Proposed Acquisition by Talace Private Limited of Air India Limited

Notifying Party:

Talace Private Limited 

Notifying Date:

14 December 2021

Summary of transaction:

(i)        the names of the merger parties;

(a)          Talace Private Limited

(b)          Air India Limited

(together, the “Parties”)

(ii)       a description of the transaction;

The application relates to the proposed acquisition by Talace Private Limited (“TPL”), a subsidiary of Tata Sons Private Limited (“TSPL”) of all shares and voting rights of Air India Limited (“AI”) from the Government of India (“GoI”), along with AI’s shareholding interest of 100% in the equity share capital of Air India Express Limited (“AIXL”) and 50% in the equity share capital of Air India SATS Airport Services Private Limited (“AISATS”), (the “Proposed Transaction”). AI, AIXL and AISATS are collectively referred to as the “Target”).

(iii)      a description of the business activities of the merger parties worldwide and in Singapore;

TPL is a private company incorporated in India. TPL was incorporated solely for the purposes of the Proposed Transaction and has no business activities worldwide or in Singapore. TPL’s parent company, TSPL is engaged in the provision of air transport services (both passengers and cargo) in India through its subsidiary Air Asia India and through its joint-venture with Singapore Airlines, Tata SIA Airlines Ltd which operates under the brand name “Vistara”. Vistara further provides international air passengers transport services, including from/to Singapore.

Air India, along with 100% subsidiary AIXL, is engaged in the business of providing (a) domestic scheduled air passenger transport service in India, (b) international scheduled air passenger transport service, (c) air cargo transport services, (d) charter flight services and (e) cargo handling services in India. AISATS provides ground handling services at various airports in India.

(iv)     a description of the overlapping goods or services, including brand names;

There is no overlap between TPL and the Target. However, TPL’s parent company, TSPL is engaged in the provision of international air transport services through Tata SIA Airlines Ltd. Under their brands Air India, Air India Express and Vistara, AI, AIXL and Tata SIA Airlines Ltd overlap in:

(a)          the provision of international air passenger transport services, along direct flights on the Singapore- Mumbai (SIN-BOM) route (and vice-versa);

(b)          the provision of international air passenger transport services, along direct flights on the Singapore-Delhi (SIN-DEL) route (and vice-versa);

(c)           the provision of air cargo services on the following routes: Singapore to India and India to Singapore.

(v)      a description of substitute goods or services;

Substitutes to the air passenger transport services on SIN-BOM and SIN-DEL are direct air passenger transport services on SIN-BOM and SIN-DEL as well as where either of these O-D form connecting points for services beyond.

(vi)      the applicant’s views on:

 a.       definition of the relevant market(s);

The Parties submit that the relevant markets are:

(a)          the provision of international air passenger transport services, along direct flights on the Singapore- Mumbai (SIN-BOM) route (and vice-versa);

(b)          the provision of international air passenger transport services, along direct flights on the Singapore-Delhi (SIN-DEL) route (and vice-versa);

b.        the way in which competition functions in this market;

On the demand side, passenger choices are primarily driven by price and convenient options for flight timings.

c.         barriers to entry and countervailing buyer power; and

To provide air transportation services to passengers, there are certain basic infrastructure requirements that need to be met – (a) adequate fleet, suitable for the kind of routes that the airline proposes to service (such as narrow-bodied aircrafts for short-haul routes); (b) landing slots at the relevant airports; and (c) in case of international routes, bilateral rights to fly to and from the international destinations. As long as an airline has these requirements in place it has the ability to enter/expand on a particular “relevant market” (i.e., an O-D route) virtually immediately, and capture market shares, regardless of whether they are already present on that route.

Whilst passengers do not have countervailing buyer power as such, passengers can easily switch from one airline to another at no cost.

d.        the competitive effects of the merger (non-coordinated, coordinated and/or vertical effects, as relevant).

The Parties submit that the Proposed Transaction will not give rise to non-coordinated effects in the relevant market(s) given:

•             the presence of strong competitors in the relevant markets which can swiftly increase their supply to meet any increase in demand by using unutilized capacities or bilateral rights to expand their operations at no additional costs

•             the low barriers to entry and the ability of new entrants to rapidly enter the relevant markets in response to any increase in prices

•             the fluid nature of the market and the ability of competitors to gain significant market shares in a very short period of time

•             the competitive constraints imposed on direct flights by one-stop flights

•             customers’ s ease of switching: there are no switching costs associated with choosing an alternative airline, i.e. the customers can switch to another airline virtually immediately

The market characteristics highlighted above and in particular the ability of competitors to swiftly expand and/or enter the market coupled with customers’ ease of switching and their price-sensitivity mean that airlines have a strong incentive to continue competing on prices, i.e. coordinated behaviour would not be sustainable. The Proposed Transaction which ensures that an established carrier continues to serve the two relevant routes further reduces any risk of coordinated behaviour.

Lastly, the Parties submit that FY 2020-21 market shares should not be considered, given the current anomaly in flights due to the COVID-19 pandemic.

 Status:

CCCS has completed its Phase 1 review of the acquisition (the “Transaction”) by Talace Private Limited (“Talace”) of Air India Limited (collectively, “the Parties”). CCCS has raised competition concerns with Talace on the Transaction, based on information received from Talace and third parties.

At this stage, the Parties may offer commitments to address the potential competition concerns of the Transaction raised by CCCS. Otherwise, the merger will proceed to a detailed further review upon CCCS’s receipt of the relevant documents from the Parties. Commitments may also be offered at any time during this review.

Decision:

Decision Date: 5 March 2024

Read the Media Release.

Read the Grounds of Decision.