Vistara to merge with Air India, confirms Singapore Airlines

Tata Sons and Singapore Airlines (SIA) will merge Air India and Vistara to create India's second-biggest carrier. SIA will hold a 25.1% stake in the entity with an equity infusion of Rs 2,058.50 crore. Tata will hold the rest.
The deal is part of Tata Sons chairman N Chandrasekaran's effort to simplify the conglomerate's businesses and make them more efficient.

"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," Chandrasekaran said.

The merger, which is to be completed by FY24, will see SIA investing Rs 5,020 crore in the combined entity as additional capital for FY23 and FY24. SIA currently holds a 49% stake in Vistara, while Tata holds the rest. Tata took over Air India early this year following its privatisation. The Vistara brand will be retired. SIA has already invested about Rs 4,591 crore in the venture with Tata.



"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, CEO of SIA. "We will work together to support Air India's transformation programme."

ET was the first to report in its November 14 edition that the deal was imminent.

The merger will require approval from multiple agencies, including antitrust regulators of the countries that the two airlines operate in, the DGCA and NCLT.

This will be the next step in the consolidation of Tata's aviation businesses after taking over Air India. The group is already in the process of merging Air India Express and AirAsia India, both low-fare units. Air India and Vistara have 218 aircraft and 23.9% of the domestic market and 23.10% of the international market. This will make the combined entity the country's second-largest domestic carrier behind IndiGo and the largest international carrier.

"Vistara has been loss-making and it needs to scale up to achieve cost and network efficiency to reach profitability," SIA said. "Vistara faces challenges in scaling up amid strong competition from larger incumbent Indian airlines, which have established strong footholds in air traffic rights and aircraft slots."