempt in 2018.
“The current debt of Air India is huge, it has a total debt of Rs.60,074 crore as of March 2019 and the Tatas will have to absorb one-third of it. This is a huge amount and a drain on Tatas resources,” said Talwar.
He said the Tata Group’s seemingly complex interests in the sector may make the process more challenging. “We need to remember that mergers are not easy. Hope people remember Jet Airways’ merger with Sahara and Kingfisher’s merger with Air Deccan were highly unsuccessful.”
Other than the Tata Group, multiple bidders have submitted EoI in the AI bidding process. Interestingly, a section of Air India employees have emerged and are backed by Interups Inc. — a US-based fund. Soon, shortlisted bidders will receive the request for proposal and the final stages of the bidding process will begin. Until now, Tata Group is considered to be the most ‘serious bidder’ for the national carrier by the experts.
Recently, Tata Group has emerged to be the largest promoter of listed companies in India. Over a century old Group has surpassed the Central Government, at the market capitalization of Rs.15.6 lakh crore.
Talwar holds over two-decade experience in the sector and has served multiple leading clientele in the Indian aviation industry. #banking #investment #financing #debt #aviation #airlines /fiinews.com
