Uncertainty still surrounds the extent and timing of India’s airline consolidation phase
CAPA ANALYST PERSPECTIVE - a series where CAPA - Centre for Aviation's analyst team provide their personal views on a hot topic facing aviation around the world.
Although a major round of consolidation is still likely to occur in the Indian airline industry, the process is taking longer to play out than expected a year or two ago.
Planned mergers between some airlines and the financial and legal struggles of others in the post-pandemic period appeared to presage a significant reduction in the number of airlines in the Indian market.
Around the middle of 2023, Go First had ceased operations, efforts to revive Jet Airways had stalled and Spicejet looked to be in a fragile financial condition as well.
It is still far from clear if, or when, Go First and Jet Airways will re-emerge, but their prospects have brightened somewhat in 2024. And Spicejet has raised funds and reached deals to satisfy many of its creditors.
Meanwhile, the proposed integration of the Tata Group airlines Air India and Vistara is generally on track, despite some pilot workforce issues that have arisen recently at Vistara.
So although there will be fewer airlines in the domestic market - the timing and extent of consolidation in India remains a shifting target. This is largely because of the ongoing regulatory and legal quagmire the smaller airlines are stuck in.
Adrian Schofield, Asia Pacific Chief Analyst at CAPA - Centre for Aviation and Senior Air Transport Editor for Aviation Week Network, shares his observations.
Go First has been granted another reprieve, which may be its last shot at finding a new owner
Go First entered bankruptcy protection in May-2023. Creditors have struggled to find appropriate bidders to relaunch the airline, causing a string of extensions to its bankruptcy moratorium period. The latest such extension will last through early Jun-2024.
The longer this drags on, the less likely it is that Go will successfully revive.
However, two possible suitors have emerged to warrant the most recent extension. One of these is a group led by Spicejet, and the other is believed to be Sharjah-based SkyOne Aviation.
These bids are still being scrutinised by Go First's creditor banks. If the mix of financial commitments offered by the proposed buyers is not deemed sufficient, liquidation is the most likely next step for the airline.
Owners of aircraft leased to Go First also remain in limbo. These lessors are still awaiting court rulings to allow them to reclaim their aircraft from Go First.
The Jet Airways saga still has more months to run, while Spicejet's prospects have firmed up
Jet Airways, meanwhile, has been grounded since 2019. India's National Company Law Tribunal (NCLT) selected the Jalan-Kalrock consortium as the winning bidder for Jet Airways, but its relaunch prospects have been hurt by a series of legal disputes between Jalan-Kalrock and the airline's creditors, which prevented the takeover.
Revival odds were dwindling for Jet Airways, but a decision by the NCLT in Mar-2024 raised hopes again. The court ruled that creditors must finally hand over Jet Airways to Jalan-Kalrock within 90 days.
Despite this ruling, many hurdles remain. Jet Airways still must regain an air operator's certificate, meet financial conditions, and secure aircraft and slots.
Spicejet has confronted severe financial challenges in recent years, which have led to disputes with aircraft lessors and caused some creditors to try to trigger insolvency proceedings for the airline. Problems were compounded by the departure of senior executives, including the CCO and COO, and in Feb-2024 the airline announced significant workforce cuts.
On the plus side, however, Spicejet achieved settlements with several lessors through Mar-2024 to Apr-2024, some of which have involved the transfer of aircraft ownership to Spicejet. The airline has also secured additional aircraft, including the short-term lease of two Airbus A340s for Hajj flights.
Perhaps most importantly, it has secured fresh capital through share issues in early 2024. While the airline is not out of the woods, its prospects have strengthened, and management is bullish about pursuing expansion plans.
Air India is checking off the tasks required for its Vistara merger, although deals of this magnitude take time
The consolidation step that appears most likely to occur is Air India's merger with Vistara. Important moves have been made in this process, such as gaining approval from Singapore competition authorities in Mar-2024.
When the merger proposal was announced in Nov-2022, Air India estimated that the acquisition would be completed in Mar-2024. However, there are still some regulatory steps remaining before this point is reached. A timetable slip is not totally unexpected, as complex takeovers generally take longer than predicted in the airline industry.
One of the key remaining items is clearance from NCLT, which is due to hold a hearing on 23-Apr-2024. However, other approvals will be needed, including foreign direct investment clearance.
Air India hopes the merging of the two air operator's certificates will be achieved by the end of 2024, CEO Campbell Wilson said on 28-Feb-2024.
Vistara has been hit by a temporary shortfall in pilot availability recently, which has caused it to trim its flight schedule. Local media reports claim that pilot dissatisfaction over contract changes prompted by the merger were partly responsible - although the airline stresses that almost all Vistara pilots have signed the new contract.
Whatever the reasons for the current roster problem, there is obviously some degree of concern in the workforce about the takeover. This serves as a reminder that integrating workforces will be a major challenge for Air India, as it is in any airline merger.
Vistara will eventually disappear, Spicejet is likely to stay, but the fate of Jet Airways and Go First remains in the balance
The grounding of Jet Airways and Go First has created de facto consolidation in the Indian airline industry. However, it is still unclear whether this situation is temporary or not.
Both airlines will likely remain in limbo at least through midyear. And beyond that, they will have some major challenges ahead of them before actually beginning operations.
Spicejet is now in a more stable position, and should have ensured its survival in the medium term at least. It may actually play a role in consolidation if it manages to gain approval for a takeover of Go First.
The Air India-Vistara merger is taking slightly longer than initial estimates, but is still making good progress. Compared with similar merger efforts elsewhere in the world, this one is proceeding fairly smoothly.