Tuesday, Oct 04, 2022

Why Singapore’s Competition Commission Has Raised Concerns For Air India’s Acquisition By Tata Group 

The Singapore’s competition regulator has cited the cause of concern to be based on the information received from Talace Private Limited and the third parties

AP/File Photo

As Air India gears up to ace the sky amidst the rising competition, it is facing a little roadblock as the Competition and Consumer Commission of Singapore (CCCS) has raised eyebrows over the airline’s acquisition by the Tata Group. The development comes even as Tata Group has made key management changes to revive the beleaguered airline. Tata Group currently has four airlines under its wings—Air India, Air Asia, Air Vistara, and Air India Express for operations on both domestic and international routes. Notably, Air Vistara is a joint venture between Tata Group and Singapore Airlines, with the former having a 51 per cent stake in the airline.

Reason Behind Concern

The bone of contention is the presence of three key airlines Air India, Air Vistara and Singapore Airlines on two overlapping routes—Singapore- Mumbai and Singapore-Delhi and on the overlapping air cargo transport routes between Singapore and India or vice-versa.

In January this year, the CCCS had accepted an application of Talace Private Limited— the subsidiary of Tata Sons which was formed for Air India’s takeover, for a decision on whether the transaction infringes section 54 of the Competition Act, 2004. The section prohibits mergers that have resulted or may be expected to result, in a substantial lessening of competition within any market of Singapore, according to CCCS.

The Singapore’s competition regulator has cited the cause of concern to be based on the information received from Talace Private Limited and the third parties.

In its statement on June 3, the regulator said, “In particular, Air India and Vistara are two of the three key market players along the Overlapping Air Passenger Transport Routes, and both airlines are likely to be each other’s close (if not the closest) competitor.” 

“Third-party feedback also suggests the presence of Singapore Airlines (SIA) as a significant competitor of Air India and Vistara along the Overlapping Air Passenger Transport Routes and the Overlapping Air Cargo Transport Routes. However, CCCS needs to assess further the extent to which SIA competes with the merged entity along these routes, given that SIA is a joint-venture partner with Tata Sons in Vistara and a prospective partner with Vistara in the Commercial Cooperation Framework Agreement,” it added.

Moreover, the CCCS has also raised concerns regarding the competitive constraints on other airlines such as IndiGo. It said, “CCCS also needs to assess further whether the competitive constraint from other airlines such as IndiGo would be sufficient post-Transaction. Accordingly, CCCS needs to further review the competition effects of the Transaction in greater detail.”

Notably, in January, Tata Group acquired Air India after its subsidiary Talace Private Limited won a bid worth Rs 18,000 crore against the SpiceJet promoter last year, to take over the beleaguered airline. Apart from Air India, the Tata Group has also acquired Air India Express and a 50 per cent stake in Air India SATS.

Paramprit Singh Bakshi, Vice President, CAPA India South Asia says, “Air India’s acquisition by the Tata Group was a watershed moment that has the potential to change the structure of the sector over time. It is possibly a game-changer, and the acquisition gives a secure and viable future to Air India.”

Tata Group’s Market Share In Indian Aviation

Tata Group currently holds a 26.6 per cent market share in the Indian aviation with Air India having a 9.8 per cent stake, Air Asia having 7.3 per cent stake, and Vistara having 7.1 per cent stake, respectively. While Air India and Vistara are predominantly focused on international routes, Air Asia caters to domestic travel.

In order to hold a stronger portfolio in the aviation industry, Tata Group is trying to consolidate all its assets, with a possible merger between Air India and Vistara as well acquisition of Air Asia. AirAsia India is majority-owned by Tata Sons Private Ltd with a shareholding of 83.67 per cent and the remaining stake is with AirAsia Investment Ltd (AAIL), which is part of Malaysia's AirAsia Group.

Jyoti Mayal, President, Travel Agents Association Of India said, “With so many airlines under its wings, there is collaboration and a coordinated way of working. Tata Group could play on its strength because they would be able to cover more routes with such a huge fleet collectively. That’s going to be an upside.” 

As of 2022, Air Asia has 30 aircraft, Air India has 113 aircraft Vistara has 42 aircraft and Air India Express has 24 aircraft.