India’s cut-throat aviation sector prepares for consolidation

India’s dog-eat-dog aviation sector is on the cusp of a transformation. After years of cut-throat pricing wars between Indian airlines, the landmark merger of former national carrier Air India with Vistara will shake up the fast-growing industry. In a boom and bust sector where some analysts argue consolidation has been overdue, the deal will challenge the dominance of the country’s biggest domestic flyer IndiGo, analysts said. An enlarged Air India group, with an estimated value of $4.4b, will have just under a quarter of the domestic sector, making it the country’s second biggest carrier after IndiGo, which commands well over half of the market. “The competitive dynamics in India are moving towards a two-pillar system around the Air India Group and IndiGo,” wrote CAPA India, an aviation advisory. Significantly, it expects the two carriers between them will grow to claim about half of India’s international market, which is dominated by foreign carriers. “You can’t have six to seven airlines competing, offering uneconomical fares and perishing,” said Air India’s former executive director Jitender Bhargava. The merger of Air India and Vistara, after owners Singapore Airlines and Tata on Tuesday announced that the companies were set to combine, concludes a chapter started 22 years ago. Singapore Airlines, which holds 49% of Vistara, announced it would invest about $250m in Air India group, giving it a 25.1% stake in the entity, which will be “four to five times larger” than Vistara. Story has more.<br/>