After months of planning and discussions, the Tata Group has acquired full ownership of AirAsia India. The development is crucial as it clears the road for the eventual merger of AirAsia India and Air India Express to form a consolidated low-cost airline under the Tata brand.

The takeover

Air India has announced that it has acquired 100% shareholding in AirAsia India to turn it into its subsidiary. The deal had been in the works for quite some time as the Tatas wanted to consolidate their airline business.

The plan received a significant boost in June when the Competition Commission of India (CCI) approved its decision to buy the entire equity share capital of AirAsia India. This gave the Tatas a free hand to plan any potential merger of the carrier in the days to come.

AirAsia India was launched in 2014 as a joint venture between the Tata Group and AirAsia Investment Limited. The Tatas began with a 51% equity share in the company, which was further raised to 83.67% in 2020. And now, the remaining 16.33% share has also gone to the Indian conglomerate for ₹1.56 billion (almost $19 million).

Bo Lingam, Group Chief Executive Officer of AirAsia Aviation Group, commented,

“We have had a great experience working with India's leading Tata Group … This is not the end of our relationship, but the beginning of a new one as we explore new and exciting opportunities to collaborate and enhance our synergies moving forward.”

The merger

What had long been speculated is now finally confirmed by the Tatas - AirAsia India will be merged with the regional international low-cost carrier Air India Express.

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Air India issued a statement that said an operational review process is underway with a view to ultimately integrating AirAsia India fully with Air India Express.

Both budget airlines will be merged as part of the restructuring roadmap that is being envisioned for the Tata group’s airline business and is expected to be complete by the end of 2023, subject to necessary corporate approvals.

Air India’s CEO Campbell Wilson commented,

“We are excited to initiate the creation of a single Air India Group low-cost carrier. This is a key step in the rationalisation and transformation of the Group, and we will be working closely with the management teams and staff throughout the process. We also look forward to the many new opportunities a stronger AI Group low-cost carrier will bring for customers and staff alike.”

Bringing them together

In the coming months, the chiefs of both airlines will help facilitate the merger and report to a committee led by Wilson himself. Both airlines have already begun the process of moving their offices under one roof by early next year, and key decisions such as employee and fleet integration (AI Express operates a fleet of Boeing 737s and AirAsia India A320s) will take place.

AirAsia India has had a rough couple of years due to the pandemic, with its loss increasing by 42% on a year-on-year basis to almost $275 million. Its revenue grew by nearly 39% to $238 million, but a 67% hike in aviation turbine fuel and a weakening Indian rupee against the US dollar impacted the overall numbers.

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Air India Express maintained a healthy balance sheet for many years but posted a net loss of around $8.9 million against a net profit of around $12 million last year, losing money for the first time in seven years.

Still, it intends to go for a significant fleet and network expansion, and its integration with AirAsia India will certainly help the carrier with those plans.

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