[V.Narayan]

Air India Vistara merger – is it in the interests of the customer?

Air India-Vistara Merger: No adverse impact on competition, Tata group tells CCI (moneycontrol.com)
https://www.moneycontrol.com/news/bu...-10905731.html


As a retired member of the aviation industry, I find it very hard to swallow the line that Air India-Vistara merger is in the interests of the common man. It might be in the interests of the shareholders of the two airlines i.e. Tata’s and Singapore Airlines but not so for the flying customers. A monopoly or a duopoly is never beneficial for any market least of all a service one.

Thus far Vistara is by far the better run airline and going by what I have seen/read Air India is still at the starting blocks at least where providing a quality & reliable service to the customer is concerned.

I fear that the might of the Tata empire will prevail on the Govt to allow the merger to go ahead.

Competition Commission of India (CCI), India’s fair-trade regulator has issued a show-cause notice to Air India, asking the Tata-owned airline why an investigation into its proposal to merge with Vistara should not be conducted. Tata Group has 30 days to respond to the notice convincingly and secure approval for the merger of its airlines without an investigation. If the CCI is unmoved by the response and decides to pursue an investigation, the Tatas have two choices—one, divest their stake in Vistara, and two, commit to “behavioural guidelines" that will not adversely impact competition in the aviation sector. The former is a clear cut route. The latter is fraught with interpretation of woolly criterion.

As it is Air Asia India, now called AIX Connect is a wholly owned Air India entity and Spicejet is half dead, Go First is fully dead and Akasa is an infant. We are at risk of getting stuck with a duopoly.

[Comrade]

GoI has sold Air India to Tatas, who were already part owners in two different airlines (AirAsia India & Vistara). GoI had no choice or else they would have given Air India to someone else & not caused this duopoly. After this, the mergers were imminent due to the ownership. How can anyone expect same owner to run three different brands, fair & square, within an industry!!! CCI's process seem to be just clerical work necessary to approve the merger.

[chanz2015]

Originally Posted by Comrade

How can anyone expect same owner to run three different brands, fair & square, within an industry!!! .

Lufthansa is already doing this.

They have 5 fully owned subsidiaries operating in the same region - Austrian Air, Brussels Air, Swiss Air , Air Dolomiti and Eurowings.

Air India Express and Air Asia merger was imminent due to both being low cost airlines.

Tata should keep Vistara as separate entity. They should make Vistara a luxury brand which can compete with the likes of Emirates and Qatar Airways

[Comrade]

Originally Posted by chanz2015

Lufthansa is already doing this.

They have 5 fully owned subsidiaries operating in the same region - Austrian Air, Brussels Air, Swiss Air , Air Dolomiti and Eurowings.

Interesting! I don’t know any thing about Lufthansa but just have lots of questions. shouldn’t we consider the overlap either in routes or service-level. Operating Hubs and target market seem to be different for each airline. Also what is Lufthansa opinion on this vs how much is this EU enforced? Also, how successful is this model and what is industry opinion on how lufthansa is doing?

In case of Vistara, there seems to be great/full overlap with Air India in terms of service level, routes, pricing etc. So it may be redundant for Tata to maintain two teams for same market.

Tata should keep Vistara as separate entity. They should make Vistara a luxury brand which can compete with the likes of Emirates and Qatar Airways

Tata and SIA have stated that new Air India will be the luxury brand competing with top-most airlines. How successful they will be, only future can tell.

I also wished previously that Vistara would be a separate brand competing head on with Air India, with Tata exiting and someone else acquiring their stake. But that seems impossible now.

It’s my strong belief that a separate Vistara under Tata will only suffer a slow death of non-investment as Tata seem to be keen on Air India as a brand.

[SedateGuy]

Originally Posted by V.Narayan

Air India Vistara merger – is it in the interests of the customer?

As it is Air Asia India, now called AIX Connect is a wholly owned Air India entity and Spicejet is half dead, Go First is fully dead and Akasa is an infant. We are at risk of getting stuck with a duopoly.

Maybe a Duopoly with strong contenders gunning for top spot may be a better idea than one top gun with a plethora of weaklings.

[Suprit]

Economies of scale are critical in the airline industry. Even in the US, none of the Big There airlines offer multiple full-service brands.
Tatas made a wise choice by acquiring Air India as that enabled them to acquire AI’s airport slots the world over, giving them a huge edge over all other Indian carriers.
The Tatas have correctly assessed that the brand of AI is far better known abroad as compared to Vistara and it makes eminent sense to capitalise on that brand. No doubt AI’s brand image took a beating under government ownership but its fleet renewal plans should correct that over time.
IMHO there is too much hype over “service quality” defined with frills such as free meals, frequent flier programmes etc. if these mattered so much, how come Indigo went far ahead of both AI and Jet which were well entrenched when Indigo started operations? And let’s face it, Vistara never acquired sufficient market share.
Consumers are looking primarily at reliability, network size and affordability. I recently read that Indigo has a monopoly on 50% of all city-pairs in India. I live in Nashik where Indigo is the only airline operating, and that too to 5 cities!

