Air India and SIA will jell very well, but they can jar too

After almost three decades of Air India being run into the ground by sarkari babus whose writ ran large at the Maharaja, Tuesday’s announcement that Singapore Airlines and Tata Sons had agreed to merge Air India (AI) and Vistara must have gladdened the heart of JRD Tata, the man behind making AI a leading global airline, and an icon to many, including global airlines and Singapore Airlines too.

In some ways the announcement is also ironic. When JRD was at AI’s helm there was no need for partners as the AI brand was in a class by itself with the airline being able to buy aircraft just on his name. Such was AI’s brand recall and recognition that several global airlines including SIA initially tried to model themselves on the Maharaja.

Just as JRD was passionate about his airline, this feeling also runs through all those who work for Singapore Airlines. From ensuring that the offices of AI resembled and were a showpiece for India and its culture, to acquiring the first jet, a Boeing 707, in Asia and becoming the first all-jet airline in the continent, no detail was too small or big for JRD.

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The same is true of SIA which since its inception as Malayan Airways Limited, when its first flight took off from Singapore in May 1947, also has many firsts to its credit. It introduced female stewards in 1951-52 (which eventually gave way to the Singapore Girl some 20 years later), and became the first airline to offer headsets for inflight entertainment systems and provide a choice of meals and drinks in economy class. Like AI decades before, SIA too took delivery of the world’s first Airbus A-380 in 2007. Change and adopting the best have been a way of life for SIA since its inception much as it was for JRD and AI.

But now times and the aviation world have changed. India’s outbound market is dominated by foreign carriers who carry over 60 per cent of the outbound traffic. In the domestic market, IndiGo commands a market share of close to 60 per cent with the Tatas-owned airlines Vistara and AI having about 20 per cent.

SIA acquiring a 25 per cent stake in AI will ensure that while SIA is in one of the fastest growing domestic markets, it is not involved with trying to understand the thinking of Indian passengers who are known to change their loyalty from one airline to another to save a few hundred rupees.

The buy-in decision also makes sense as SIA will get a stake in AI as the global aviation world bounces back to pre-covid passenger numbers. The Indian market is set to become the third largest in the world and Indian outbound travel is estimated to cross $42 billion by 2024.

A stake in AI will allow SIA to take on competition from global carriers such as Emirates, Qatar Airways and Etihad which have the largest number of weekly flights too and from India.

Further, the buy-in into AI will allow SIA to get passengers from India and also be part of an existing domestic market that has seen Vistara become the number two airline among the domestic carriers and seen AI topping the charts as the most punctual airline in September, the first time in eight years that it has achieved this distinction.

But the merger will also bring its problems as has been seen globally and even in India during the buy-out of Air Sahara by Jet Airways, Air Deccan by Kingfisher Airlines and Damania Airways by NEPC. With AI and Vistara both existing airlines having their own personnel, there is bound to be friction as to which person from which airline will head departments such as finance, HR, commercial and corporate affairs.

There is also bound to be heartburn over what should be the brand name of the airline into which SIA is buying a 25 per cent stake. Since its launch in 2013, Vistara has been working endlessly and is set to have spent upwards of $1 billion to brand itself. But ignoring AI’s more than seven-decade-long identity will also be foolhardy.

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