Tata Group, the parent company of Air India and the majority shareholder of Vistara, announced its plan to merge the two airlines in a bid to strengthen its position in India and internationally. Aiming to compete with Middle East-based carriers, the bolstered Air India would look to grow further.
Under this merger plan, Air India would absorb Vistara. The latter, which is jointly owned by Tata Group (51% stake) and Singapore Airlines (SIA1) (SINGY) (49%), would transfer its fleet and network to India’s de facto flag carrier. Going forward, Tata would own a 74.9% stake in Air India, while the Singaporean carrier would have a 25.1% stake in the enlarged airline.
The two companies expect to receive approvals from various Indian authorities, including the Directorate General of Civil Aviation (DGCA), the Ministry of Civil Aviation, and others, by October 31, 2024. If the merger is not completed by then, the agreement “will terminate, and the Proposed Merger will not proceed,” Singapore Airlines’ (SIA1) (SINGY) press release read.
The Singapore Changi Airport (SIN)-based airline will invest up to INR50.2 billion ($615 million) if the merger proceeds to further bolster Air India’s future. The final amount, according to the filing, is dependent “on various factors, including the progress of the business plans of the enlarged AI, and its access to other funding options.”
Making Air India a world-class airline
“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,” said Goh Choon Phong, the Chief Executive Officer (CEO) of Singapore Airlines (SIA1) (SINGY). According to Phong, the two companies will work together to unlock Air India’s potential and “restore it to its position as a leading airline on the global stage.”
Natarajan Chandrasekaran, the Chairman of Tata Sons, added that the merger was an important milestone for the Indian airline, as the two companies aim to make it into “a truly world-class airline.”
In total, the combined fleet would have 218 aircraft serving a total of 38 international and 52 domestic destinations. According to the announcement, the new “Air India will be the only Indian airline group to operate both full-service and low-cost passenger services.” The low-cost arm of Air India, Air India Express, announced its intentions to merge with AirAsia India, another no-frills carrier based in the country, on November 3, 2022.
“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,” concluded Chandrasekaran.
A leaked memo recently indicated new grooming guidelines for Air India’s cabin crew, which included rules that prohibited balding spots, gray hair for both genders, and other directions for their appearance.
Tata Group acquired Air India in October 2021, when the Indian government accepted a $2.4 billion bid from the conglomerate for the ailing carrier. The acquisition was formally completed in January 2022.