Tata group commercial airlines — Air India, Vistara, and AirAsia India — had a cumulative marketplace share of 25.9% in October 2022. Singapore Commercial coincided(SIA) and Tata Sons have coincided to merge Air India and Vistara, with SIA also investing Rs 2,058.5 crore (US $250 million) in Air India as part of the transaction, as per a media statement issued on November 29.
The merger, which is “aimed to be finalized by March 2024”, will give SIA a 25.1 percent share in an enlarged Air India group with a consequence presence in all key marketplace segments, it added.
Currently, SIA holds a 51 percent share in Vistara, whereas, the remaining 49 percent is held by Tata. The latter had accomplished Air India for Rs 18,000 crore from the Indian government earlier this year.
“Based on SIA’s 25.1 percent share post-completion, its share of any further capital injection could be up to Rs 50,200 million (US $615 million), payable only after the completion of the merger,
The actual amount will depend on factors including the progress of the enlarged Air India’s commerce plan, and its access to other funding options, the statement said, adding that SIA plans to fully fund any further capital injections with its internal cash resources.
Through this transaction, SIA will establish its partnership with Tata and immediately acquire a strategic share in an entity that is four to five times larger in scale compared to Vistara.
The merger is anticipated to make stronger SIA’s presence in India, strengthen its multi-hub strategy, and allow it to continue participating directly in a large and fast-growing aviation marketplace. As per the marketplace summary for October 2022 shared by the Directorate General of Civil Aviation, the three Tata group commercial airlines — Air India, Vistara, and AirAsia India — had a cover the past few months, Air India and Vistara have, over the past few months, been competing for the number two position in Indian skies. While Vistara was able to maintain the position for four consecutive months, it could not violate the 10 percent mark in October, as it did in July.
Meanwhile, Air India gained consequently last month and was only 0.1 percent behind Vistara. In terms of absolute numbers, the difference was just 11,000 travellers.
Discussing the Air India-Vistara merger, Tata Sons chairman N Chandrasekharan said it is “an important milestone in our journey to make Air India a truly world-class commercial airline”.
“We are excited about the chance of creating a strong Air India which would offer both full-service and low-cost service across national and international routes. We would like to thank Singapore Commercial airlines for their continued partnership,” he added.
According to SAI chief executive officer Goh Choon Phong, the merger provides a chance to deepen the company’s relationship with Tata and “participate directly in an exciting new growth phase in India’s aviation marketplace”.
Vistara CEO Vinod Kannan said the amalgamation process “will take some time”, and during this phase, “it will be commerce as usual for all our shareholders including consumers”. “Air India is a legendary brand with a rich heritage that pioneered civil airlines in India. There is enormous potential for a commercial airline group with the scale and network of the combined entity,” he added.
Aviation research and advisory firm CAPA India said the merger will “redraw marketplace and consumer power in the international sector to Indian carriers”, which has historically been dominated by foreign carriers.
Following the merger, CAPA India says, it expects to see the arrival of Air India as a worldwide network carrier in terms of size, scale, and quality “in the next six years”. The commercial airline could garner a marketplace share of “50 percent in international traffic”, it added.
Singapore Commercial airlines and Tata Sons (Tata) will merge national carrier Air India and full-service commercial airline Vistara by March 2024. it would emerge as a 25.1% owner of Air India, as part of an agreement that would merge its Vistara joint venture with Tata Sons, into Air India. As part of the transaction, SIA will invest $250 million into Air India, Singapore Commercial airlines said, with the match aiming to complete the merger by March 2024 subject to administrative approvals.
Singapore Commercial airlines and Tata have also coincided to participate in further capital injections, if required, to fund the growth and operations of the enlarged Air India in FINANCIAL YEAR 2022-23 and FINANCIAL YEAR2023-24.
SIA said it plans to fully fund this investment with its internal cash resources, which stood at S$17.5 billion (Singapore dollars).
SIA and Tata have also coincided to participate in further capital injections to fund the growth and operations of the enlarged Air India.
Based on SIA’s 25.1% share post-completion, its share of any further capital injection could be up to US$615 million, payable only after the completion of the merger
After the merger, the brand Vistara will cease to exist and Air India will become India’s second-largest national and largest international carrier, with a fleet of 218 aircraft.
This is the Tata group’s second association exercise in the sector after it initiated the merger of AirAsia India with Air India Express earlier this year.
As part of the agreement, and instead of its 49 percent share in Vistara and fresh investment of Rs 2,059 crore in the merged entity, SIA will receive a 25.1 percent share in the enlarged Air India, the rest will be held by Tata group. The transaction is anticipated to be complete by March 2024 and will give SIA board representation in the commercial airline.
Based on its 25.1 percent share, SIA’s share of further capital could be around Rs 5,020 crore and payable only after the completion of the merger, Singapore Commercial airlines said. Based on the pro-rata share of the two partners, it indicates that the total capital injection into the enlarged AI will be up to Rs 20,000 crore over FINANCIAL YEAR 23-24.
The actual amount will depend on a host of factors, including the progress of Air India’s commerce plan and its access to other funding options. SIA plans to fully fund any further capital injections with its internal cash resources, it added.
Through this agreement, SIA aims to establish its relations with the Tata group. SIA and Tatas tried to set up a commercial airline in India during the mid-1990s, but the plan fizzled out due to opposition from political parties and incumbent commercial airlines. A second chance came in early 2000 when the government decided to divest Air India. Again Tatas partnered with SIA for a bid but once again the plan was skipped.
Eventually, the two parties joined hands to set up Vistara, which took to the airspace in January 2015. At present, Tatas and SIA own 51 percent and 49 percent shares in the commercial airline and have invested over Rs 9,370 crore in it.
SIA said the merger would bring consequence synergies, as Air India has valuable slots and air traffic privileges at domestic and international airports, which Vistara does not have. It added that Air India also stands to benefit from Vistara’s operational capabilities, consumer base, and a strong focus on consumer service.
Tata Sons Chairman N Chandrasekaran said this was an important milestone in the group’s efforts to rebuild Air India into a world-class commercial airline. “Air India is focusing on growing both its network and fleet, rebuilding its consumer proposition, enhancing safety, reliability, and on-time performance,” Chandrasekaran said.
“Air India group would comprise a single full-service commercial airline and a single low-cost commercial airline operating in co-ordinated and optimized manner,” Air India’s Chief Executive Officer Campbell Wilson wrote to employees.
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Khushal Jain