Air India, Vistara to merge; Singapore Airlines to get 25.1 pc stake in combined entity

Full-service airlines Air India and Vistara are to merge as the Tata Group looks to further consolidate its aviation business. The merger will make Air India the country’s largest international carrier and the second-largest domestic carrier with a combined fleet of 218 aircraft.

The Tata Group had completed the acquisition of Air India from the central government in January this year. Vistara is the existing full-service carrier, in which Tata Sons holds a 51 per cent stake, while Singapore Airlines (SIA) holds 49 per cent. The Tata Group also owned low-cost carrier Air Asia India. Tata Group had already announced the merger of Air Asia India and Air India’s low-cost arm Air India Express.

Now, Vistara will be merged with Air India. SIA will invest Rs 2,059 crore in Air India and post the consolidation, will hold 25.1 per cent shares in Air India. Tata and SIA aim to complete the merger by March 2024, subject to regulatory approvals.

SIA and Tata have also agreed to participate in additional capital injections, if required, to fund the growth and operations of the enlarged Air India in the current financial year (2022-23) and the next.

Based on its 25.1per cent stake post-completion, its share of any additional capital injection could be up to Rs 5,020 crore, SIA said. The actual amount will depend on factors including the progress of the enlarged Air India’s business plan, and its access to other funding options, it added.

SIA further said through this transaction, it will reinforce its partnership with Tata and acquire a strategic stake in an entity that is four to five times larger in scale compared to Vistara. The merger will also bolster its presence in India, strengthen its multi-hub strategy, and allow it to continue participating directly in a large and fast-growing aviation market, SIA added.

“With this merger, we have an opportunity to deepen our relationship with Tata and participate directly in an exciting new growth phase in India’s aviation market. We will work together to support Air India’s transformation programme, unlock its significant potential, and restore it to its position as a leading airline on the global stage,” said Goh Choon Phong, CEO, Singapore Airlines.

The merger of Vistara and Air India is an important milestone in our journey to make Air India a truly world-class airline, said Natarajan Chandrasekaran, chairman of Tata Sons.

“We are transforming Air India, with the aim of providing great customer experience, every time, for every customer. As part of the transformation, Air India is focusing on growing both its network and fleet, revamping its customer proposition, enhancing safety, reliability, and on-time performance,” said Chandrasekaran.

Presently, Air India, including Air India Express and AirAsia India, and Vistara have a total of 218 widebody and narrowbody aircraft, serving 38 international and 52 domestic destinations. With the merger of Vistara, Air India will be the only Indian airline group to operate both full-service and low-cost passenger services.

The merger of Air India and Vistara will bring several synergies. Air India has valuable slots and air traffic rights at domestic and international airports that are not available to Vistara. Air India will benefit from Vistara’s operational capabilities, customer base, and strong focus on customer service and product excellence.

According to data from the Directorate General of Civil Aviation (DGCA), Vistara was the second-largest airline in the country with a market share of 9.2 per cent in October. Air India and AirAsia India had market share of 9.1 per cent and 7.6 per cent respectively last month. Indigo, by far, remains the country’s largest airline with a market share of 56.7 per cent.

Earlier this year, Air India had appointed Singapore Airlines veteran, and the CEO of SIA’s low-cost arm Scoot, Campbell Wilson as its MD and CEO.

Air India has already begun revamping customer service, reliability, and growing its network and fleet through the project Vihaan.AI, which was unveiled in September.