Jet Airways has a considerable presence on the ground with its 124 aircraft that do nearly 700 flights a day
Soon after taking over as the Chairman of Tata Sons, N Chandrasekaran shared his vision for the $100 billion conglomerate. He wanted each of its companies to be 'top performers' in their respective sectors.
The vision also included simplifying the structure of the group. There are the big three - Tata Consultancy Services, Tata Steel and Tata Motors. The rest will be organised around clusters, which include infrastructure, defence, consumer goods and travel.
Vistara and AirAsia India are the two companies that fall in the travel cluster. The Tatas hold 51 percent in Vistara, its joint venture with Singapore Airlines, and Tata Sons owns 49 percent in AirAsia India.
The two airlines are far from meeting Chandrasekaran's "top performers" vision.
Although Vistara's revenue jumped over 50 percent to Rs 2,228 crore in the 2018 financial year, it still reported a loss of Rs 431 crore. As on September 30, its market share was just 3.8 percent.
AirAsia India, on the other hand, recorded its first profitable three-month period in the fourth quarter of the last financial year. But it's bottomline returned to red in the first quarter of the current financial year and its market share at the end of September was 4.8 percent.
The two companies rank just above regional airlines in the market. IndiGo, which had a market share of 40.9 percent at the end of September, continues to be the dominant airline in India.
To be fair, the two airlines are relatively new entrants in the market. But in an industry that is rapidly expanding, and when every other peer is focused on garnering market share, Chandrasekaran understands that the Tata's aviation ambitions need a strong push.
Enter Jet Airways
Numerous reports have come up over the last couple of weeks about the Tatas' interest in Jet Airways. Last week, it was reported, that Jet Airways Chairman Naresh Goyal had called up on Ratan Tata, Chairman Emeritus of Tata Sons, and met senior officials of Tata Sons, including Chandrasekaran himself.
"Yes, it does seem that discussion have taken place. One can question why the Tatas want to own three loss-making airlines. But that is unless they want to follow Chandrasekaran's policy of having substantial market share in any business the Group is in," said a senior airline executive.
Another senior executive from the industry said: "If the Tatas do buy Jet Airways, it would be to scale up Vistara."
Vistara had planned to launch its first international flight by the end of this year, but that may get postponed to next year. While its services, including its in-flight menu, have a large following, the airline's network is limited and its fleet of 22 aircraft is small.
Jet Airways, on the other hand, has a considerable presence on the ground with its 124 aircraft that do nearly 700 flights a day. The airline flies to and from 66 destinations and has a market share of 15.8 percent.
Surely, Jet Airways' debt pile of nearly Rs 6,000 crore is worrisome. The airline is losing Rs 10 crore a day. And more importantly, Goyal has shown no signs of letting go of the reins.
These would be the hurdles that Chandrasekaran would have to clear, to make the group's aviation business one of the top performers.
