Tata Sons and Singapore Airlines (SIA) will merge Vistara into Air India.
Tata gets majority stake
They intend to finish the process by March 2024 subject to regulatory approvals.
After the merger is done 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% stake.
After SIA invests $250 million as this integration is complete, the new Air India will be valued at about $1 billion.
Tata Sons’ statement
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 truly world-class airline.
We are transforming Air India, with the aim of providing great customer experience, every customer experience, every time, for every customer.”
He said as part of the transformation, Air India will focus on growing both its network and fleet, revamping its customer proposition, enhancing safety, reliability, and on-time performance.
The airline will offer both full-service and low-cost services across domestic and international routes.
SIA CEO Goh Choon Phong said, “Tata Sons is one of the most established and respected names in India.
Our collaboration to set up Vistara in 2013 resulted in a market-leading full-service carrier, which has won many global accolades in a short time.
With this merger, we have an opportunity to deepen our relationship with Tata and participate directly in an exciting new growth phase in India’s aviation market.”
With the integration, Air India will be the only Indian airline group to operate both full-service and low-cost passenger services.
After this merger, Air India-Vistara will become India’s biggest international airlines, and 2nd biggest domestic airlines only behind Indigo.
IndiGo’s market share was 56.7% in October, followed by Vistara at 9.2%, and Air India at 9.1%.
Vistara CEO Vinod Kannan said,” We, at Vistara, take immense pride in embarking on this journey.
Vistara is a fine manifestation of its parent brands Tata Sons and Singapore Airlines, and we are delighted that we will continue to be guided by their legacies as we merge with Air India.”
He assured that during the integration phase it will be “business as usual” for all its stakeholders including customers.
World’s third largest aviation market
Sources say that India’s aviation market is currently the world’s third largest and is expected to double in the next decade.
The new AI will be the largest international and second largest domestic airline.
The plans are to triple the fleet size in the next five years.
“Investing in the new AI makes sense for SIA as it gives the scale required to be profitable in the long run.”
SIA is expected to provide the expertise and experience.
Vistara scrambles to reassure employees
Meanwhile Vistara’s chief executive tried to reassure employees about their future after the merger.
In an internal email, Kannan told them not to worry and speculate about their future since the efforts they had put in to build the airline had “not gone unnoticed” by its shareholders.
According to industry sources, the uncertainty has led to many Vistara employees seeking jobs outside the company.