In another step towards consolidating airline businesses, the Tata group has finalised the merger of Air India and Vistara. Reportedly, Tata group and Singapore Airlines (SIA), the joint owners of Vistara, have agreed to the merger. Tatas may own around 75% of the amalgamated company, with SIA holding the remaining 25% share. Currently, Tatas and SIA hold 51% and 49% stakes in Vistara, respectively. The proposed merger is expected to be announced soon and is intended to be completed within a year after receiving all necessary clearances.
The Tata Group hopes to develop Air India as an umbrella carrier through the merger. The Tata Group desires AI to serve as the umbrella provider, with a full-service arm formed by combining Vistara and the Maharaja and a low-cost arm formed by combining AirAsia India (AAIPL) and AI Express. This is part of the Tata group’s plan to bring all four airlines under it under a single entity, Air India.
Tata group currently operates four airlines, Air India, it’s subsidiary Air India Express, Vistara, and Air Asia India. Among them, Air India and Vistara are full-service operators, while AirAsia India and AI Express as low-cost carriers. The group has already started the merger of Air Asia India with Air India Express after the group purchased the 16.3% share of AirAsia Aviation Group in AirAsia India. After the Rs 155.6 crore deal was finalised earlier this month, Tata Sons became the 100% owner of AirAsia India, and now the company is in the process of merging it with AI Express, which is expected to be completed in 12 months.
The company has started working on the integration of information technology and passenger booking systems, with the systems of AI Express being moved to AirAsia India’s system. The Competition Commission of India has already approved the proposed acquisition of the entire shareholding of AirAsia India by Air India.
This move will make Air India the second-largest airline in India in terms of fleet and market share. Eventually, the merged entity of Air India-Vistara will be a full-service airline, and the merged entity of AirAsia India-Air India Express will become the low-cost arm of the group. According to people who know about the matter, Air India will be the only airline brand under the group, with Air India Express as its low-cost arm. Which will mean the Vistara and AirAsia India brands will be dropped.
As three related companies (AI, SIA, and Vistara) now have a significant presence on “overlapping passenger routes” (Delhi-Singapore and Mumbai-Singapore) in addition to “overlapping cargo routes” between India and town state, the Competition and Consumer Commission of Singapore (CCCS) expressed concern over Tata’s acquisition of AI in June.
According to reports, in early November, one of the executives stated that SIA has decided to become a part of the integrated firm since India is a major market for the airline. He said, “SIA has reaped benefits from Vistara and realizes that the cost of scaling up Vistara will be significantly higher as compared to Air India, which already has a significant size.”
Tata Group reclaimed control of Air India in January of this year after placing the highest bid for the airline, which was operating at a loss. It had submitted a proposal of Rs 18,000 crore, which included a Rs 2,700 crore cash payment and the assumption of Rs 15,300 crore of the carrier’s debt.
