Tata Group is considering a plan to integrate its four airline brands under Air India, people with knowledge of the matter said, as the sprawling company prepares to rebuild its faltering aviation empire.
India’s largest conglomerate is also considering scrapping the Vistara brand, which is Singapore Airlines Ltd.’s local affiliate in the South Asian nation, the people said, declining to be identified because the discussions are private. Singapore Airlines is evaluating the size of the stake it should take in the combined entity, one of the people said.
Representatives for the Tata Group, Air India and Vistara didn’t respond to requests for comment. Singapore Airlines said in a statement that “discussions are ongoing between SIA and Tata” and that it had nothing further to add beyond an October 13 exchange filing, which said the talks “seek to deepen the existing partnership between SIA and Tata, and may include a potential integration of Vistara and Air India.”
Air India is gearing up for a revamp under its new owner Tata. The full-service carrier is considering ordering as many as 300 narrow-body jets, a transaction that would be one of the largest orders ever in commercial aviation history. Air India Chief Executive Campbell Wilson last month said the airline will triple its fleet of 113 aircraft over five years, with a “significant” increase in both narrow and wide-body aircraft.
Air India is also in discussions to raise at least USD 1 billion in a funding round that could value the carrier at around USD 5 billion, other people familiar with the matter said in late September. The airline is planning to add 25 Airbus and five Boeing aircraft from lessors, starting in December.
Air India’s narrow-body fleet stands at 70 aircraft. Out of them, 54 are in service and the remaining 16 aircraft will progressively return to service by early 2023. The wide-body fleet stands at 43 aircraft, of which 33 are operational.
Tata was selected as the winning bidder for Air India in October 2021 after beating rival suitors with a USD 2.4 billion offer. The transaction marked the country’s most high-profile privatization under Prime Minister Narendra Modi, ending decades of attempts to offload the money-losing, debt-laden carrier that survived on years of taxpayer bailouts.
It also meant Tata had four airline brands — Air India and other full-service carriers Vistara, along with budget carriers Air India Express and AirAsia India. Air India earlier this month said it is acquiring AirAsia’s local venture and merging it with Air India Express into a single low-cost carrier. That consolidation will likely happen by the end of 2023.
The integration of all Tata group airlines under the Air India brand will create an entity with nearly 200 aircraft and more than 800 domestic and international departures. This would make it the country’s second-largest airline after IndiGo. Air India is also expected to announce one of the largest aircraft orders in recent times which would lead to an almost threefold increase in its fleet size.
Tata Group could own about 75%, SIA 25% in the Air India-Vistara merger
The Tata Group and Singapore Airlines (SIA) are learnt to have finalised the proposed merger of Air India and Vistara. While Tatas will have about 75% stake in the merged entity, the remaining will be with SIA, say people in the know. In Vistara, Tatas and SIA’s stake is at 51% and 49%, respectively.
According to a report published in The Times of India, the proposed merger, which is targeted to be completed within a year of getting all required approvals, is likely to be announced shortly.
For this, Vistara may be merged into AI. Also, AirAsia India (AAIPL) and AI Express may be merged. But all the mergers would require clearance from several agencies including the Competition Commission of India (CCI). It might take up to 6 months, the report said.
However, the report further said that the merger may not be completed within one year. In June, the Competition and Consumer Commission of Singapore (CCCS) expressed concern over Tata Group acquiring SIA.
One of the executives said that SIA had agreed to become part of the merged entity because India is a key market for the carrier. “SIA has reaped benefits from Vistara and realises that the cost of scaling up Vistara will be significantly higher as compared to Air India, which already has a significant size,” said the person.