Once this occurs, Tata Sons will hold 74.9% stake in the AI-Vistara-AI Express-AirAsia India Pvt Ltd (AAIPL) combined entity and SIA the remaining 25.1%.
SIA will invest $250 million as soon as this integration is completed, valuing the new Air India at approximately $1 billion.
SIA stated that it intends to fully finance this investment from its internal cash resources, which amounted to 17.5 billion Singapore dollars (Singapore dollars) as of 30 September 2022.
SIA and Tata also agreed to participate in additional capital injections to finance the growth and operations of expanded Air India in FYs 2022-23 and 2023-24.
Based on SIA’s 25.1% post-completion stake, its share of any additional capital injections could be up to US$615 million, payable only after completion of the merger.
Tata Sons Chairman N Chandrasekaran said, “The merger of Vistara and Air India is an important milestone in our journey to make Air India a world-class airline. We are transforming Air India, with a focus on providing a great customer experience, every time, for every customer.”
Chandrasekaran further noted that as part of the transformation, Air India is focusing on growing both its network and fleet, revamping its customer proposition, enhancing safety, reliability and punctual performance.
“We are excited about the opportunity to build a strong Air India that offers both full-service and low-cost services on domestic and international routes. We would like to thank Singapore Airlines for their continued partnership,” he added.
SIA CEO Goh Choon Phong said, “Tata Sons is one of the most established and respected names in India. Our collaboration to create Vistara in 2013 resulted in a market-leading full-service carrier, winning multiple global awards in a short time. With this merger, we have the opportunity to deepen our relationship with Tata and directly participate in an exciting new phase of growth in the Indian aviation market.”
The SIA CEO also said that “both airlines will work together to support Air India’s transformation agenda, unlock its significant potential and restore it to its position as a leading airline on the global stage.”
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.
Sharing his excitement about this new journey, Vistara CEO Vinod Kannan said, “We, at Vistara, are extremely proud to embark on this journey. Vistara is a beautiful manifestation of its core brands Tata Sons and Singapore Airlines, and we are delighted that they will continue to be guided by their legacies as we merge with Air India.”
He further said that Air India is a legendary brand with a rich heritage that pioneered civil aviation in India and that there is huge potential for an airline group with the size and network of the combined entity.
“We look forward to providing more opportunities for our customers, employees and partners by putting the spotlight on Indian Aviation globally. The integration process will take some time and during this stage it will be normal for all our stakeholders including our customers. We will continue to share relevant information with all of them, as appropriate,” he added.
Tata Group took over Air India and AI Express last January. Vistara, in which Tatas holds a 51% stake and SIA 49%, and AI are the two full-service carriers (FSCs) in Tata’s fold. AI Express and AAIPL are the group’s two low cost carriers (LCC).
Now the plan is to have one airline – Air India – with an FSC and a budget arm by merging the two airlines in each segment and operating them with AI. This job is in full speed.
Excluding AI Express, all three other Tata airlines including Vistara which has established itself in terms of providing decent inflight experience as old AI, former Jet Airways (international product) and former Kingfisher in its early years, they are all losing money.
AAIPL had started flying in 2014 and Vistara a year later and both didn’t have a single profitable balance sheet. The promoters have lost money on all these airlines.
“India’s aviation market is currently the third largest in the world and is expected to double in the next 10 years. The new AI will be the largest international airline and the second largest domestic (in terms of passenger traffic). Plans are to triple the size of the fleet over the next five years. Investing in the new AI makes sense for SIA as it offers the scale needed to be profitable in the long run,” the sources said. SIA will provide the expertise and experience.
Earlier this month, Tatas entered into a share purchase agreement with AirAsia Aviation Group Ltd to acquire the remaining 16.3% stake in AAIPL for $18.8 million (Rs 155.6 crore). The Indian conglomerate will be the sole owner of AirAsia India and merge it into AI Express within a year.
Now, with SIA agreeing to merge Vistara into AI, Tatas will now seek regulatory clearances for the same and complete the task by March 2024. Which means that in the next 16 months – just over two years after taking over AI – there will be a mega Maharaja in place.
