Ratan Tata’s dream of owning a top-notch pan-India airline with reach to the western world may come true. If Tatas take Jet Airways – with reports suggesting its merger with Tata-SIA – along with its controlling stake in Vistara and Air Asia, the venerable group will complete its aviation arch to evolve as the largest player in the tricky Indian market. The Narendra Modi government for long fancied the idea of handing over loss-making Air India operations to Ratan Tata with a firm commercial framework and revenue sharing arrangement. But, after RSS Sarsanghchalak Mohan Bhagwat publicly aired his displeasure on the sale of the bleeding state-run carrier, Modi had to give up on the idea. Also, Tatas’ bid to take over the GoAir from Ness Wadia also did not bear fruit.
The acquisition will be sweet revenge for the Tatas who were thwarted by Naresh Goyal of Jet Airways in their efforts to set up a private airline with equity from SIA. While the Tatas had the backing of officialdom and the necessary policy was outlined, Goyal prevailed upon successive aviation ministers to scuttle Tata plans.
Meanwhile, it makes sense for Ratan Tata and current Tata group chairman N Chandrasekaran to pursue the group’s aviation sector dreams through Jet Airways. What the Tatas bring to the table is the finance that will be required in abundance if all three – Jet, Vistara and Air Asia – were to be run in their present format. It makes sense for the Tatas to carve out a full aviation company that houses all the three companies and bring about a synergy of sorts to cut costs, optimise services and enter new markets. Tatas’ growing aviation family also means the emergence of a big industrial player in aviation sector with deep pockets to burn cash and make business tick. Partner in Vistara, Singapore International Airlines will perhaps become the main partner for Tatas in running the aviation business after acquisition of Jet Airways. Its Malaysian partner, AirAsia Berhad in AirAsia India will have to chart its own course following Tatas’ acquisition of Jet Airways. The fallout of this on UAE’s second largest operator, Etihad Airways that owns over 24 per cent stake in Jet Airways, would be significant.
The development could result in a churn in the sector where domestic private, foreign and state-run players needing to revamp their operations and possibly look for mergers and acquisitions. It would also mean taking on the newfound aggression of the Tata group in the aviation business where ATF prices dictate the pricing, profitability and thin margins rule the roost. Several aviation companies like Air India, SpiceJet, Vistara, AirAsia India and Jet have been reporting huge losses quarter on quarter. From Jet Airways’ perspective, the reported deal will be a big lifeline at a time when even payment of salaries has been delayed. The Tatas will have their own sets of challenges in running three airlines though there is synergy of sorts. While Jet Airways would offer a window to the west, AirAsia and Vistara have strengths in low-cost services and East Asian markets. The development coincides with the Tatas’ aggressive inorganic growth bid through acquisition of steel and power assets from rivals through the NCLT process. Perhaps, the long-term objective should be to build a global airline and taking the India brand forward.