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Air India and Vistara have told the Competition Commission of India (CCI) that their merger will not harm competition in the industry, The Economic Times (ET) reported. Citing people in the know, the report said that carriers told the competition watchdog that there are enough services from rivals on the routes that the combined entity will fly.
The people cited above told ET that while CCI's scrutiny is unlikely to have any material impact on the business of the airlines, it could affect the timeline of the merger.
As the Tata Group plans to put its airlines in sync with each other and consolidate operations, it has come under the regulator's lens. Thus, the two airlines have not been given the expedited permissions sought by them. Moreover, the regulator has asked the two airlines why an investigation of the impact the merger would have on the industry not be conducted, the report said.
A person aware of the matter was quoted in the ET report as saying, “Anti-trust regulators around the world examine the impact on competition through an origin and destination (O&D) approach to identify relevant market.”
The Tata Group is merging Vistara with Air India to create a single full-service airline. Singapore Airlines will have a 25.1 per cent share in the new entity. On the other hand, AirAsia India is moving forward with the process of merging with Air India Express to create a single low-cost subsidiary of Air India.
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Elaborating on the merger, Air India told the CCI that a full-service and a low-cost airline are not different. They operate from the same airports and use fuel that costs the same, pay similar landing and parking charges as well. Post-merger, Air India will be the only full-service airline operating out of India.
What is a full-service airline?
Full-service airlines tend to focus on their network of routes rather than looking at profitability on individual routes. For example, a full-service airline like British Airways will continue to serve on a route even if it does not have enough passengers because that route serves as a feeder for the larger network of British Airways services.
To operate on different types of routes for a varying number of passengers, full-service airlines operate aircraft of different sizes and capacities. This allows them to cater to the flux in the number of passengers while also keeping their operations efficient.
How is a low-cost carrier different from a full-service airline?
Low-cost carriers tend to suspend services that do not have enough passengers. In their case, the focus is on the profits made on individual flight routes.
Low-cost carriers mostly operate flights of the same design and type, which ensures that they do not have to make maintenance arrangements for different types of aircraft. Another benefit of operating aircraft of the same type is that the cabin crew does not need to be trained for different types of aircraft.
