NEW DELHI: In a major consolidation in the aviation space that will catapult Air India into the country’s largest international airline and second largest domestic carrier, Tata Sons and Singapore Airlines on Tuesday said their joint venture Vistara will be merged into the national carrier. After merger, brand Vistara will cease to exist.
The deal needs regulatory approval and the entire process is expected to take around 16 months. The Singapore firm, which has a 49% stake in Vistara, will invest Rs 2,059 crore in Air India and have a 25.1% stake in an enlarged Air India group. The Tatas will hold the remaining 74.9% stake.
After the merger, Air India’s fleet strength will grow to 218, second only to IndiGo’s 279. The consolidation is part of Tata groups’ strategy to bring its airline business under one roof. Earlier this year, it had initiated the merger of AirAsia India with Air India Express.
It is learnt that the Tatas plans to have two strong verticals Air India Express as a formidable low-cost airline and Air India as a full-service carrier, which will take on the likes of Emirates, Lufthansa and Qatar Airways that currently dominate international operations from India.
For Singapore Airlines, the merger with Air India means strategic advantage as it will get significant presence in all key market segments. “The merger is an important milestone in our journey to make Air India a truly world-class airline. 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,” said Natarajan Chandrasekaran, chairman, Tata Sons.
According to experts, the consolidation marks the beginning of a duopoly in Indian aviation with IndiGo and Air india controlling 80-85% of domestic traffic. “There can be a price war. This would be a positive for passengers but a nightmare for weaker airlines such as GoFirst and SpiceJet,” said a senior aviation analyst.
What the merger means
Brand Vistara will cease to exist
SIA, which owns 49% in Vistara, will invest Rs 2,059 crore and have 25.1% stake in Air India
Air India to become India's 2nd largest domestic carrier with a fleet of 218 aircraft
Merger to be completed by March 2024 subject to regulatory approval