The selling of state-owned Air India to the Tata Group is expected to spur fresh competition in the Indian civil aviation sector.
The country’s leading airline, IndiGo, which currently enjoys over 50% market share in the domestic circuit, expects tough competition once the salt-to-software conglomerate finalizes its $2.4 billion purchase of Air India from the government.
“I see them as formidable competition but I welcome them. It is a sensible thing,” IndiGo CEO Ronojoy Dutta said at a CAPA Center for Aviation event on Wednesday. Dutta said he believed a Tata-owned Air India would become “more economically responsible.”
It remains to be seen how the Tata Group plans to integrate Air India into its existing aviation joint ventures – Vistara and AirAsia India. It will also take time to integrate the air operating permits of Air India and its subsidiary Air India Express with Vistara and AirAsia India. However, close competition is expected to start soon. For the Tata Group, buying Air India has now placed it as the second-largest domestic player after IndiGo.
While IndiGo is a dominant player in the Indian domestic market, its international operations are far smaller than Air India’s. Air India, which has been India’s national carrier since 1953, is “sitting on a lot of bilateral rights,” said Dutta. Indigo “will be struggling as we go international,” he added. Thanks to its long legacy, Air India also enjoys some prime slots in major airports across the world.
The IndiGo chief said the Indian market has plenty of room for both. He said his airline’s thrust is on flight duration of fewer than seven hours using narrow-body planes, while Air India was more focused on full-service long-haul operations.
Apart from Tata’s takeover of Air India, the other recent development in the Indian civil aviation sector was billionaire investor Rakesh Jhunjhunwala’s receilpot of an Indian government no-objection certificate to start a new airline, Akasa. Jhunjhunwala, often referred to asan Indian Warren Buffet, is aiming to launch his airline next year.
Dutta does not see Akasa as a major threat for now. “They’ll have to grow slowly and get the slots and the planes,” he added. “They’re not going to be coming out of the box raring to go.”
As for IndiGo’s international operations, he said, after the opening of Doha, Dubai and Sharjah things are looking up. “My next push is to get Saudi Arabia and Thailand – those are again important markets for us,” he added.