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Competition Concerns of the Air India-Vistara Merger in the Aviation Industry

[Shreya Saswati and Sruti Patra are third year B.A.LL.B. (Hons.) students at National Law University, Odisha]

In November 2022, the TATA Group announced the consolidation of its airlines, Vistara and Air India. Air India, which is entirely owned by Tata Sons with a 100% stake, is the flag carrier airline of India and one of the biggest players in the Indian civil aviation industry. Vistara is a joint venture between TATA Sons Private Limited (TSPL) and Singapore Airlines Limited (SIA). The Merger transaction seeks to merge Vistara into Air India subject to regulatory approvals.

TSPL and SIA got the approval from the Competition Commission of India (CCI) back in September, 2023 and have recently completed the final step in their competition clearance by getting the approval of the Competition and Consumer Commission of Singapore (CCCS). This post seeks to analyze the implications of this merger on the competition within the civil aviation industry of India and its potential effects on consumer choice, pricing dynamics, and market structure.

Proposed Combination and CCI’s Approval

The acquisition of enterprises by one or more persons or the merger or amalgamation of enterprises is known as combination. The procedure for starting a combination as laid down under regulation 5 of the Combination Regulations requires the enterprise to give a notice to the CCI regarding the proposed combination. The CCI received a notice from TSPL, SIA, Air India Limited (AIL) and TATA SIA Airlines Limited (Vistara) on 18th April 2023 for a proposed combination which sought their merger and the acquisition of the shares of the merged entity, i.e., AIL by TSPL and SIA.

The CCI approved this merger and acquisition of shareholding subject to compliance of voluntary commitments offered by the parties. Hence, the new entity would be AIL where the Tata Group would hold a majority stake of 74.9% and SIA would hold 25.1%.

However, combinations which cause appreciable adverse effects on competition (AAEC) are prohibited under the Competition Act, 2002. The controversy behind this combination is the competition concerns attached to it, which were also brought up by the CCI.

Competition Concerns highlighted by the CCI

The CCI took note of the characteristics of the civil aviation industry being highly oligopolistic with barriers to entry. With limited players in the market, there are trends of aggressive pricing. The merger of AIL and Vistara would c

ombine two large players in the aviation sector, subsequently leading to a “near monopoly” over the flights between India and Singapore.

TSPL and SIA have highlighted mitigating factors such as presence of a strong competitor, i.e., Indigo, and entry of new players into the industry, but the CCI was of the opinion that there are prima facie competition concerns which may lead to anti-competitive consequences such as collusive pricing, market allocation and unilateral price hikes post-combination. This is because, when two airlines merge, there is a loss of one player resulting in a reduction in the number of available flights on certain routes causing a proportional increase in prices negatively affecting consumers. In such cases, in order to pursue their proposed combination, enterprises are allowed to provide commitments as a safeguard against reduced competition.

Voluntary Commitments offered by TSPL and SIA

Capacity commitments in the airline industry are designed to prevent inevitable price increases post-combination by requiring the newly formed entity to maintain a certain level of capacity and pricing. In this case, TSPL and SIA proposed voluntary commitments to maintain minimum capacities on certain domestic and international routes ensuring that there is no scarcity of flights for the consumers and they have a choice on these routes. AIL and SIA also proposed the appointment of an independent auditor at their own cost to monitor their compliance with these commitments. As a result, the CCI was of the view that these commitments sufficiently address any competition concerns arising from the proposed combination and approved it accordingly, allowing TSPL and SIA to successfully complete the first step to their merger.

Singapore’s stand on the Merger

On 30 November 2020, the Proposed Cooperation between SIA and Vistara, in relation to scheduling, pricing, sales and marketing was accepted by the CCCS. Following the acceptance, CCCS went forward with assessing the cooperation in terms of Section 34 of Singapore’s Competition Act, which talks about agreements and concerted practices which restrict competition. The basic objective behind the move was to improve the connectivity between Singapore and India’s aviation and tourism sectors during COVID-19.

