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 FY 2022/23 and FY 2023/24.
Singapore Airlines (SIA) and Tata Sons (Tata) have agreed upon the decision to merge Air India and Vistara. SIA will also be investing INR 2,058 Crores (S$360 million, US$250 million) in Air India as part of the transaction. This investment would 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 FY 2022/23 and FY 2023/24. Based on SIA’s 25.1% stake post-completion, its share of any additional capital injection could be up to INR 5,020 Crores (S$880 million, US$615 million), payable only after the completion of the merger.
Goh Choon Phong, Chief Executive Officer, Singapore Airlines said, “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. “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.”
The actual amount to be invested will depend on factors including the progress of the enlarged Air India’s business plan, and its access to other funding options. SIA has expressed intentions 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 would help in enhancing SIA’s presence in India and strengthen its multi-hub strategy which will allow it to continue participating directly in a large and fast-growing aviation market.
Natarajan Chandrasekaran, Chairman, Tata Sons said, “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, intending to provide 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. “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.”
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. With Vistara widely recognized as India’s leading full-service carrier, Air India will benefit from its operational capabilities, customer base, and strong focus on customer service and product excellence.
Currently, 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. With the integration, Air India will be the only Indian airline group to operate both full-service and low-cost passenger services. It can optimize its route network and resource utilization, be flexible and agile in capturing demand across market segments, and tap into a larger consumer base to strengthen its loyalty programme.
