Nearly seven months after it was confirmed that Air India and Vistara will be merged by March 2024, the mega merger seems set to be delayed. The reason???It is reported that the anti-trust regulator Competition Commission of India (CCI) has decided to review the merger of Tata Group-owned Air India and Vistara, which may potentially delay the process.
People aware of the development said that CCI has not given expedited permission to the process and has instead sent a notice to the two airlines seeking reasons why an investigation of the impact of the merger should not be conducted. ¡°The process has moved to phase 2 which will entail more discussion between the parties and CCI,¡± an official of the anti-trust body said, as per ET.
Phase 1 approval is given by CCI within 30 days if it finds that the transaction is unlikely to cause an adverse effect on competition. If the regulatory body forms an opinion that the merger or acquisition is likely to cause an adverse impact on the competitive scenario in the sector it sends show cause notice on further review which may take up to 210 working days. On April 19, the Tata-owned airline Air India had approached for a merger.
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The Tata Group is merging Air India Express and AirAsia India to form a low-cost airline while Air India and Vistara combined will be its full service entity. The combined Tata airline entity with 218 aircraft flying 23.9 % of domestic and 23.10% share of international traffic to and from India will be the second largest domestic carrier behind IndiGo, which has more than 60% market share, and largest international carrier in India, as per the report.
While Tata Group's parent company Tata Sons holds 51% in Vistara, the remaining 49% is owned by Singapore Airlines (SIA). After the merger, SIA will be holding a minority stake of 25.1% stake in the combined entity.?
The CCI official quoted above said that the concern is that the entity will be the sole operating Indian full-service airline on domestic routes and a combined entity of Air India, Air India Express and Vistara will have a lion¡¯s share of the market on the Gulf and Middle East route. Full-service airlines as against low-cost airlines offer a higher standard of service including complimentary inflight meals.
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However, a Tata group official reportedly said that there will be no adverse impact on the merger process. ¡°It may increase the time taken for the process but will not require any material change,¡± he said, adding that there is no business cost difference between a full-service and low-cost airline in India as they operate from a common airport and bear equivalent costs like charges on fuel, landing and parking.
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