Singapore Airlines has confirmed that Vistara and Air India will merge
- ByStartupStory | December 9, 2022
Singapore Airlines (SIA) and Tata Sons (Tata) have reached an agreement to combine Air India and Vistara. As part of the deal, SIA would also invest INR 20,585 million (S$360 million, US$250 million) in Air India. With a larger Air India group and a considerable presence in all important market categories, this would grant SIA a 25.1% interest in the company. In March 2024, SIA and Tata want to finalise their merger, pending regulatory permission.
With its internal cash resources, which were S$17.5 billion as of the 30th of September 2022, SIA intends to fully fund this investment. Additionally, SIA and Tata have agreed to take part in future financial infusions that may be necessary to finance the expansion and operations of the larger Air India in FY2022/23 and FY2023/24. SIA’s share of any extra capital infusion, based on its 25.1% post-completion interest, could be up to INR 50,200 million (S$880 million, US$615 million), payable only once the transaction is complete.The precise sum will rely on a number of variables, such as how well the expanded Air India’s business strategy is going and how readily it can obtain alternative sources of money. Any further capital infusions will be completely funded by the internal financial resources of SIA.
Through this deal, SIA will strengthen its relationship with Tata and gain an instant strategic position in a company that is four to five times bigger than Vistara in terms of size. The merger would increase SIA’s footprint in India, solidify its multi-hub strategy, and enable it to keep directly competing in a sizable and quickly expanding aviation market.The Chief Executive Officer of Singapore Airlines, Mr Goh Choon Phong, stated: “Tata Sons is one of the most reputable and well-known names in India. Our joint efforts to establish Vistara in 2013 produced a market-leading full-service carrier that has quickly garnered numerous awards on a global scale.
“With this combination, we have the chance to strengthen our bond with Tata and take part directly in the aviation market’s exciting new growth phase in India. Together, we will support Air India’s reform initiative, tap into its enormous potential, and help it regain its status as a preeminent airline on the international scene.
“The merger of Vistara with Air India is a major milestone in our path to establish Air India as a genuinely world-class airline,” stated Mr Natarajan Chandrasekaran, Chairman, of Tata Sons. With the goal of giving each and every customer a fantastic customer experience, we are reinventing Air India. Air India is concentrating on expanding both its network and fleet as part of the transformation, redesigning its customer proposition, and improving safety, dependability, and on-time performance.
“We are thrilled about the prospect of building a robust Air India that would provide full-service and budget options on both domestic and international flights. We appreciate Singapore Airlines’ continuous support, and we thank them.
India’s GDP is expected to develop at the quickest rate in the world and reach the third-largest status by the year 20273. It is also the third-largest aviation market in the world. With passenger traffic forecast to more than quadruple over the next 10 years due to rising income levels and continuous investments in aviation infrastructure, demand for air travel is soaring. With low international seats per capita, India also continues to be underserved, which indicates significant growth potential.Following Tata’s purchase of Air India in January 2022, the airline revealed a comprehensive transformation initiative to improve its operational efficiency, reinforce its operational basis, and position it for development. The combination of Air India and Vistara would bring significant synergies. At domestic and international airports, Air India possesses significant slots and air traffic rights that Vistara does not have access to. Air India will gain from Vistara’s operational capabilities, customer base, and a strong emphasis on customer service and product excellence as it is widely acknowledged as India’s top full-service carrier.
Currently, 38 international and 52 domestic routes are served by a combined 218 widebody and narrowbody fleets operated by Air India (including Air India Express and AirAsia India) and Vistara. With the integration, Air India would operate both full-service and low-cost passenger routes, making it the only airline group in India. It can maximise the use of its resources and route network, be adaptable and quick to meet customer demand across market segments, and draw from a larger pool of customers to strengthen its loyalty program. This would strengthen its position as the second-largest domestic and international carrier in India, allow it to provide more options and connectivity for business and leisure customers, and give it the ability to compete as a major international airline.
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