Singapore Airlines and Tata Sons have agreed to
merge Air India and Vistara, with SIA also investing INR 20,585
million (S$360 million, US$250 million) in Air India as part of
the transaction
The deal will give SIA a 25.1% stake in an
enlarged Air India group with a significant presence in all key
market segments.
SIA and Tata aim to complete the merger by March
2024, subject to regulatory approvals.
SIA intends to fully fund this investment with its
internal cash resources, which stood at S$17.5 billion as of 30
September 2022.
SIA and Tata have also agreed to participate in
additional capital injections, if required, to fund the growth and
operations of the enlarged Air India in FY2022/23 and FY2023/24.
Based on SIA’s 25.1% stake post-completion, its share of any
additional capital injection could be up to INR 50,200 million
(S$880 million, US$615 million), payable only after the completion
of the merger.
The actual amount will depend on factors including
the progress of the enlarged Air India’s business plan, and its
access to other funding options. SIA has said that it intends to fully fund any
additional capital injections with its internal cash resources.
Through this transaction, SIA will reinforce its
partnership with Tata and immediately acquire a strategic stake in
an entity that is four to five times larger in scale compared to
Vistara. The merger will also bolster SIA’s presence in India,
strengthen its multi-hub strategy, and allow it to continue
participating directly in a large and fast-growing aviation
market.
“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,
Chief Executive Officer, 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.”
India is the fastest growing global economy, and
is projected to become the third largest in the world by 2027. It
is also the world’s third largest aviation market.
Demand for air travel is surging with passenger
traffic expected to more than double over the next 10 years,
supported by rising income levels and ongoing investments in its
aviation infrastructure. However, India also remains underserved
with low international seats per capita, signifying significant
growth potential.
Following its acquisition by Tata in January 2022,
Air India unveiled a wide-ranging transformation programme to
strengthen its foundations and revamp its operations, setting it
on the road to recovery and positioning it for growth.
The combination of Air India and Vistara would
bring significant synergies. Air India has valuable slots and air
traffic rights at domestic and international airports that are not
available to Vistara.
Today, Air India (including Air India Express and
AirAsia India) and Vistara have a total of 218 widebody and
narrowbody aircraft, serving 38 international and 52 domestic
destinations.
“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,” said Natarajan Chandrasekaran, Chairman, Tata Sons. “We are excited with the opportunity of creating a
strong Air India which would offer both full-service and low-cost
services across domestic and international routes. We would like
to thank Singapore Airlines for their continued partnership.”
