India’s salt-to-software conglomerate Tata group, which entered the civil aviation sector three years ago but failed to make any major impact, is looking closely at the disinvestment of state-owned carrier Air India to enhance its scale of operations.
Tata Group Chairman N Chandrasekaran has for the first time said the company might consider looking at Air India, which the Indian government wants to sell off, reports Business Standard.
He also admitted the group cannot run two airlines (it has 49% stake in Air Asia India, and 51% in Air Vistara with Singapore Airlines) with just 15-20 aircraft, as all businesses need to have scale.
Air Asia and Air Vistara together have a domestic market share of only 6.8% (April-June 2017) with a fleet of 29 aircraft. Even Go Air, with a similar number of planes, has a market share of 8.3% (in April-June 2017).
Air India could be a good fit depending upon how much Tata is willing to pay. It would give Tata a jump-start in international arena as Air India has 18 valuable slots in important airports such as London, Paris and New York. Moreover, over 119 aircraft would be added in one go.
Even in the domestic market, the deal could help them in improving their market share to around 20% from 6.8%.
However, Tata does face some hurdles. The current policy does not allow foreign airlines to bid for Air India, hence Tata will not be able to do so along with its joint venture partner Singapore Airlines. However, due to lukewarm response to Air India divestment, the government is reassessing its policy.