Tata Sons and Singapore Airlines (SIA) have agreed to merge Air India and Vistara to create India’s second-biggest carrier.
Why is this merger significant?
- The Singapore Airlines (SIA) will get 25.1 per cent stake in the merged entity at an investment of Rs 2,058.5 crore (250 million USD). The rest of the stake will be held by Tata.
- These stakes will be in an enlarged Air India Group, which will have Air India, Vistara, AirAsia India and Air India Express. The merger of all these airlines are expected to be completed by March 2024 after receiving regulatory approvals.
- The Air India Group is already in the process of merging Air India Express and AirAsia India into a single entity that will provide low-cost flight services.
- The enlarged Air India Group would help consolidate India’s aviation sector. It will provide fresh growth opportunities for the previously state-owned carrier after years of mismanagement and losses.
- The joint venture between Tata Sons and Singapore Airlines will provide Air India the required strategic expertise, industry capabilities, and capital inflow.
- For Tata Group, this merger marks the start of yet another chapter of its business activities in the aviation sector.
- After the merger of all the brands, the SIA will have access to lucrative landing and parking slots around the world. It will also receive a strong foothold in the busy westbound market from India, which is dominated by Dubai’s Emirates and others.
- The merger will help SIA protect itself from consequences of another pandemic. It was especially impacted because of the lack of the domestic market and the closure of international borders.
- The SIA is planning to fully fund the Air India investment from its internal cash sources, which was S$17.5 billion as of the end of September 2022.
- The Tata and SIA have agreed to take part in additional capital injection if required to promote the growth and operations of the enlarged Air India entity in FY2022/23 and FY2023/24.