AVIATION BUZZ

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?VISTARA-AIR INDIA MERGER -(1) YAY OR NAY

?The news of the merger of Vistara and Air India has brought out many strong feelings across India, for many months now. On Monday, the Air India CEO-MD announced the operationalization of the merger, and there were many mixed emotions. In this series of short articles starting today, we examine the background and rationale of the arguments for and against this merger.

We are a nation of thinkers, with many varying opinions, and social media gives us all an opportunity to vent our thoughts and feelings. So, whether it is Cricket, politics, Bollywood, prices, or Air India, every Indian has an opinion. To this list, we have recently added religion.

Why? We often wonder? Is it because, like Cricket and Bollywood, Air India evokes the heartbeat of every Indian, whether to love our heroes or vilify them? Almost forty years before India beat England in a test match in 1972, or fifty years before we won the World Cup in 1983, or decades before Amitabh became the angry young man in 1973, a young Parsi pilot and businessman had dreamed a dream – to bring aviation to pre-Independence India.

That dream was Air India, and few may recall, that even before the “stroke of the midnight hour,” when our young nation had its “tryst with destiny”, JRD Tata was already flying through the skies, with his fledgling Air India. The dream of Air India, has run parallel to the dream of India.

So, Air India is a symbol of free India, that we all love to love, and some -love to hate, but it symbolises something so quintessentially Indian, like our freedom, carrying India’s flag far and wide, across lands, as a symbol of her freedom and excellence.

The post-nationalization years were not entirely kind to the Tatas or Air India, and though JRD made sure he raised a world-class airline,. The 1970s and 1980s were her pinnacle and glory, when JRD helped train and guide the fledgling nation of Singapore, to groom its national airline – Singapore Airlines, at its Kalina training centre, and Air Mauritius crew too, and took a stake in that company, So many others came to JRD for guidance. Somewhere along the way, in the last three decades, the wheels fell off.

The mid-1990s and beyond were harsh, the subsequent mergers of Vayudoot into Indian Airlines and then with Air India, scandals, corruption, union issues, quotas, and restrictions, brought JRD’s once mighty giant of a world-beating airline to its knees.

Three decades of neglect and political kicking around meant that the airline did not grow, but suffered at the hands of bureaucracy. I have been fortunate to have had both my parents at Air India during its best years, and then sadly, during later years there, I watched it decline, until the “ghar wapasi.”

The eventual sale of Air India to the Tatas in January of 2022, was a carefully calibrated plan of the government and the result of many months of discussions between the Secretaries of MoCA, the Air Indians themselves, and later on the Tatas team. We were fortunate to play a tiny part in that. However, the corporate giant had spent the previous eighteen months studying the company and understanding what it believed could make this airline work, if anything.

“The quickest way to become a millionaire is to get a billionaire to start an airline business," Richard Branson, the mercurial founder and chairman of Virgin Atlantic, famously said.

Running an Airline is not an easy job as the Tatas learnt very early on with Air Asia, and they then partnered with Singapore Airlines to found, what then became India’s favourite airline, Vistara. The holy grail however, was JRD’s airline Air India, not merely because it had great emotional value, because businesses are not about emotions alone, but because of its history, infrastructure, reach, and, most importantly, because only they knew that at the right terms and the right positioning, if anyone else could, then the Tatas could make Air India great again.

They put together the best teams of consultants and minds to put together a plan to make Air India world-class again, some Air India old-timers, from the golden days, were called to give their thoughts to the consultants. This was, after all, the group that miraculously turned around Tata Motors when it was at the bottom, revived Tata Steel after the 2008 crash, rebuilt Indian Hotels after its net worth was almost wiped out, and then again, after the terror of 26-11, they knew business, but they also knew India, better than anyone else.

Like a few traditional corporate houses, the Tata Group aims at long-term sustainable growth and eschews quick-fix, short-cut solutions. Their vision for Air India, was to be a world-class airline, through the five-year Vihaan turnaround plan, which had various stages of consolidation, change, growth, stabilisation, and then reaching its summit, and a growth strategy that stretched well into the next decade.

The discussions with their partners Singapore Airlines, and group companies, led them to a strategy-based consolidation process of their airline strengths, designing a new improved airline product, that was in tune with the needs of the changing India and the world, and a consolidated carrier.

The goal could only be met if they achieved synergies and harnessed the collective strengths of the four airlines in their fold. This was what was discussed with Singapore Airlines, very early in the piece, even before the purchase was finally completed.

Many felt that Vistara was a truly world-class airline and deserved to be built upon, and expanded, and there is some merit in that statement. However, Vistara neither had the scale, the footprint, the bilateral slots, nor the infrastructure that Air India had. As two separate carriers, the owners would, by law, have had to keep them at arm’s length, in view of the competition. The terms with the government had made it clear that the Tatas would have to operate Air India for a minimum of five years before any change of name or significant structure was effected. Perhaps another factor, was that to grow Vistara on its own, both owners would have to keep funding its growth in equal parts, to bring it to scale.

Vistara had become India’s favourite airline, with incredible benchmarks in inflight service, comfort, and premium operations, however, what it had not yet controlled was the cash burn that a growing airline feeds off, in its early years.

The merger discussions happened in detail through 2022 and the plans were formalised in 2023, The company had a working group to study the path forward. The focus was on SIA bringing its expertise and muscle into the merged airline, apart from a significant cash infusion for its 25% equity. This merger gives both airlines economies of scale and a lower-cost platform. If properly handled, this same experience can be replicated across their LCC operations as well.

There have been many opinions expressed for and against the move, and we will go into that in the next edition of this article. However, , let us all just take a step back and appreciate what this means for both carriers and the Tata group, it is nothing short of a great leap forward – into the future.

For the many critics and naysayers of Air India, this is a path-breaking change, it takes time, Wait and watch, History is being made here.

#aviation #Airbus #boeing #Vistara #Airindia #merger #airlines

This article was written for Avialaz Consultants an aviation consultancy and research organisation, co-founded by Sanjay Lazar, an author and Harvard Law Professional with 37 years of experience in aviation, law, public speaking, and leadership coaching.

He is available at @lazar1 on Linked-In & @sjlazars on X (formerly Twitter)

His book ‘On Angels’ Wings — Beyond the Bombing of Air India 182' is a number 1 #Bestseller available on Amazon.in?