Air India-Vistara Merger: What Changes | Former Air India Executive Director Explain

Summary

In an interview with NewsX, Mr. Jitendra Bav, former Executive Director of Air India, discusses the strategic benefits of the merger between Air India and Vistara. He emphasizes the need for a strong international airline to compete with global carriers and highlights the improvements made by Tata since acquiring Air India, such as refurbishing aircraft, enhancing service quality, and reengineering work practices. Bav anticipates that the merger will create a formidable player in the aviation industry, both domestically and internationally, and will ultimately benefit consumers through increased competition and potentially more affordable fares.

Takeaways

• 😀 The merger of Air India and Vistara is a strategic move to create a strong international airline capable of competing with global carriers like Emirates and Southeast Asian airlines.
• 🕒 The merger process took over two and a half years due to the need to refurbish and upgrade Air India's fleet and services to meet international standards.
• 🔄 The integration aims to harmonize manpower, network thinking, and growth programs, leveraging Vistara's reputation for quality to enhance Air India's image.
• 🌟 Post-merger, Air India is expected to improve its service quality, induct new aircraft, and expand its operations, aiming to compete with top airlines within a year.
• 🌐 The merger is not just about the domestic market; it's crucial for India to have a formidable player in the international aviation sector.
• 🛫 Air India's refurbished and new aircraft, along with Vistara's quality service, will contribute to changing the negative perception and creating a new image for the combined entity.
• 📈 The combined market share of Air India and Vistara could challenge the dominance of Indigo in the domestic market, promoting healthier competition.
• ✈️ Internationally, the merged entity plans to operate direct flights from various Indian cities, reducing reliance on Gulf and Southeast Asian carriers for international travel.
• 💼 The merger is expected to benefit consumers by providing more choices and potentially driving down fares due to increased competition and capacity induction.
• 🌟 The long-term vision is for Air India to become a source of pride for Indian aviation, competing effectively on the global stage within the next few years.

Q & A

What was the main reason behind the merger of Air India and Vistara?

The merger was a natural progression after Tata acquired Air India, as it was not feasible for the same promoter to run two competing airlines. The goal was to create a strong international airline that could compete with global carriers like Emirates, and the merger was timed to create harmony in manpower, network thinking, and growth programs.

How did the merger impact the perception of Air India's quality?

Air India had a negative perception in the past, but with the merger and the induction of new aircraft like the A350s, the quality has been upgraded. The merger is expected to blend the good quality product of Vistara with the upgraded Air India product, leading to a perceptual change and a new image for the combined entity.

What changes did Tata bring to Air India in the 2.5 years post-acquisition?

Tata refurbished old aircraft, inducted new ones like the A350s, and initiated VRS schemes to bring in new employees, leading to a cultural change and reengineering of work practices. This was aimed at aligning with customer-friendly systems and improving service quality.

How does the merger plan to enhance Air India's international presence?

The merger aims to expand Air India's international operations by not just operating out of Delhi and Mumbai. They plan to start direct flights from other Indian cities like Bangalore to various international destinations, reducing the reliance on Gulf and Southeast Asian carriers for international travel.

What is the expected impact of the merger on domestic market competition?

The combined market share of Air India and Vistara could challenge the dominance of Indigo, stimulating competition and potentially leading to better services and more competitive fares. The merger is expected to provide a formidable domestic airline to compete with the market leader.

How does the merger influence the consumer experience and fares?

The merger is expected to increase competition, which could lead to more affordable fares as both airlines have ordered a large number of aircraft and need to fill them. However, the consumer experience will also depend on the balance between service quality and the need to generate revenue for expansion.

What is the role of Singapore Airlines in the post-merger scenario?

Singapore Airlines, with a 25.1% stake post-merger, is expected to contribute technology, innovative work practices, and better work standards to Air India, enhancing the overall quality and efficiency of the combined entity.

How does the merger address the issue of market share and competition?

The merger combines the market shares of Air India and Vistara, potentially reaching close to 30%, which could provide a strong challenge to Indigo's dominance. This is seen as a move to create a stronger airline that can compete effectively in the market.

