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Tata Group announces merger of Vistara and Air India

Tata Group: Tata company announced the merger of Vistara and Air India on Tuesday, marking a significant consolidation in the Indian aviation industry. As part of the agreement, Singapore Airlines would own a 25.1% share in Air India.

In March 2024, the proposed transaction is anticipated to close, pending regulatory approval. Tata Group controls 51% of Vistara, and Singapore Airlines owns the remaining 49%. (SIA).

In a press release, SIA announced that Vistara and Air India will merge, and as part of the deal, it would invest Rs 2,058.5 crore in Air India.

“This would give SIA a 25.1 per cent stake in an enlarged Air India group with a significant presence in all key market segments.

SIA stated that it intended to fund the entirety of this investment from its internal cash resources, which as of September 30 totaled 17.5 billion Singapore dollars.

With a combined fleet of 218 aircraft, Air India would become the premier domestic and international carrier of the nation, according to a separate statement from Tata Group, “making it India’s largest international carrier and second largest domestic carrier.”

Additionally, SIA and Tata Sons have agreed to take part in future financial infusions that may be necessary to finance the expansion and operations of the larger Air India in the fiscal years 2022–2023 and 2023–2024.

“Based on SIA’s 25.1 per cent stake post-completion, its share of any additional capital injection could be up to Rs 50,200 million (S$ 880 million, US$ 615 million), payable only after the completion of the merger,” SIA said in the release.

The precise sum will vary depending on a number of variables, including the expansion of Air India’s business plan and its access to alternative sources of capital. SIA continued by saying that it intended to use its internal financial resources to fully cover any new capital infusions.

The combination of Vistara with Air India, according to Tata Sons Chairman N Chandrasekaran, is a significant step toward transforming Air India into a true airline of the highest calibre.

“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. We are excited with the opportunity of creating a strong Air India which would offer both full-service and low-cost service across domestic and international routes,” he said.

There are four airlines in the Tata group. They are Vistara, AirAsia India, Air India, and Air India Express. In January of this year, the Tata Group purchased Air India and Air India Express.

In January 2015, Vistara began operations. Unlike Air India Express, which started operations in 2005, AirAsia India was introduced in 2014. With a domestic market share of 9.2% in October, Vistara came in second place after IndiGo, which had a market share of 56.7%.

The domestic market shares of Air India and AirAsia India were 9.2% and 7.6%, respectively, for the same time period. Air India led the pack in terms of On-Time Performance (OTP) with 90.8%, followed by Vistara and AirAsia India, both of which achieved 89.1%.

On October 13, SIA said that it and the Tata group were having “secret negotiations” regarding the possibility of combining Vistara and Air India.

“The discussions seek to deepen the existing partnership between SIA and Tata, and may include a potential integration of Vistara and Air India,” it had said in a filing to the Singapore Stock Exchange.

The acquisition will give SIA the chance to strengthen its ties to Tata and directly take part in the aviation sector in India’s exciting new growth phase, according to SIA Chief Executive Officer Goh Choon Phong.

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