Abrupt Halt to Air India – Vistara Merger, CCI Decides to Have a Deeper Look into the Deal

The Tata Group has hit a review wall as the Air India Vistara merger is being scrutinized by the Competition Council of India (CCI). The antitrust body asked the Tata Group why it shouldn’t be investigated over competition concerns. 

The Ratan Tata-led firm acquired the beleaguered Air India from the Government of India in 2022 with an ambitious plan to modernize its fleet, revenue management and operational systems. The Air India and Vistara merger was expected to create a dominant player in the Indian aviation industry. This was anticipated to revolutionize the domestic and international flight market, providing enhanced services and competitive fares for passengers. 

The Tata Group intended the merger to take on IndiGo and Middle Eastern carriers that currently have a bigger share of the pie for outbound traffic from India. However, concerns have been raised about the potential anti-competitive effects of such a partnership. The CCI, which is responsible for regulating fair competition practices in India, has decided to step in and take a closer look at the deal. The decision came after careful consideration of various factors, like potential impact on market competition and consumer choice. 

The watchdog believes the merged entity, Air India and Vistara, could have a monopoly on some routes and categories, such as business class. And it could further drown the already struggling SpiceJet and Go First airlines. As such, it issued a show cause notice to Air India to explain the airline’s position. Sources say Air India could make compromises such as cut off certain routes and reduce frequency in a bid to address the CCI’s concerns. But the former national airline is confident that the matter can be solved by proposing certain changes. 

Vaibhav Choukse, an expert in competition law, says the CCI could order a Phase II review if it’s not pleased with Air India’s response. He said the antitrust body, as part of Phase II review, will seek comments and objections from stakeholders, including the public. And this can potentially bring changes to the merger. 

CCI’s review is a standard procedure to ensure fair competition and protect consumer interests. The antitrust body has carried out similar investigations in the past for high-profile mergers and acquisitions in various sectors. 

Furthermore, Air India is likely to face similar reviews from foreign countries, after clearance that is. It should be noted that major airline mergers receive scrutiny from major markets in which they operate. Air India and Vistara, a joint venture between Tata Sons and Singapore Airlines, also fly international routes, including Dubai and London.