All the managerial expertise would be required to turn Air India into a successful purchase
Tata Group’s acquisition of Air India ends Last week marks both the culmination of the airline’s return to its Original founder after a gap of almost seven decades, as well as the start of a difficult long-haul flight for the loss-making, formerly state-owned flag carrier. Tata’s zeal to win back what was once the country’s iconic airline brand, has changed the skies in which the industry operates. A look at the market share data of the domestic air passenger segment clearly shows that budget or low-cost flights now hold a dominant position, dominating around four-fifths of the market. The Tata Group’s full-service venture, Vistara, which has no fewer partners than Singapore Airlines, has struggled to gain a foothold and with the addition of Air India, Tata accounts for 23% of its combined domestic market share. With a large portion find themselves unhappy. (as of November) To be in the less-demand full-service segment. Nor is the group’s new combined share from the low-cost segment, which comprises Air Asia India’s 5.9% and Air India’s partial share of Air India Express, enough to scale it into a high-volume business at the moment. The group is said to be looking at consolidating Air Asia India operations as well as Air India’s domestic low-cost services, a clear indication that Tata owners realize the need to optimize various aviation resources. which are now within the purview of the group so as to grow. feasibility.
On the international front too, Air India faces several challenges, not the least of which is the government’s current pandemic-related restrictions on commercial international flights. With foreign carriers limited to limited capacity under the ‘air transport bubbles’ arrangement, Air India has also found itself constrained in the number of overseas flights it operates under bilateral arrangements with its counterparts. Tatas, however, may use the current curtailment of overseas services as an opportunity to overhaul the long-overdue overhaul of Air India’s inflight experience. Also, with Vistara now operating out to select overseas destinations, Tata will need to decide whether they want a young in-house competitor for Air India once the COVID-19 restrictions are lifted. and normalcy is restored with respect to international flights. The options ahead for the Tata group should be strategic. With at least one new budget airline entering the domestic market and other rivals struggling for capital to see more churn, the group needs to decide whether it wants to add capacity to budget offerings. Or primarily wants to remain a full-service carrier. The time when more lucrative business class travel has hit. And with the cost of aviation fuel rising further, Air India will need to harness all the acclaimed managerial expertise of the Tata Group if it is to turn into a successful buyout.
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