Reviewing Merger Control Regime and Analysing Competition in the Aviation Industry: Tata-Air India Case Study

[By Divya Khanwani and Suneel Kumar]

The authors are students at the National Law School of India University, Bengaluru.


On January 27, 2022, Talace acquired 100% equity share capital and sole control over the management and operations of Air India and AIXL, and 50% equity share capital and joint control over the management and operations of AISATS. The transaction meets the threshold for activating a requirement of notifying the CCI under s6(2) of the Competition Act, 2002 (‘The Act’) because two prerequisites are fulfilled.

First, the notification (S.O. 988E), extended for 5 years on 16.03.2022, exempts any enterprise being acquired (target) having (i) assets less than INR 350 crore, or (ii) turnover less than INR 1000 crore, from notifying the CCI. The combined turnover of the target (Air India, AISATS and AIXL) far exceeds the required limits.

Name of the Parties Assets (as of 31st March 2021) (INR crore) Turnover (for FY 2020-21)
India (INR crore)
Air India 63,317.23 8,224.19
AIXL 4,529.50 920.66
AISATS 213 730
Combined 68,059.73 9847.85


Therefore, the transaction cannot avail the benefit of the exemption.

Second, if the transaction classifies as a combination under s5 of the Act, it needs to be notified to CCI under s6(2) of the Act.

Name of the Parties Assets (as on 31st March 2021) (INR crore) Turnover (for FY 2020-21)
India (INR crore)
Talace 0.08 unavailable
Tata Sons  102,969.01 9,460
Combined (Target) 68,059.73 9847.85
Combined 1,71,028.82 19,334.85
s5(a)(i)(A) In India, parties to jointly have  assets > 2000 INR crore Total assets =1,71,028.82 INR crore Condition fulfilled Effect: The transaction is a combination under s5(a)(i), and therefore, needs to be notified under s6(2) of the Act.
s5(a)(i)(B) In India, parties to jointly have a turnover> 6000

INR crore

Total turnover (India) = 19,334.85 INR crore Condition fulfilled


Consequently, the merger notification was filed by Talace on November 30, 2021,[i] which was approved by the CCI under s31(1) of the Act on December 20, 2021. This post argues that the acquisition of Air India by Tata Sons causes an appreciable adverse effect on competition (AAEC) in the relevant market, and therefore, should not have been approved by CCI.

Substantial Overlaps

The transaction will result in significant overlaps in horizontal,[ii] and non-horizontal relevant markets. Vistara and AirAsia, subsidiaries of Tata Sons, operate in international and domestic passenger air transport on nine and ninety-one overlapping origin-destination routes respectively with the Target. After the fruition of the transaction, Vistara and AirAsia will also share business with the Target in international and domestic cargo services, charter flight services and ground and cargo handling services.

With respect to vertical/complementary relationships, AISATS provides ground handling services to airlines at the Bengaluru, Hyderabad, Delhi, Thiruvananthapuram and Mangalore airports, while AirAsia India provides passenger air transport services in all these airports and Vistara provides passenger air transport services at all these airports except Mangalore airport. AISATS provides cargo handling services to airlines at the Bengaluru airport, while Vistara and AirAsia India provide passenger air transport services at the Bengaluru airport. Taj SATS and its wholly-owned subsidiary Taj Madras provide in-flight catering services to airlines in India, while Air India and AIXL provide passenger air transport services in India.

Plummeting Competition in the Aviation Industry

S20(4) lays down the factors, which the CCI shall have due regard while determining whether a combination would have an AAEC in the relevant market. This section seeks to analyse the Tata- Air India combination through the lens of the factors mentioned in s20(4) of the Act.

Changing Market Composition in the domestic market

In 2021, the domestic passenger air traffic market share for Air Asia and Vistara was 13.2% and for the Target was 12%. The total market share of Tata-Air India enterprise will be 25.2% [in reference to s20(4)(h)]. The combination along with the three major competitors [Indigo (54.8%), Spice Jet (10.5%) and Go Air (8.8%)] occupies more than 99% of the market share. The current composition indicates a highly concentrated market, which becomes more obvious in a comprehensive HHI analysis.

