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  • Writer's pictureBrain Booster Articles


Author: Zaier Ahmad, III year of B.A. LL.B (Hons.) from National Law Institute University, Bhopal

Co-author: Adnan Danish, III year of B.A. LL.B (Hons.) from National Law Institute University, Bhopal


Indian giant whose business expands from salt to steel, the Tata Conglomerate made a recent announcement that it is planning to consolidate the entire airline business by 2024 which will be under a single brand- Air India. Cherishing the dream of their forerunner, an aviator, Industrialist and Chairman of Tata Group J.R.D. Tata, Tata Sons, via its fully subsidiary Talace Private Investment(“Talace”) on 27th January,2022 acquired Air India from the Indian Government.

Who are the Stakeholders in the Merger

Currently, the Indian Behemoth owns a total of four airlines, including a 100% ownership in Air India and its subsidiary India Express, 83.67% in Air-Asia, 51% in Vistara, and rest 49% in Vistara controlled by Singapore Airlines Limited (SIA).

After the aforementioned consolidation, which is anticipated to take place in the year 2024, Tata will hold 74.9% of the new company, Singapore Airlines Limited will hold 25.1%, and as part of the agreement, SIA will invest Rs. 2,059 crores in Air India.

Objective of the Merger

At the very outset, the first process will be the consolidation of Air India and Air Asia within a year, and then finally it will conclude with the Consolidation of Vistara into Air India.The principal cause for this is that Air India wants to expand its network, revive its Maharaja Air India image, and take market share away from Indigo and other international airlines.

Air India is concentrating on expanding both its network/coverage and aircraft fleet, overhauling its service offering, and improving safety, reliability, and consistency in performance as part of the transition to becoming a truly world-class airline. Building a strong Air India with full service and cheap service on both domestic and international flights is yet another ambition for Tata's.

Regulatory Approvals Involved in M&A transaction in Aviation Sector

M&A process in the aviation sector is more prone to government approval, authentication and authorization.It has to follow the regular procedure of Merger and Amalgamation as provided under Section 230-232 of the Companies Act,2013 additionally if there is any foreign direct investment it needs to fall in line with FDI Policy and NDI Rules, approval from the ministry of corporate affairs and other ministries if required. Finally, approval from the principal regulating authority under the Ministry of Civil Aviation is warranted.

Now, elucidating the process of M&A in the Aviation Sector, after the scheme is approved under the Companies Act and by the Ministry of Corporate Affairs,the role of CCI comes into play.

CCI Role in Merger in Aviation Sector: The Competition Act 2002 is the principal statute that governs the anti-trust framework in India. The Act does not particularly deal with or govern the airline sector, nonetheless, every notifiable combination has to pass through the provisions of the statute.

Section 3[i]of the Act provides that no enterprise or person or association of the above two shall enter into an agreement that can potentially have an appreciable adverse effect on competition in India. Further,Section 5[ii] provides that any combination exceeding the specified threshold shall have to be notified to CCI and such combination cannot be effectuated until the approval of CCI or 210 days have passed subsequent to the notification to CCI.[iii]

With this consolidation, the Air India group has the second-largest domestic market share of 25.9% behind only IndiGo,[iv] which could raise the eyebrows of the competition watchdog thereby warranting scrutiny.

The CCI implements the point of origin/point of destination (O&D) pair technique,[v]which is widely used internationally. According to this approach, every combination of a point of origin and a point of destination should be regarded to be a separate market from the customer’s viewpointand CCI may apply conditions for authorisation if it believes that there are concerns about competition.In contrast, if there are no other viable options and there is a significant amount of network overlap with relatively low economic gains relative to the harm to competition, prohibiting the transaction may be the only recourse.

It's intriguing to note that since the CCI's formation, there have been around 850 filings submitted with the competition watchdog about issues connected to competition. It is noteworthy that despite 40 submissions undergoing revisions in order to be approved for Phase I and Phase II of review, no such combination has been prohibited or blocked.

By taking a quick look at the precedents, it is reasonable to assume that the competition watchdog would approve the merger of the two airlines. The Foreign Investment Promotion Board must be contacted for clearance if there is any foreign investment. Foreign airlines may invest up to 49% of the paid-up share capital through the automatic method and up to 100% through the government route in the air transport industry for passenger services. Such investments shall be subject to being scanned under the government approval route.

In the Air India and Vistara merger, Singapore Airlines which is a foreign entity investing via FDI will get a 25.1% stake in the merged entity,[vi] which is within the specified threshold.

Also, it is necessary to get security clearance of the Directors and the Chairman of the company, then the Acquiring company will first file No- Objection Certificate(NOC), this application needshould be submitted to the Ministry of Civil Aviation in a prescribed procedure along with requisite fee, when the scrutiny is completed by MoCA,[vii] the applicant who fills the basic criteria, the Directorate General of Civil Aviation(DGCA) issues initial NOC, the functions of DGCA is primary in nature as it enforces civil aviation regulations, all the standards which includes air safety and airworthiness standards, also it coordinates with International Civil Aviation Organisation,[viii] clearance related to use of Airport and other ground infrastructure facilities need to be obtained from Airport Authority of India(AAI). The appraisal of fees for passenger services and aeronautical services allows for the monitoring of performance standards in areas such as service quality, continuity, and dependability. Further, The Bureau of Civil Aviation Security (BCAS) is also responsible for determining security standards and is required to adhere to those set forth in national and international air safety treaties to which India is a signatory.

