Tata is returning to the aviation sector after 60 years. Back in 946 the conglomerate surrendered their stakes in Air India and skipped this sector for a while. Now Tata is setting its foothold in this sector by investing in 2 airlines. First being, Vistara an Indian full-service airline based in Gurugram with its hub at Indra Gandhi International Airport. The carrier is a joint venture between Tata Sons (51% stake) and Singaporean Airlines (49% stake).
The second airline where Tata’s stake stands at 51% comes after years of cautions, AirAsia India, low-cost carrier at Bangalore, a joint venture with Tata Sons holding 51% stake and AirAsia Berhad 49% stake. Tata group injected around INR 500 cr in the airlines to fund its international growth plans.
Air Asia commenced operations on 12th 2014 majorly targeted T-II & T-III cities, it’s the 1st foreign airline carrier company that has set up a subsidiary in India. It’s the 4th largest low-cost carrier in the country after Indigo; Go Air; Spice Jet and their market share are 6.5% according to the sources.
The airlines took off with 49% shareholding by AirAsia Group, 30% by Tata group and 21% owned by Arun Bhatia’s Telstra Tradeplace. Arun Bhatia departed the airline in 2016 and Tata sons, Venkatraman & Ramadorai bought its stake.
Tata also took management control or AirAsia India recently with group representatives now holding key posts. Sunil Bhaskaran, a Tata Steel veteran took over as Chief Executive and Managing Director in November last year.
Prior to Bhaskaran, AirAsia’s 1st CEO – Mittu Chandilya left in 2016 who was picked by Tony Fernandes himself but he had to quit the origination due to allegation of financial frauds in his tenure. Then came Amal Abroi who went down the post 2 years later and moved back to AirAsia Group’s headquarters in Malaysia to work on Group Strategic Projects from June 2018.
Tata Sons and AirAsia Berhad have agreed to amend a controversial brand licensing agreement that gave control of crucial functions to the Malaysian parent. The agreement signed between the 2 firms in 2013 gave the airlines the right to use the AirAsia brand – has been in controversy and was the major reason why Tata Sons didn’t increase their stakes previously in the company.
In India, regulations state that effective control of airline company jointly owned by India and foreign entities should lie with a local company. Brand license agreement included crucial decisions related to – ancillary, branding, catering, inflight services, customer experience, engineering, flight operations, innovations, commercial, technology, marketing, network planning people, quality and assurances, revenue management, safety, sales, and distribution.
Tata Group has increased its stakes in AirAsia India during the time when airlines and Tony Fernandes are being investigated by the Central Bureau of Investigations (CBI) for allegedly bribing some government officials to get a waiver in foreign flying eligibility norms of 5 years and 20 aircraft.
With Tata Group heading AirAsia from the font, it seems to be an interesting transition for the airlines and a happy moment for Tata’s as they have re-entered the industry with 2 key players in the market. As of January – March 2019, the domestic market share of prominent airlines is as follows:
Indigo – 44%
SpiceJet – 13.6%
GoAir – 9.2&
AirAsia – 5.5%
Vistara – 4%