Will Airline Industry go Under Monopoly After Tata Buying Air India with Air Asia and Vistara under its belt?

With Air India, it’s nearly back to square one after 67 years. The Tata Group appears to be returning to the helm of Air India, as the government has allegedly picked them as the winning bidder. While the transaction has yet to be disclosed, some sources claim that Air India is worth Rs 10,000-15,000 crore, in addition to the Rs 23,000 crore in debt that Tata Group would assume as part of the sale.

With a 26.7 percent market share, Tata Group will become the second-largest airline operator in the domestic market, after only IndiGo (57 percent market share). Tata Group, on the other hand, would emerge as the market leader with the lion’s share of the market.

Both the Tata Group and Air India stand to benefit from the transaction. Once the legacy concerns are resolved, Air India will finally fall into the hands of a huge corporation (with annual revenues of Rs 7.5 lakh crore) that can efficiently operate the airlines.

The greatest issue with Air India is that its service quality has been below par for long years. “Service standards have worsened over the previous few decades,” says the CEO. Many loyalists have been frustrated by the lack of consistency in service. On the passenger side, the Tatas will have to modify people’s perceptions about Air India, among other things.

Vinamra Longani, Head of Operations at Sarin & Co, a legal company, argues that India is needed to turn back the airline. The more pressing concern is how the Tata Group’s existing airlines, AirAsia India and Vistara, will coexist with Air India. “Air India and Air India Express are unlikely to compete with established airlines.” Tatas would have worked it out long ago. “It’s also apparent that the Air India brand name will be preserved if all the airlines unite into a single business a few years down the road,” says one aviation analyst.

The domestic aviation market is heavily biassed in favor of low-cost carriers (low-cost carriers). Despite the fact that Vistara is a full-service carrier, its back-end is still operational.