[avaneesh.]

Originally Posted by chanz2015

Lufthansa is already doing this.

They have 5 fully owned subsidiaries operating in the same region - Austrian Air, Brussels Air, Swiss Air, Air Dolomiti, and Eurowings.

Most of the European Airlines are owned by either Lufthansa, IAG(British Airways, Iberia, Vueling, etc), or Air France-KLM Group. So it is not unusual for an Airline group to have overlapping routes. However, unlike in Europe, we do not have competition in the domestic sector from foreign Airlines. Although there is news of new regional airlines starting up soon (Fly91, Jet Airways 2.0, etc), I doubt they will be able to plug the gap that is being left by Airasia and Vistara. It is for the same reason the merger of Air Korea with Asiana has been stalled by the CCI of the EU and the US (AFAIK). This case would have been less complicated if Jet Airways and Kingfisher would have been still flying.

[chanz2015]

Originally Posted by Comrade

Interesting! I don’t know any thing about Lufthansa but just have lots of questions. shouldn’t we consider the overlap either in routes or service-level. Operating Hubs and target market seem to be different for each airline.

Yes, Each airlines has different Hubs. All flights of the group from Geneva and Zurich is operated by Swiss, Brussels by Brussels Air, Vienna by Austrian, Frankfurt and Munich by Lufthansa. Eurowings seems to operate from multiple hubs like Dusseldorf, Cologne, Hamburg, Prague etc...

Originally Posted by Comrade

Also, how successful is this model and what is industry opinion on how lufthansa is doing?

As avaneesh said this seems to be common practice in Europe. One of the advantage Lufthansa had with this model was during Covid pandemic. Belgium, Austria, Switzeland, Germany governments gave financial aid to Brussels Air, Austrian Air, Swiss and Lufthansa respectively, as all of them are their country's flagship carriers.

Originally Posted by Comrade

In case of Vistara, there seems to be great/full overlap with Air India in terms of service level, routes, pricing etc. So it may be redundant for Tata to maintain two teams for same market.

Tata and SIA have stated that new Air India will be the luxury brand competing with top-most airlines. How successful they will be, only future can tell.

Originally Posted by avaneesh.

Most of the European Airlines are owned by either Lufthansa, IAG(British Airways, Iberia, Vueling, etc), or Air France-KLM Group. So it is not unusual for an Airline group to have overlapping routes. However, unlike in Europe, we do not have competition in the domestic sector from foreign Airlines. Although there is news of new regional airlines starting up soon (Fly91, Jet Airways 2.0, etc), I doubt they will be able to plug the gap that is being left by Airasia and Vistara. It is for the same reason the merger of Air Korea with Asiana has been stalled by the CCI of the EU and the US (AFAIK). This case would have been less complicated if Jet Airways and Kingfisher would have been still flying.

As V Narayanan Sir said, This Duploy and too much price regulation and taxes by govt. agencies will only harm the consumers. It will be very hard for new players to compete until and unless they come with huge load of capital.

The scene is going to get worse as it seems Spicejet will soon take GoAir path. Read the news that 39% of their flights were either delayed or cancelled in moth of May. Also they have to pay up 380Cr to Kalanithi Maran by Supreme Court order

[PPS]

Originally Posted by chanz2015

Tata should keep Vistara as separate entity.

I too feel the same but I doubt thats going to happen. I hope they delay the inevitable.

They should make Vistara a luxury brand which can compete with the likes of Emirates and Qatar Airways

Isn't that what Air India aspires to become as per the bulk orders for planes placed recently!

[Vishal.R]

Originally Posted by V.Narayan

We are at risk of getting stuck with a duopoly.

I don't have any insights about airline operations, so kindly correct me but what I understand is running an airline in India is financially very difficult; I think only Indigo has achieved this, so If Ratan Tata or Rakesh Jhunjhunwala weren't attracted to the industry (even after looking at Vijay Mallya even Maran brothers, Wadias, Sahara group to some extent) We might have ended up with almost monopoly.

So there is no harm in having a profitable 2nd or 3rd airline, and It MAY eventually help customers.

I fully agree about the point that customers don't have any direct advantage, but at the same time, there is no immediate disadvantage as well.

The business itself is complex, so cost reduction is not only required for maximizing profits but also a necessity for the long-term sustainability of the companies, and the same group owns both airlines.

