Singapore Airlines in talks with Tata on Vistara-Air India merger

Singapore Airlines (SIA) on Thursday confirmed that it is in discussion with Tata Group to explore a potential merger of Vistara Airline with Air India, a subsidiary of Tatas. The move is being seen as part of the Tata Group’s strategy to consolidate its aviation business under one umbrella. Singapore Airlines, the flag carrier of Singapore, owns a 49% stake in Tata SIA Airlines, which operates Vistara, while Tata Group holds the remaining 51% shares in the carrier.

“In line with its multi-hub strategy, SIA is currently in confidential discussions with the Tatas to explore a potential transaction in relation to the securities of Vistara and Air India. The discussions seek to deepen the existing partnership between SIA and Tatas and may include a potential integration of Vistara and Air India,” Singapore Airlines (SIA) said in a filing to the Singapore stock exchange.

As per the release, the discussions are ongoing and no definitive terms have been agreed upon between the two parties. “There is no certainty or assurance whatsoever that any definitive agreement will be entered into or a potential transaction will materialise or proceed to completion arising out of these discussions,” it said.

The Tata Group plans to integrate its airline companies under the single brand of Air India, which it acquired from the central government through its wholly owned subsidiary Talace Pvt Ltd. last year. In June this year, the Competition Commission of India (CCI) had given green signal to the merger of low cost carrier AirAsia India with Air India. The country’s largest business conglomerate owns 83.67% stake in AirAsia India and the remaining shares are with AirAsia Investment Ltd (AAIL), a part of Malaysia's AirAsia Group.

The merger of Vistara with Air India will create the second-largest airline in the country, after IndiGo. As per the latest available DGCA data, Air India's domestic market share stands at 8.4% as of July 31, 2022, while the market leader IndiGo's market share is 58.8%. Tata's other companies Air Asia India and Vistara hold 4.6% and 10.4% market shares, respectively.

Last month, Air India announced its first unveiled a transformation plan called 'Vihaan.AI' under which it plans to capture at least 30% market share in the domestic market in the next five years. In its first major fleet expansion since the acquisition by the Tata Group, Air India will induct 30 leased aircraft from Airbus SE and Boeing Co. These aircraft will result in Air India offering premium economy haul flights for the first time. The airline plans to use them for domestic routes and short-haul global destinations. For this, Air India has signed leases and letters of intent for 25 Airbus narrow-body and 5 Boeing wide-body aircraft. These aircraft, which will enter service in late 2022, will increase its fleet by over 25%.

The aircraft being leased include 21 Airbus A320neos, four Airbus A321neos and five Boeing B777-200LRs. The B777-200LRs will join the fleet between December 2022 and March 2023 and will be deployed on routes from Indian metro cities to the United States.

The airline has reportedly earmarked $1.9 billion to expand Air India's operations in the next two years. This will mark the complete overhaul of the iconic airline, which up until last year was standing on a shaky foundation amid mounting losses and huge debt. The government sold its entire stake in Air India to Talace, a wholly-owned subsidiary of Tata Sons, on 27 January 2022. The sale marked the national carrier’s return to the salt-to-software conglomerate after a span of 69 years.