Since October 2021 (or January 2022, depending on where you count from), one of the big questions on the mind of everyone tracking aviation in India has been the future of Vistara.
Back in the day, the Tata Group hedged their bets and entered the no-frill and full-service space with AirAsia India and Vistara. However, with the acquisition of Air India (which came with its subsidiary Air India Express), the Tata Group now has its hands in four airlines, which, of course, leads to overlaps and cost inefficiencies, amongst other things.
Vistara and Air India Merger on the cards
Air India is putting to bed all the questions around the overlapping entities as they untangle them along the way. Earlier on, they announced that Air India Express and AirAsia India would be combined and that the remaining equity of AirAsia Express was going to be acquired by Air India instead of Tata Sons (which have 80%+ of equity already in their name).
However, the question of Vistara’s merger with Air India was slightly complicated. From the looks of it, Singapore Airlines did not want to play a part in the privatisation of Air India, where they were offered a seat on the table, as significant resources were already sunk into Vistara for them. So, the Tata Group went on with the acquisition of Air India themselves and decided to close the gap with Singapore Airlines later.
Singapore Airlines, in October 2022, indicated that it was having discussions with Tatas about the future of Vistara through an exchange disclosure. At the time, it said,
In line with its multi-hub strategy, SIA is currently in confidential discussions with Tata to explore a potential transaction in relation to the securities of Vistara and Air India Ltd, a subsidiary of Tata (the “Potential Transaction”). The discussions seek to deepen the existing partnership between SIA and Tata, and may include a potential integration of Vistara and Air India.
By many indications, an announcement is coming soon. The Times of India aviation reporter Saurabh Sinha filed a report today. He mentions that an announcement could be around the corner and that Singapore Airlines will get about 25% of the equity in the merged entity. Although I believe the stake could be more in the region of 20-24% for Singapore Airlines or 26%, purely depending on how the two sides agree on the participation of Singapore Airlines in the merged entity (active or passive).
The merger of the two entities is, of course, a long-drawn process and won’t happen at the flick of a switch. They will need to go through various regulatory processes. As things stand, aviation mergers or acquisitions in India are a lot of mess (think Kingfisher/Deccan, Jet Airways/JetLite, Air India/Indian Airlines, et al.). So I hope there is a crack team on standby to make this work.
Inside Vistara, it has been business as usual, with the airline focusing on new route launches at the moment and the addition of capacity to the carrier.
Vistara and Air India could be operating under one brand name sometime soon. The two shareholders are at the table right now discussing the nitty gritty, and we could expect to hear about a deal sooner than later.
What do you make of the impending merger of Air India and Vistara? What do you think will be the pain points? Leave them in the comments, and I’ll try to address them in a separate post.
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