The Asian market was shaken on Tuesday following the announcement by Singapore Airlines and Tata Sons that they will move forward with the merger of Vistara and Air India to optimize the operations of both companies, which today operate under a low-cost and traditional model respectively, into a single entity.
Singapore Airlines (SIA) currently owns 49% of Vistara, with the remaining 51% held by Tata Sons, while Air India is, since January this year, owned by the Indian holding company (including Air India Express and AirAsia India).
To materialize the merger, which is expected to occur in March 2024, SIA will invest USD 250 million in Air India, thus obtaining 25.1% of the shares of the new group it will form with Vistara. But additional capital injections from Tata and SIA to fund the growth of the new Air India could reach USD 615 million by 2024, depending on the progress of the business plan and access to other funding options.
«Tata Sons is one of the most established and respected names in India. Our collaboration to set up Vistara in 2013 resulted in a market-leading full-service carrier, which has won many global accolades in a short time,» said Goh Choon Phong, CEO of Singapore Airlines.
«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,» he continued.
Natarajan Chandrasekaran, chairman, Tata Sons, said, «The merger of Vistara and Air India is an important milestone in our journey to make Air India a truly world-class airline. 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.»
As one of the world’s most dynamic economies on track to become the third largest by 2027, demand for air travel in India is expected to double over the next 10 years. The international segment also has great growth potential given that it is currently underserved.
The combined fleet of Air India and Vistara currently comprises more than 220 aircraft serving a network of 38 international and 52 domestic destinations.
Air India operates 20 A319s, 9 A320s, 27 A320neo, 20 A321s, 3 B777-200LRs, 13 B777-300ERs and 27 B787-8s. Its subsidiary Air India Express has 24 B737-800s, and AirAsia India operates 28 A320s and 5 A320neo.
Vistara has 41 A320neo, 5 A321neo, 5 B737-800 and 3 B787-9.
