Tata versus Tata: Gear up for the dogfight

The Tatas want synergy but can two different partners work with each other.

You have to give it to the Tatas. When everyone has written off the airline sector, the group lined up not one but two alliances in the country. Some might call it infatuation towards a sector that was taken away from them after they nurtured it (Air India was Tata Airlines before it was nationalized) while others might call it a shrewd business decision to invest in a sector which has mostly weak players left. 

 

Whatever may be the reasoning for investment, what has taken everyone by surprise is the group tying up with two companies with completely different business models. While Air Asia, in which the Tata group will not be playing a key operational role, is a low cost airline, Singapore Airlines is a full-service airline.
 

An aggressive Tony Fernandes would not have let anyone else manage his show in the low cost airline as it requires micromanagement and a tight control of cost. This explains why the Tatas have only 30% in the company. 
 

However, the Tatas would be in the cockpit in its venture with the Singapore Airlines. Singapore Airlines had made it public that they will be focusing more in the Asia Pacific market rather than their earlier focus in America and Europe.  

 

It is very unlikely that the Tatas would not have informed Air Asia on its plan to invest and operate another airline.Chances are that the two airlines will be crossing swords and competing with each other in the same sectors. Their respective performance will however be closely watched and compared over the years. Air Asia and Singapore Airlines have brought their dogfight to the Indian skies.
 

To get an idea of which Tata will win in the Tata versus Tata battle for market share, we will have to look at the operations of their two partners. Strictly speaking, the two business models are not comparable but in the business world, bets will be placed on the company with stronger operational capability and not deep pockets. Especially in India, where only one airline is profitable.
 

Singapore Airlines presently operates in 63 destinations in six continents with 11 destinations in India using a fleet of 101 aircrafts. Air Asia has a more concentrated approach flying 118 airlines in 85 destinations in 20 countries. In India, Air Asia covers five destinations. Passenger load of both the airlines remain high between 79-80%. However, Air Asia has an operating profit of nearly 20% due to efficient operations as compared to around 2% for Singapore Airlines due to its skewed cost structure. 
 

The Indian aviation market and travelers are extremely price conscious. They would switch airline loyalties for a few hundred rupees. A simple comparison of prices on any of the Indian online ticket booking sites offering international flight tickets between Singapore and Kuala lumpur shows a very interesting picture. Air Asia is one of the cheapest, selling its tickets at Rs 2,299 for a non-stop one way flight while Singapore Airlines was the costliest selling at Rs 19,542. 
 

Any guesses which airline will be successful in India? One thing we can however be sure- Tatas will emerge as the winner.