Tatas almost certain to bid for Air India, explore merger plans
Not just that, the Tata Group is reliably learned to have approached Tony Fernandes, the Malaysian entrepreneur who holds 49% in AirAsia India, for his approval to acquire AI Express. The shareholders’ agreement stipulates that the Tatas cannot invest more than 10% in another budget airline without Fernandes being willing to waive the covenant.
People close to the development said a new agreement is expected to be signed soon. In lieu of the waiver, the Tatas have proposed to combine AirAsia India and AI Express. “The merger will give Fernandes a bigger play in Indian aviation; so, it’s a win-win for both partners,” said a person with knowledge of the discussions.
AirAsia India took to the skies in 2013 as a joint venture between Tata Sons and Fernandes’ airline company, heralding the return of India’s largest conglomerate to aviation, a business it had pioneered through Air India before the carrier was nationalised. Tatas also operate Vistara, a full-service carrier, as a 51-49% JV with Singapore Airlines. Tata Sons chairman N Chandrasekaran has in the recent past told TOI that the company “will not run a third airline unless we merge”. A combination of Air India and Vistara would give the Tatas a monopoly in the full-service space.
AI Express flies to 20 Indian cities and 13 international destinations in the Gulf and Southeast Asia with a fleet of 25 Boeing 737s while AirAsia’s fleet of 29 Airbus A320s services 21 cities across the country.
AirAsia India has been waiting for permission to fly overseas. The wait may get longer as Fernandes, R Venkataramanan, a Tata nominee on the AirAsia board at the time, and a number of others have been named in criminal conspiracy and money laundering cases. Fernandes has been summoned by the Enforcement Directorate on February 5.
It is yet unclear whether Fernandes or AirAsia India will be part of the Tata-Singapore Airlines alliance’s bid for AI; the cases against him could be an issue, according to some people.
Nevertheless, a Tata-Singapore Airlines bid will be based on the understanding that the budget carrier business would be run by the Tatas and Fernandes, a person in the loop told TOI, adding that Bombay House’s arrangement with Singapore Airlines is only for a full-service carrier. The last date to submit an expression of interest for Air India is March 17.