What are the expectations for Air India's growth in the next few years?

With the merger and the induction of new aircraft, Air India is expected to expand its fleet and operations both domestically and internationally. The goal is to become a major player in the international market, competing with the likes of Emirates and other global carriers.

How does the merger plan to balance quality service with the need for financial growth?

The merger aims to achieve this balance by offering a full-service carrier experience with Air India and leveraging the efficiency and innovation of Vistara. They plan to maintain quality service while keeping fares affordable to stimulate market growth and fill the new aircraft being inducted.

Outlines

00:00

🛫 Air India and Vistara Merger: Strategic Move for Global Competition

The first paragraph discusses the strategic importance of the merger between Air India and Vistara, highlighting the need for a strong international airline to compete with global carriers like Emirates and Southeast Asian airlines. The merger is seen as a step towards creating a formidable player in the international market, especially considering the previous poor state of Air India which has since been improved with new aircraft and service quality enhancements. The interviewee, Mr. Jitendra Bav, emphasizes the merger's timing, suggesting it aligns with the planned induction of new aircraft and the potential for significant market expansion.

05:00

📈 Market Share Consolidation and Future Projections for Air India

In the second paragraph, the discussion shifts to the impact of the merger on market share, both domestically and internationally. The consolidation is expected to challenge Indigo's dominant position in the domestic market, with the combined market share of Air India and Vistara posing a stronger competition. The paragraph also addresses the international strategy, suggesting that the merger will allow for direct flights from various Indian cities, reducing reliance on Gulf and Southeast Asian carriers. The interviewee anticipates that this will lead to a significant change in the aviation industry, with Indian carriers potentially dominating international skies in the future.

10:02

💸 Implications for Consumers and the Aviation Industry's Future

The third paragraph delves into the potential benefits and challenges for consumers following the merger. It addresses concerns about fewer airlines leading to higher fares but counters with the argument that the induction of new aircraft will necessitate affordable fares to fill the increased capacity. The interviewee, Mr. Bav, assures that the best safeguard against high fares is the presence of strong airlines with large fleets, as they will need to stimulate market growth through competitive pricing. The paragraph also touches on the service quality and the need for Air India and Vistara to balance quality service with the financial requirements for fleet and staff expansion post-merger.

Keywords

💡Merger

A merger refers to the consolidation of two or more companies into a single entity. In the context of the video, the merger of Air India and Vistara is discussed as a strategic move to create a formidable international airline capable of competing with global carriers. The script mentions that the merger is a 'natural thing' given that Tata, the parent company, was already running Vistara and acquired Air India, aiming to avoid competition between the two and to strengthen their position in the international market.

💡Disinvestment

Disinvestment is the act of a government or an organization selling or liquidating an investment in a subsidiary or a partially owned entity. In the video's narrative, the Government of India's disinvestment of Air India is highlighted as a pivotal event that led to Tata's acquisition of the airline, setting the stage for the subsequent merger with Vistara.

💡Market Share

Market share represents the percentage of the total available market that is controlled by a particular company or brand. The script discusses the combined market share of Air India and Vistara, which is significant in the context of domestic competition. It suggests that the merger could lead to a more competitive landscape, challenging the dominance of other airlines like Indigo.

💡Aircraft Induction

Aircraft induction refers to the process of adding new aircraft to an airline's fleet. The video script mentions the induction of new aircraft as a key aspect of Air India's strategy post-merger, which will help in expanding their services and improving their competitiveness in both domestic and international markets.

💡Quality of Service

Quality of service in the context of airlines pertains to the overall experience provided to passengers, including aspects like comfort, reliability, and customer service. The script highlights the improvement in Air India's service quality as a result of the merger and the refurbishment of older aircraft, which is crucial for changing the airline's perception and competing with other carriers.

💡Workforce Reengineering

Workforce reengineering involves the restructuring and retraining of an organization's workforce to improve efficiency and effectiveness. In the video, the concept is tied to the changes at Air India post-Tata's acquisition, where older employees took voluntary retirement schemes (VRS), and new, younger employees were inducted to bring about a cultural change and enhance customer-friendly practices.