The relevant Act the scheme should satisfy in relation to Civil Aviation are: The Aircraft Act,1934, The Aircraft Rules 1937, The Air Corporations (Transfer of Undertaking and Repeal Act, 1994, The Carriage by Air Act,1972, The Civil Aviation Policy and The Civil Aviation Requirements.

Critical Analysis

Financial Analysis

When we assess the purpose and goals of mergers and acquisitions in the Indian airline industry, we find that the primary goal of the acquirer has always been to capture market shares of the target company; the aim of the company has not been to create a big entity and mutually share each other abilities to expand overseas and create an all-famous Indian Airline which works internationally well like Qatar Airways, Etihad Airways and Emirates.

The operational and financial Highlight of Indian Airlines after the merger is not quite impressive. In the case of Kingfisher and Air Deccan, the net profit of kingfisher during 2007-2008 was -188.14 Crores, after the merger, during 2012-13 the loss got widened and reached to -2328 Crores. When talking about Air India and Air Asia merger, the merger commenced in 2014, the financial health of Air Asia deteriorated more after its merger with Air Asia, the net profit in 2018 was -125.4 Crores and in 2022 it slipped to -2178 Crores.[ix] The track record with respect to financial health post-merger has not been pleasant in Indian Aviation Market.

Legal Analysis

When talking about past challenges in the M&A with respect to Civil Aviation, the Jet Airway and Air Sahara acquisition faced challenges related to the lack of aviation merger and acquisition that prevailed in India, situations like airport infrastructure transfer and uncertainty related to international route.

In the case study of Jet Airways and Etihad Airways in 2013, Jet Airways was on the verge of collapsewhen they were salvaged by Etihad.The merger had to face various investigation by the Department of Industrial Policy and Promotion, Ministry of Corporate Affairs, Department of Economic Affairs and Ministry of Civil Aviation, the transaction was also scrutinized by Competition Commission of India (CCI), SEBI and Foreign Investment Promotion Board (FIPB).

The Scheme of Arrangement between Deccan Aviation and Kingfisher but the scheme did not bear any fruit and both companies entwined into a legal battle about the lease agreement executed by both the parties, the Court had to step into the scheme of arrangement agreed by both the parties that is the Deccan Aviation and G.E Commercial Aviation Service. The court held that the supervision of lease agreement has nothing to do with the scheme of arrangement, if there exist an arrangement between the parties elsewhere with a competent authority and or a before an appropriate Court, without following the procedure it can’t invoke the scheme of arrangement under 392 of Companies Act,1956.[x]

Air India and Indian Airlines merger also faced some issues like inconsistent administration, compensation discrepancies, employee unrest which hampered operations of the airline.


Merger and Acquisition in Aviation Industry is still an unexplored sector however with the boom in the market in general, M&A in the aviation sector will be on a rise. Looking at the precedents, arrangement/combination in the aviation sector is a risky scenario wherein the companies are not able to recover losses and any arrangement warrants a pre-planned objective and a mode of execution. The process is riddled with regulatory approvals thereby making it highly complex.

Subject to regulatory approvals the Air India merger is expected to be completed by 2024. The merged entity plans to increase its domestic market share to 30% in 5 years and significantly increase its international routes. With Indigo already holding 56% of the market share, the Indian Aviation market is moving towards a duopoly, a duopoly in Indian Sky.

[i]Competition Act 2002 § 3 [ii]Competition Act 2002 § 5 [iii]Competition Act 2002 § 6 (2A) [iv]Chandra J, “Singapore Airlines to Get 25 per Cent in Air India as Part of Vistara Merger Deal with Tata” tata/article66201406.ece#:~:text=In%20the%20meantime%2C%20%E2%80%9Cit%20will,controls%2056.7%25%20of%20domestic%20traffic., accessed December 22, 2022 [v] Guest and Guest, “Rise of Low-Cost Carriers: Re-Exploring the Traditional Market Definition” (IndiaCorpLaw December 15, 2021) <; accessed December 22, 2022 [vi] “Vistara to Merge with Air India, Confirms Singapore Airlines” (The Economic Times); accessed December 22, 2022 [vii] (Ministry of Civil Aviation, Government of India 2012)rep; accessed December 2022 [viii] “Directorate General of Civil Aviation: Government of India” (Home) <; accessed December 22, 2022 [ix] “AirAsia India: Why Did the Pioneer of Global Low-Cost Aviation Not Live up to Its Potential in India?” (Forbes India);'t%20do,losing%20money%20before%20AirAsia's%20entranc; accessed December 22, 2022 [x]Deccan Aviation Limited vs. G.E. Commercial Aviation Services Ltd. and Ors., MANU/KA/0231/2009.


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