Months after signing a merger agreement with Singapore Airlines, the Tata group has sought an approval from the Competition Commission of India (CCI) to merge Air India with Vistara. This is part of Air India's efforts to include all its airlines under an umbrella brand.
“The proposed combination relates to the merger of TSAL (Vistara) into Air India Ltd (AIL), with Air India being the surviving entity and the acquisition of shares in the merged entity by SIA and TSPL… Acquisition of additional shares in the merged entity by SIA pursuant to a preferential allotment,” says a joint filing with the competition regulator.
Tata SIA Airlines (TSAL) is a joint venture between Tata Sons Pvt Ltd (TSPL) and Singapore Airlines. TSAL operates under the brand name “Vistara” in India.
The filing says as a result of the proposed transaction, Tata Sons will hold at least 51% of the total issued and paid-up equity share capital of the merged entity and will continue to retain control over Air India and its subsidiaries, whereas Singapore Airlines will hold a minority stake, i.e., 25.1% of the total issued and paid-up equity share capital of the merged entity. Tata Sons has a direct and indirect shareholding in Air India and its subsidiaries, Vistara, and Air India SATS Airport Services (AISATS).
Tatas in November 2022 had announced that along with the merger, Singapore Airlines will infuse ₹2,058.5 crore into Air India, which will give it a 25.1% stake in an enlarged Air India group.
The merger is expected to be completed by March 2024. Both Tata group and SIA have agreed to take part in additional capital injections, if required, to fund the growth and operations of the enlarged Air India in FY23 and FY24. "Based on SIA's 25.1% stake post-completion, its share of any additional capital injection could be up to ₹5,020 crore ($615 million), payable only after the completion of the merger,” a joint statement said earlier.
Notably, Air India as an entity is four to five times larger in scale compared to Vistara. In November 2022, Malaysia-based AirAsia Aviation, the holding company of Capital A's airline group, had also sold the entire remaining 16.33% stake in AirAsia India to Air India.
In the past, Air India had unveiled a wide-ranging transformation programme to strengthen its foundations and revamp its operations, setting it on the road to recovery and positioning itself for growth. Air India will benefit from Vistara's operational capabilities and customer base. In total, Tata group-owned Air India, including Air India Express and AirAsia India, and Vistara have a total of 218 wide-body and narrowbody aircraft, serving 38 international and 52 domestic destinations.
After the merger, Air India will be the only Indian airline group to operate both full-service and low-cost passenger services. It'll also be able to optimise its route network and resource utilisation, which will help it tap demand across market segments.