In an attempt to prevent the national carrier Air India from falling to its dismay, the Tata Group and Singapore Airlines close to make a joint bid. By Bayar Jain
Founded 87 years ago by the Tata Group, India’s national carrier Air India has been struggling to continue soaring the skies, owing to mammoth debt looming over its head. However, this government owned airlines could soon be saved from its doom as the same founders are moving closer to make a bidding call in partnership with Singapore Airlines. As a part of this acquisition, the multinational conglomerate has already started working on the structure, wherein the merger of AirAsia India – in which they hold 51 per cent stakes, and Air India Express – a cent per cent subsidiary of the national carrier will also take place.
According to reports, the Tata Group has approached Tony Fernandes, the Malaysian entrepreneur who holds 49 per cent stakes in Air India, for his approval for this acquisition. The shareholders’ agreement states that Tatas cannot invest more than ten per cent in another budget airline, without consulting and getting the green signal from Fernandes to waive off the agreement. In lieu of this waiver, the Tatas have proposed to combine AirAsia India and Air India Express as well.
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Currently, the Tatas operate Vistara Airlines too – a full service carrier, also in a 51-49 per cent partnership with Singapore Airlines. The biggest advantage for Vistara would be landing slots at international airports. This will be possible since Air India has slots at London Heathrow, New York, Tokyo, Shanghai, Chicago, Amsterdam, and more among it’s total of 45 international destinations. Moreover, they even have a large fleet in their kitty. Therefore, by taking Air India under its umbrella, Tatas will gain a monopoly in the full-service space, and will also be able to spread their wings to wider skies, at an increasingly fast-paced rate.
However, as with every deal, this too comes with its share of downsides. The cost of the deal, as well as the possibility of caveats arising in the process could bog down the process. Moreover, the airlines will have to make a choice between jumping onto the bandwagon to expand its presence, or taking a slower route to build its reputation first.
The government opened the formal bidding process for Air India on January 27 offering its entire stake on sale. The last to submit an expression of interest for the same is March 17.