💡Customer-Friendly Systems

Customer-friendly systems are those designed to enhance the customer experience by being accessible, efficient, and responsive to customer needs. The script suggests that post-merger, Air India and Vistara will focus on implementing such systems to improve their service quality and attract more customers.

💡Domestic and International Competition

Domestic competition refers to the rivalry among companies within a country's market, while international competition involves companies from different countries. The video discusses how the merger is expected to impact both domestic and international competition, with the aim of creating a strong Indian airline that can compete with global carriers and challenge the dominance of other domestic airlines.

💡Fleet Expansion

Fleet expansion is the process of increasing the number of vehicles (in this case, aircraft) that an airline operates. The script mentions the large number of aircraft ordered by Air India as part of their expansion plans post-merger, which will enable them to cover more routes and destinations, both domestically and internationally.

💡Perishable Commodity

A perishable commodity is one that has a limited shelf life or a high risk of depreciation. In the context of the aviation industry, an airline seat is considered perishable because once a flight departs, any unsold seats lose their value. The script uses this concept to explain why airlines need to offer affordable fares to fill their aircraft and maintain profitability.

💡Full-Service Carrier

A full-service carrier is an airline that offers a comprehensive range of services to its passengers, including in-flight meals, checked baggage, and other amenities, often for a higher fare. The video contrasts full-service carriers like the merged Air India-Vistara with low-cost carriers like Indigo, emphasizing the different service models and customer segments they cater to.

Highlights

Merger of Air India and Vistara is a strategic move to create a strong international airline capable of competing with global carriers like Emirates and Southeast Asian airlines.

Tata's acquisition of Air India led to a natural merger to avoid competition between Vistara and Air India under the same promoter.

The merger is timed appropriately as Air India has undergone significant improvements in service quality and operational standards.

Air India's image is set to change with the induction of new aircraft and refurbishment of old ones, aligning with Vistara's known quality.

The merger aims to create a unified workforce and harmonized growth strategies, enhancing the overall brand strength.

Post-merger, Air India, with Vistara, will have a significant market share, potentially challenging the dominance of Indigo in the domestic market.

The combined entity will focus on international expansion, reducing reliance on Gulf and Southeast Asian carriers for international travel.

The merger is expected to boost the Indian aviation industry's global standing, with a strong player to compete on the international stage.

Air India's market share, combined with Vistara's, will create a formidable domestic competitor to Indigo's dominance.

The merger is not just about market share but also about improving service quality and work culture within the airlines.

The induction of new employees and the retirement of older staff through VRS schemes will bring a cultural shift towards customer-friendly practices.

Singapore Airlines' stake in the merged entity will introduce technological and operational innovations to Air India.

The merger is seen as a long-term strategic decision, akin to a test match in cricket, with significant outcomes expected in the next couple of years.

The ultimate benefit to consumers is expected to be increased competition, potentially leading to more affordable fares and better service options.

The merged entity will be a full-service carrier, differentiated from low-cost carriers like Indigo, offering a premium service experience.

The aviation industry's perishable commodity nature ensures that airlines will always strive to offer attractive fares to fill their seats.

