Air India and Vistara will be merged by Singapore Airlines and Tata Sons

According to a media announcement made on November 29, Singapore Airlines (SIA) and Tata Sons have decided to merge Air India and Vistara, with SIA also investing Rs 2,058.5 crore (US $250 million) in Air India as part of the deal.

It was added that the merger, which is "expected to close by March 2024," will give SIA a 25.1% stake in an expanded Air India group that will have a sizable presence in all important market segments.

Tata currently owns 49 percent of Vistara, while SIA currently owns 51 percent of the company. Earlier this year, the latter purchased Air India from the Indian government for Rs 18,000 crore.

According to the information in the announcement, SIA and Tata have also committed to take part in additional capital infusions, if necessary, to finance the expansion and operations of the larger Air India in the fiscal years 2022–2023 and 2023–2024.

"SIA's portion of any additional capital injection could be up to Rs 50,200 million (US $615 million), payable only after the conclusion of the merger, based on SIA's 25.1 percent interest post-completion," it said.

The development of the expanded Air India business plan and its access to alternative finance sources, among other things, will determine the precise amount, according to the press statement, which also stated that SIA intended to completely pay any subsequent capital infusions with its own cash resources.

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 is anticipated to strengthen SIA's position in India, support its multi-hub strategy, and enable it to continue directly competing in a sizable and quickly expanding aviation market.

According to the Directorate General of Civil Aviation's market report for October 2022, the three Tata group airlines—Air India, Vistara, and AirAsia India—had a combined market share of 25.9%.

In recent months, Air India and Vistara have been battling it out for second place in Indian airspace. Vistara was able to hold the position for four months in a row, but it was unable to surpass the 10% threshold in October as it had in July.

Air India, meanwhile, made huge gains last month and trailed Vistara by just 0.1 percent. The difference, measured in absolute numbers, was only 11,000 passengers.

N Chandrasekharan, chairman of Tata Sons, commented on the merger of Air India with Vistara, calling it "an important milestone in our path to establish Air India a truly world-class airline."

"The possibility of building a robust Air India that would provide full-service and affordable service on both domestic and international routes excites us. We appreciate Singapore Airlines' continuing relationship, and "Added he.

Goh Choon Phong, the chief executive officer of SAI, claims that the merger offers the company the chance to strengthen its ties with Tata and "participate directly in an exciting new growth phase in India's aviation market."

He declared, "We will collaborate to support Air India's transformation program, unleash its enormous potential, and reinstate it to its prior status as a preeminent airline on the international stage.

The integration process "will take some time," according to Vistara CEO Vinod Kannan, and during this time "it will be business as usual for all our stakeholders, including customers." "An iconic company with a long history, Air India helped establish civil aviation in India. With the combined entity's size and network, an airline group has a tonne of potential "Added he.