Singapore Airlines (SIA) is exploring the possibility of a merger of Vistara with Tata Group’s Air India. In a statement to the Singapore Stock Exchange, SIA said: “The discussions seek to deepen the existing partnership between SIA and Tata, and may include a potential integration of Vistara and Air India. The discussions are ongoing and no definitive terms have been agreed upon between the parties."
This is the first time that SIA has officially acknowledged that it is in talks with Tata Group on the possibility of merging the two airlines.
Since the acquisition of Air India in January 2022, the Tata Group has been insisting SIA agree to a merger of Vistara with Air India. If the merger happens, it will create the second-largest airline in India, after IndiGo.
The Tata Group is also merging its other airline, AirAsia India, with Air India Express. The Competition Commission of India has approved this merger.
The Tata Group has previously stated that it has always believed in consolidating its airline business for operational efficiency and cost control.
Last month Air India also outlined a five-year roadmap that involves capturing a market share of 30% in the domestic market. Air India has a market share of 8.5% making it the fourth largest in India. Analysts are of the opinion that Tata’s vision of achieving the 30% market share might not be possible without the Vistara merger.
Recently the Tata Group Chairman, N. Chandrashekaran, said: “We will definitely have both full service and low-cost carrier. It’s a long journey. We will have to work on many aspects of the airline and we are working at great speed. Essentially, we will have one airline with two platforms.
The filing also said: “This is an integral part of the SIA Group’s multi-hub strategy, allowing it to get access to important sources that complement its strong Singapore hub. The establishment of Vistara in 2013 gave SIA Group a stake in India’s fast-growing aviation sector. India has strong domestic and international traffic flows, which is expected to more than double over the next 10 years.”
Air India currently has a total fleet of 113 aircraft, almost double as compared to Vistara’s 54 aircraft Last month, Tata Group announced Air India’s first major expansion wherein it promised to add 30 new aircraft in the coming months which would boost its fleet by more than 25%. The Group signed leases and letters of intent for 25 Airbus narrow-body and five Boeing wide-body aircraft.
At this stage it is unclear if the merger will actually happen, but it is interesting to note the change of position by SIA on the merger as it did not agree with Tata Group during the Air India deal. The Tatas had hoped that SIA would jointly bid for Air India via Vistara. However, SIA did not go ahead, but they waived the no-compete clause, which enabled Tata Group to go ahead with its bid for Air India.
Tata Group has a 51% stake in Vistara, while SIA has the remaining 49%.