Transcripts

Mr jitendra bav former executive

director of Air India Mr bav thank you

so much sir for taking our time to speak

to newsx your voice and explanations

will be extremely crucial for all our

viewers that are watching us right now I

want to begin by asking you what really

will be the key benefits of the

merger see let's put it this way when

government of India disinvested Air

India Tata acquired it tataa was already

running vistara and it was a natural

thing that the merger will take place

you cannot have Tas of the promoters to

have run two Airlines say for example

India to London can you have vistara and

Air India competing with each other the

answer is no so if India needed a

formidable Airline international airline

that can compete with Emirates ithad and

the other Gulf carriers and Southeast

Asian carriers or even European carriers

India needed a strong International

player what is unfortunately happening

is that we're judging the merger between

Air India and bisara in relation to

domestic market right what we need to do

is to do it for the international market

and the reason why they took two and a

half years plus to get the merger going

was because when tatas inherited Air

India it was in a bad shape a large

number of aircraft were on ground for

want to spare parts they had to be

refurbished now they have reached a

modicum level of standard of service

quality trative change reengineering of

work practices induction of new aircraft

and they're on the threshold of major

expansion so the merger is taking create

at an appropriate time because as we all

know theara was known as a good quality

product Air India had a perception which

was of not a good quality product now

that the product has been upgraded and

you somewhere at part with each other

the merger is taking place so with the

large number of aircraft that have been

ordered starts getting

inducted what you need is a total

Harmony as far as Manpower is concerned

Network thinking is concerned growth

programs are concerned so in my opinion

the merger is just the right thing and

is happening at the right time and for

the Indian Aviation is that we should

legitimately be proud in 6 months time

or one year's time when we give airl

like Emirates itad and even the

Southeast Asian carries Run for the

money so they'll have a good quality

product Mr barav how exactly does uh Air

India then hope to achieve this boost

and how exactly does it plan on ramping

its image before the world you see let's

put it this way as I said the perception

has been very negative with regard to

Air

India carried from the time when

government own Air India now what Tas

have done in this 2 and a half years

time is to a refurbish some of the old

aircraft A3 500s have been inducted into

the a350s have been inducted into the

fleet and there's going to be starting

operation from November onwards so it's

timed in the such a manner that you the

perceptual change that they are seeking

will come about let's look at the the

Manpower one was in merger the critical

part of manpower now what happened was

that in the 2 and a half years since

they acquired Air India there have been

three or four times the vrs schemes have

been launched so a lot many old people

have taken advantage of the vrs and gone

away and tatas in their place of

inducted new employees which means the

work cultural change reengineering of

work practices and getting onto systems

which are customer friendly and younger

crew members to come on board so that's

where the difference comes in

and once you have to the new product

being launched like take for example

India JFK has a better product than

India New Jersey at the moment but come

the next six month with more planes have

been inducted all of United States will

be covered either with the new plan or

with the refurbished plan so what

happens in the US market which is the

largest one for India globally is to

have a perception chain people will

erase the impression that they have of

the past will get erased and a new image

will get created now that is where I say

is the fundamental difference that will

come about and vistara will contribute

to it with Singapore Airlines having

25.1% post merger the technology flow

the Innovative work practices better

work standards Etc will be inherent part

of Air India so if you look at the

merger from that perspective right

fabulous decision let's look forward

give Tas another 2 years time as I very

often said the

merger the acquisition of Air India by

tatas isn't AK to a 20 T20 match it's a

to a test match two and a half years

have gone by let's look at another two

years time when we'll be legitimately

proud of what Air India has become Mr

parav I'd also like to understand um as

far as air India's market share is

concerned somewhere near 9.3% vistara

holding about 10% of the market share

earlier yes they were competitive until

of course the tatas took over Air India

and the tatas were already operating

with Sara as you've already explained to

our viewers that it was a tricky

situation when uh it's the same parent

entity that's uh literally holding two

Airlines which are meant to compete but

when we talk about now combining the

market share what does that mean for

domestic and international competition

you see let's look at the domestic

Market first yes I agree with you both

tatas and vistara have had 10% each and

Air India Express has another 34 5%

market share now with with Indigo having

60% plus market share and if you had

splintered Airlines with nobody

commanding a dominating position would

have been that indigos would have R

ruled the skies now when you have a

major carrier formidable Airline

combination having close to 30% market

share you will be giving Indigo Run for

the money better from the market now

unfortunate part is that this small

lines that we have have perished in the

last few years they've not been able to

survive the onslaught because Indigo