AIL and SIA notified their arrangement in the form of multiple transactions. The first transaction involved the complete acquisition of AIL by TSPL. After notifying the first transaction to CCCS in late 2021, the completion of Phase-1 review unveiled various competition concerns, which included AIL, SIA and Vistara having majority market shares on offering direct flights on four routes, price and capacity coordination restricting competition on the above routes etc.

As per the second transaction, there would be an establishment of an Integrated Entity which would be replacing Vistara with SIA as a party to the Proposed Cooperation and this will be the Revised Commercial Cooperation. The parties came forward with certain commitments to which the CCCS gave conditional approval for the merger.

Commitments with respect to the First Transaction

AIL and Vistara committed that post the merger, for the routes Singapore-Bombay and Singapore-Delhi, Air India will have to maintain minimum weekly scheduled air passenger transport capacity in aggregate at pre-COVID-19 levels and prior to merger, it will maintain it with respect to Singapore-Tiruchirappalli and Singapore-Chennai routes. There would be appointment of an Independent Auditor, who will provide a report to the CCCS which will contain the compliances over the preceding Report Year. There also has to be submission of an interim report by the parties involved so as to monitor compliances with the committed capacity levels and this has to be done every three weeks of non-fulfilment in a report year.

Commitments with respect to the Second Transaction

SIA committed that for each of the above four routes, it will maintain the minimum weekly scheduled air passenger transport capacity at Pre-COVID-19 levels and the report has to be submitted by the Independent Auditor to the CCCS. Further parties also need to submit an interim report to check the compliances with committed capacity levels.

Potentials Challenges and Concerns

While mergers between enterprises may have undesirable effects on the market and structure of competition, authorities such as the CCI and CCCS seek to authorize them by looking for ways to overcome potential AAEC. But that doesn’t mean the commission won’t approach such cases with caution. The CCI in its order clarified that ex-ante approval of the combination cannot be inferred as a grant of immunity to the parties for any conduct post-combination. Additionally, the CCI also stated in its order that if the parties fail to abide by the voluntary commitments, there will be a presumption of AAEC arising out of the combination, exposing them to competition proceedings.

While TSPL and SIA outlined comprehensive voluntary commitments to manage the impact of their merger on the airline industry, there is a substantial risk of default. Firstly, AIL is set to regulate the frequency of flights and its pricing. The commitment of maintaining the minimum weekly scheduled air passenger transport capacity at pre-COVID-19 levels is not feasible and practically impossible considering the volatile nature of the aviation industry, especially after the pandemic. It’s difficult to accurately predict passenger preferences, hence difficult to maintain transport capacity at pre-COVID-19 levels, especially when catering to demands on specific routes. This commitment is dependent on external factors like regulatory changes which may necessarily bring adjustments to the flight schedules, hence interrupting the ability to fulfill it.

Secondly, an independent auditor is required to perform the audit of a company and prepare a report by gathering its financial statements and determining whether it is free of fraud and financial misstatements. The responsibility of the auditor is more opinion-oriented considering his knowledge of the internal matters of the company is limited with respect to the audit acquired. Hence, the data provided in the report may look reasonable while actually being misleading or tainted.

As an added factor, the barriers to entry into the civil aviation industry, including high capital requirements and regulatory complexities, greatly amplify the power AIL would hold over the market. With little to no scope for entry of new players, the only other biggest competitor for AIL would be Indigo, creating a near-monopolistic landscape. The reduced competition will naturally allow these players to set prices as per their needs. This means that the consumers will have no choice but to accept whatever prices are placed before them.

Lastly, even if the submission of an interim report is on the path of bringing transparency to the system, the frequency of submission of these reports every three weeks raises concern of administrative burden which may deviate from the operational tasks.


While the Air India-Vistara merger has received the green light of approval from the Competition regulators of both involved countries, the competition concerns do not end here. Practically, there is still a huge possibility for anti-competitive practices to emerge due to the further concentration in the market along with the volatile nature of the aviation industry.

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