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Tata, SIA may merge Vistara, Air India under new JV

The Tata group and Singapore Airlines are reportedly on their way to merging their airline businesses Air India and Vistara and housing them under a new joint venture, two people aware of the development said.

The two companies plan to merge Tata SIA Airlines Ltd, their joint venture which operates Vistara, and Air India, which Tata group acquired last year. In a new joint venture, Singapore Airlines could own a minority stake of as much as 25 per cent in Air India and Vistara, people aware of the matter told LiveMint.

“SIA (Singapore Airlines) is Tata Sons’ current JV partner in Vistara. Talks are going on between the two JV partners on how best to leverage the future India opportunity in aviation. What corporate structure will emerge is still under discussion,” one of the two people cited above told LiveMint.

The merger may take about a year to complete and is a part of Tata Sons’ consolidation strategy to save costs, build synergies by optimizing aircraft utilization and routes, and gain market share to compete with IndiGo, India’s largest airline with a 59% market share, according to the report.

“According to a recent internal exercise, the combined valuation of Air India and Vistara could be at least INR 30,000 crore,” said the second person, as quoted in the report.

By merging Air India and Vistara, Tata Sons may be able to consolidate its aviation business balance sheets on the one hand and provide Singapore Airlines with access to dozens of new slots globally on the other. Post-merger, Air India and Vistara are expected to retain their individual brand identities, but one brand may eventually dominate.
Spokespeople for Tata Sons and Vistara declined to comment. An email sent to Air India remained unanswered, while a Singapore Airlines spokesperson said, “We do not comment on any confidential discussions that we may or may not be having with our partners,” according to the report.

Last October, Tata Sons, through its subsidiary Talace Pvt. Ltd acquired Air India for INR 18,000 crore. “Since then, more funds have been infused, more assets have been added, and operational efficiencies have been improved. Even after considering debt, Air India’s valuation has gone up by at least 20% over the past nine months,” said the second person.

Vistara, which is a 51:49 JV between Tata Sons and Singapore Airlines, has been enjoying regular fund infusions from both partners to expand operations.

Through a rights issue, Tata Sons invested INR 255 crores into Vistara in February 2022. A similar amount was invested in Singapore Airlines. Vistara received an equity infusion of INR 750 crore from Tata Sons and Singapore Airlines in August 2021. Prior to that, it received INR 465 crore from the two owners in May last year.

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