with multiple frequencies on each

destination profitable Airline growth

program that we have never seen before

with the Thousand aircraft on order ET

for India you will have to have a

formidable Airline domestic Airline from

India and that is what the merger

between Air India and vistara will

provide come to the international sector

India Air India has been the largest

domestic International pray from the

Indian among the Indian carriers now

what you need to do is that if you have

a large Fleet and which they will have

they've ordered aircraft you do not have

to necessarily operate Services out of

Delhi and Mumbai why were Emirates and

IAD capitalizing because no passenger

from Bangalore Hyderabad Chennai Kolkata

Etc was wanting to come to the hub of

Air India Mumbai and Delhi and then take

an international flight and they felt

why not fly directly to Dubai or Abu

Dhabi and fly onward to the United

States now what happens in the next two

years or which is already started

happening is that they are no longer

treating Mumbai Delhi as the bases they

will commence operating Bri flight they

already doing flight from Bangalore to

San Francisco they will have Bri flights

to multiple points in United States from

multiple cities in India totally oating

the need for Gulf carriers or Southeast

Asian carriers to funnel Indian traffic

out of India to their hubs and then on

to these destinations abroad so

significant change will come about and

look at from the Indian perspective 2027

Indigo has placed orders for large Hall

Ultra capacity aircraft Ultra Long Haul

aircraft when they also get inducted

that will be The Shining chapter in

Indian Aviation when International Skies

from India will also be dominated by

Indian

car at the same time Mr bav what really

are you uh expecting or hoping will then

become the ultimate benefit to the

consumer at this point in time because

from a consumer's perspective um

honestly speaking it's two companies

that are merging but what what is in it

for the consumers are we hoping that

there as you've mentioned that there'll

be now solid competition to Indigo which

is uh holding more than 50% of the

market share which sometimes also leads

to a lot of people have been complaining

recently about the sort of charges that

we see around a flight ticket and the

the the multiple charges that people are

today paying to just fly from one point

to another and uh the fact that they

don't have too many options available so

now with this merger how do you hope or

or what do you think will happen from a

consumer's perspective you know this is

like a fear being created that if you

have a fewer Airline the fairs will go

up the best guarantee against fairs

going recklessly high is that both Tas

and indigo have placed orders for large

number of aircraft yes how can they

sustain a market if they have to keep

inducting new aircraft they have to

ensure that the market is stimulated for

growth and the growth will only come if

feds are affordable you see when you had

five six Airlines go first collap jet

will collap they're unable to do it and

then you had left with these play but

it's better to have fewer Airlines but

stronger Airlines rather than larger

number of Airline but financially weaker

Airlines now take the case of SpiceJet

which you're currently witnessing now

yes SpiceJet is operating onethird the

number of flight that they did two years

ago now isn't that affecting so I would

rather prefer Air India expanding Indigo

expanding monopolizing market and as I

said earlier the best guarantee against

FS being abnormally high is the large

induction of capacity because once they

keep inducting new aircraft they will

have the need to fill up this aircraft

and aircraft can only be filled up if

you have fairs which are

affordable Mr bhav at the same time if

we're looking at say the next few years

uh maybe three years or or the next 5

years if you're talking about an indigo

and a uh and an Air India vistara merger

then competing with one another and

monopolizing the market in a way a lot

of consumers have also in the recent

past then complained of the overall

service or the overall experience that

they get in some of these flights and

like I said the consumer doesn't really

have a choice at the uh end of the day

when there is a singular player that's

really taken over the market how will uh

Air India and vestara after the merger

then strike a balance a neat balance

between providing really quality service

and also getting in the money they

require to expand their Fleet to expand

their staff you know quality part let's

not compare because Air India withar

combination will be a full service

carrier whereas indigo is a lowcost aine

yes that's one part of it okay the

second part that we need to understand

is that Indigo will be growing the fairs

are reasonable will be high let's look

at only 10 days ago Indigo came out with

a scheme that this is a 3-day window and

if you're wanting to buy tickets now for

flying between such and such period the

fair was

1,111 and upwards from there because

aviation industry being Capital

intensive the fairs are regulated

keeping in view the lean periods and the

peak period in the market so when we

normally look at extended weekends

holiday period the fairs are high and

but we forget the part when airlines are

offering far lower fairs only to fill up

the aircraft because you can't be flying

empty and one important thing that I

keep R trading and I want to get it in

public domain again that unlike any

other product which if it is not sold

today can be sold tomorrow like a motor

car a refrigerator and air conditioner

Etc but in aviation industry seat is a

perishable commodity once a flight takes

off the value is zero so it is as much

in Airlines interest to get passengers

to fill up the aircraft and that can

only be done if the fs are affordable

attractive enough for passengers to fly

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