If someone thinks a merger would harm customers / Industry, TATA group shouldn't be allowed to acquire Air India.

[AutoNoob]

Originally Posted by Suprit

IMHO there is too much hype over “service quality” defined with frills such as free meals, frequent flier programmes etc. if these mattered so much, how come Indigo went far ahead of both AI and Jet which were well entrenched when Indigo started operations?

In my order of preference, route (direct flights), pricing and on-time performance are first priority. In terms of service quality my preference lies at overall meal service, cleanliness, ambience quality; infotainment and frequent flier miles come thereafter. And there is nothing called 'free meal', neither in airline industry nor in any other industry; its being charged directly or indirectly, so never a point of preference.

During long haul flights, for me, the service quality is the difference between a relaxed or stressed travel. There are few airlines on my 'Never Ever' list for want of service quality, including Air India.

However, after Tatas took over, now I am thinking of giving it a try.

[libranof1987]

Originally Posted by V.Narayan

Air India Vistara merger – is it in the interests of the customer?

I have counter-questions.

- Was selling AI to Tata against the interest of Indian aviation?
- Would not approving the AI-Vistara merger be against the interest of Indian aviation?

Jet Airways bought Sahara Airlines, Kingfisher bought Air Deccan, Air India and Indian Airlines merged, so there has been a lot of precedent. What's different now?

I wonder if it is the GoI's job (real world scenario) to think through it, but most people knew that Tata would eventually bring all the different airlines together to make the most of the sale.

Also, why haven't the same questions been raised on the Air India Express - Air Asia India merger?

The US approved the merger of US Airways and American Airlines; what's the red flag here? The US has four main carriers: Delta, Southwest, American Airlines - US Airways, and United Airlines. India has two/four belonging to Tata, Indigo, Spicejet, Akasa.

Should the poor financial/operational performance of Spicejet and GoAir be allowed to affect decisions of such magnitude?

[NiInJa]

Yup, gone are the days when I used to buy a Pune-Bengaluru flight ticket for 900 Rs only! (Airavat Bus used to cost 1000-1100 Rs !) That was when all: Kingfisher, Spicejet, Indigo, Jet Airways, Air India Express, GoAir were functional. With such a duopoly, we can forget about getting most affordable deals although in terms of connectivity, it will be better as both Air India and Indigo have placed good orders for future.

For shorter distances (example: Mumbai-Pune-Hyderabad or Pune-Bengaluru, Hyderbad-Bengaluru), I am honestly pinning my hopes on Vande Bharat trains.

[Dry Ice]

Originally Posted by V.Narayan

As a retired member of the aviation industry, I find it very hard to swallow the line that Air India-Vistara merger is in the interests of the common man.

But, it is in common man’s interest, isn’t it?

Flying will be so much simpler. Just open 2 sites, key in your dates and pick one.

At the airport, no need to look around trying to find the right check-in or baggage drop counters. You simply spot Team blue or Team red and queue up.

Over a period of time, I suspect both offerings will probably become identical and it will come down to a preference of color. I can’t really predict if Blues will drop their standards or the Reds will up theirs though. Time will tell.

[Baddychat]

Originally Posted by libranof1987

I have counter-questions.

Also, why haven't the same questions been raised on the Air India Express - Air Asia India merger?

Should the poor financial/operational performance of Spicejet and GoAir be allowed to affect decisions of such magnitude?

Air India Express is/was a LCC with a hub out of Kochi primarily targeting the passengers from the Middle East and onwards to a few select domestic destinations. A merger with Air Asia really does not affect the domestic competition space.

Air India and Vistara are the only remaining full service domestic carriers and a merger automatically reduces it to 1 option which takes the pricing advantage away from the customer. We can already see the duopoly in action as both Indigo and AI/Vistara have steeply hiked their fares. Yes Go Air has closed shop and other things are happening but these steep fares are a consequence of the imminent duopoly. Wait for the 2023 festive travel season to begin. A DEL-MUM or a DEL-CCU flight would be high as 20 k 2 weeks before the date of travel.

While it financially makes sense for a merger to the Tata's there isn't any regulatory body determining or setting a limit to surge pricing, in the absence of which this will only get worse.

Also Air India will need a lot of time to acquire the international traffic from the Gulf carriers.

Originally Posted by Dry Ice

But, it is in common man’s interest, isn’t it?

Over a period of time, I suspect both offerings will probably become identical and it will come down to a preference of color. I can’t really predict if Blues will drop their standards or the Reds will up theirs though. Time will tell.

You have put it nicely. But the only issue here is whether air travel will remain affordable or not. We could see empty blue and red counters going forward.