Air India has proposed to buy the entire equity share capital of AirAsia India, and plans to merge the two carriers into a single airline, according to an application made to India’s competition commission.
Air India is owned by Tata Group, who also hold a majority stake in AirAsia India.
Tata Group acquired Air India in a $2.4 billion deal at the start of the year, regaining control of the company sold to the Indian government in 1948. Subsidiary Tata Sons holds an 83.67% stake in AirAsia India.
The news comes as no major surprise, with many predicting such a move when Tata Group completed the Acquisition of Air India.
“This was on expected lines as it makes no sense for the Tata Group to own stakes in separate airlines,” said Vinamra Longani, head of operations at Sarin & Co, as quoted by Reuters.
“The Tata Group has embarked on what will go down in history as possibly one of the most challenging airline realignment or turnarounds.”
Tata faces a battle to turn around the fortunes of what was once India’s flagship carrier. Air India’s fleet is in desperate need of upgrading, and the company’s financials are not looking healthy. On the positive side, the carrier does still hold a number of high-demand landing slots.
“The proposed combination will not lead to any change in the competitive landscape or cause any appreciable adverse effect on competition in India,” according to the application made to the Competition Commission of India (CCI).
It is not expected that there will be any major hurdles to the purchase going through. After successfully merging the airlines it is believed that Tata will seek to integrate its other airline business Vistara in a further merger.