Competition notice in aviation

Source: The post is based on the article “Competition notice in aviation” published in “Business Standard” on 3rd July 2023.

Syllabus: GS 3 – Liberalization of Indian Industry

News: The Competition Commission of India (CCI) has raised concerns over the proposed merger of Air India, which was acquired by Tata Group in 2022, and Vistara, a joint venture of the group and Singapore Airlines.

The CCI has issued a notice to Air India asking why its merger with Vistara should not be investigated from the perspective of antitrust norms.

The latest notice has come in response to the Tatas’ proposal in April for a merger of Air India and Vistara. After the merger, Singapore Airlines’ stake in Vistara would come down to 25.1 per cent from 49 per cent now.

What are the possible concerns of CCI?

CCI might be of concern that this dilution would make the Tatas a stronger player in aviation industry.

The market share of the merged Air India entity is estimated at a little over 25 percent, which is way below market leader IndiGo’s 55.7 percent. However, on the busiest routes, the entity will hold a substantial market share, i.e., between 38 to 53 percent.

What are the potential Implications of the CCI notices for aviation sector?

First, the CCI’s decision to review the merger could potentially delay the deal and set a precedent for defining what constitutes anti-competitive behavior in the aviation sector.

Second, the outcome of this investigation could have significant implications for future mergers and acquisitions in the aviation sector.

Third, the CCI’s decision could also impact the market dynamics in the Indian aviation sector, potentially leading to changes in market shares and competition levels.