Market shares Square before merger Square after merger
Acquirer (and its affiliates) (combined) 13.2 174.24
Target (combined) 12 144
Total Combined 25.2 635.04
Indigo 54.8 3003.04 3003.04
Spice Jet 10.5 110.25 110.25
Go Air 8.8 77.4 77.4
HHI (Total) 3,509.26 3,826.09


An HHI of 2500 or greater is indicative of highly concentrated market. In this market, even before acquisition, the HHI was of 3509, which implies very low competition. As a general rule, mergers or acquisitions that increase the HHI between 100- 200 points in highly concentrated markets raise antitrust concerns, as they are assumed to create barriers to entry for potential competitors [s20(4)(b)] and to increase the likelihood drive out the existing competitors [s20(4)(c)]. Hence, it goes without saying that this acquisition will exacerbate anti-competitiveness in the market and will drive the market towards a more oligopolistic structure.

Explicating Ripple Effect

The incident of Tata-Air India enterprise occupying a share of more than 25% in the domestic passenger traffic market, has consequences and ramifications beyond this market. A larger share enables the combination to exercise significant influence in other relevant markets. For instance, it enables Tata Sons to secure favourable ground handling and in-flight catering service contracts. Another relevant example is that the transaction will provide Tata Sons control over 22% share in the domestic cargo air transport market instead of the previous acquisition share of 13%. This will provide Tata Sons an upper-hand in the cargo handling services, thereby creating unfair hardships for existing enterprises providing similar services.

Aggravating factors

The dominance in market share will enable Tata Sons to acquire the benefits of economies of scale. However, the anti-competitive impact of the transaction does not stop at the effects of the increased market share. The peculiar features of the aviation industry enable the acquisition to be an extremely powerful tool for driving out potential competitors. Consequent to the transaction, Tata Sons will enjoy the benefits of ‘grandfathering rights’ in slot allocation and public barriers to entry in the aviation sector.

In the aviation industry, time slots allotted to airlines to take off and land from an airport, while also granting access to other airport infrastructure and traffic rights or travel routes between destinations, constitute critical assets. In India, the Airports Authority of India and the DGCA allot slots in accordance with the IATA guidelines. Under the policy of grandfathering rights, the historical precedence of the allocated slots is maintained, if the slots in question have been utilised by the passenger airliner to whom they were allocated at least 80% of the time during the last season. This deprives the new airlines of securing slots during peak times in prestigious airports, which in turn, reduces the outreach of their services. By the virtue of ‘grandfathering rights’, when airlines merge, the merged entity retains all the slots that the airlines had access to before the merger. Consequently, Tata Sons will gain access to Air India’s over 4,400 domestic slots and 1,800 international slots, which will enable it to expand its service base exponentially.

Indias Civil Aviation Requirement (CAR) Section 3, in Parts II and III, mandates that a scheduled service operator that applies to provide services using aircraft with a takeoff mass of 40,000 kg or more must purchase or lease a minimum of five aircraft with start-up equity requirement of Rs. 50 crores. Additionally, as an airline’s fleet grows in increments of up to five planes, equity requirements grow by Rs. 20 crores. These requirements are aimed at ensuring that the new entrants to the airlines market are financially viable, but they impose very high burdens on potential entrants who already have to incur huge fixed costs. These public barriers to entry provide additional leverage to Tata Sons to operate independently of competitive forces prevailing in the relevant market.


The acquisition of Air India by Tata Sons has a likelihood of causing AAEC, which should have alarmed the CCI. However, CCI approved the transaction, without modifications,[iii] in a political rush to privatize Air India and save the taxpayers money” before the next election season. It is ironic that a move to save the taxpayer’s money will inevitably cause him to spend excessively for availing air transport in the near future. Therefore, at this stage, the government’s assurances of affordable air travel under ‘Ude Desh ka Aam Nagrik’ are unreliable and undependable.


[i] Order approving Combination Registration No. C-2021/11/883, Competition Commission of India (June 23, 2022, 9:36 PM),

[ii] Order approving Combination Registration No. C-2021/11/883, Competition Commission of India (June 23, 2022, 9:36 PM),

[iii] Order approving Combination Registration No. C-2021/11/883, Competition Commission of India (June 23, 2022, 9:36 PM),


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