Air India, Vistara boards may not be unified soon

Tata Sons is unlikely to integrate the boards of Air India and Vistara in a hurry, said people with knowledge of the matter. It will keep the management teams separate for at least a year after the companies receive all official clearances for their proposed merger, which is expected to take place sometime this year or the next.

Given Vistara’s strong brand equity, Tata Sons is keen on Air India achieving a similar level of consumer trust and operational efficiency before they are integrated. Besides that, merging airlines involves an overhaul of their networks, consumer touchpoints such as apps and websites, and airport resources. Tata Sons did not comment.

‘Hurdles for Air India’
“The operational merger could stretch through 2024 as merging networks and operations of airlines take time,” said a top executive. The merger is part of the exercise to consolidate the Tata group’s aviation businesses. Air India and Vistara are merging to form a full-service airline. Air India Express and AirAsia India are uniting to create a low-cost airline that’s a subsidiary of Air India. Singapore Airlines (SIA), which has a 49% stake in Vistara, will hold 25.1% of post-merger Air India.

“Vistara is an established efficient brand, with a huge credible reputation built over the years in terms of quality and service,” said a senior airline official. “Air India, comparatively, has a lot of hurdles to cross to achieve that kind of brand equity. Therefore, there is a plan to keep the brands separate until Air India attains a similar standard of operations.”

Tata earlier planned to drop Vistara and use the Air India brand to lower costs and drive up its domestic market share, apart from implementing a unified corporate culture. However, even after the approvals come in, the group won’t rush to retire the Vistara title, said the people cited above.

Name game
Retaining the Vistara name would be a good idea, said brand expert Santosh Desai. “Vistara is the best-regarded airline in the country today, and to sacrifice such a brand for Air India, which is certainly not ready yet, would not be a good plan,” he said. “Air India has a legacy issue and to completely revamp it inside out – with new aircraft and staff customer service mindset -will take several years. And it is not because of any lack of effort by the Tata group, it is the sheer enormity of the job.”
Approvals by the National Company Law Tribunal (NCLT), the ministry of civil aviation and the Department for Promotion of Industry and Internal Trade (DPIIT) are expected by the middle of this year for the merger.

Air India has much ground to cover before it can match Vistara in the customer-facing experience and operational efficiency, executives said. This includes on-time performance, service and in-flight experience. Apart from inducting new planes, Air India aims to refurbish the airline’s interiors, which are known for their decrepitude.

Vistara has built a strong brand equity as a premium carrier with a small international presence. However, the two airlines will start working on benefiting from synergies such as ensuring that they don’t compete against each other and eliminating duplication of manpower and services. Also being looked into are the effective deployment of personnel and services offered at various points.

“There are some routes, including international, where Air India and Vistara operate almost at the same time,” said one of the people cited above. “Such duplication will be removed to build a network where the airlines are not competing, but rather complementing.”

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