IndiGo, Tata group, and Singapore Airlines Ltd. are on their way to merging their airline businesses Air India and Vistara. They wish to house them under a new joint venture
Notably, the two companies plan to merge Tata SIA Airlines Ltd, their joint venture which operates Vistara, and Air India, which Tata group acquired last year. In a new joint venture, Singapore Airlines could acquire a minority stake of as much as 25 percent in Air India and Vistara, people aware of the matter told LiveMint.
“SIA (Singapore Airlines) is Tata Sons’ current JV partner in Vistara. Talks are going on between the two JV partners on how best to leverage the future India opportunity in aviation. What corporate structure will emerge is still under discussion,” one of the two people cited above told LiveMint.
Meanwhile, the union may take about a year to finalize. This is a part of Tata Sons’ unification strategy to save costs, build synergies by optimizing aircraft utilization and routes, and gain market share to compete with IndiGo, India’s largest airline with a 59 percent market share, according to the report.
Further, SIA may hold a minority stake worth Rs 5,000 – Rs 10,000 crore in the new JV. “According to a recent internal exercise, the combined valuation of Air India and Vistara could be at least Rs 30,000 crore,” said the second person, as quoted in the report.
Previously, Vistara CEO Vinod Kanan told Hindustan Times that all chances of a merger between Air India and Vistara were being discussed. However, he did not provide any further clarity on the matter.
The airline will then operate two types of aircraft — Air India Express’ Boeing 737 and AirAsia’s Airbus 320. The report also mentioned that there are plans to shift all aircraft with AirAsia India to Air India Express.
Earlier this year the Tata Group acquired Air India from the government for Rs 18,000 crore, and also got the authority to operate Air India Express, a fully-owned low-cost subsidiary of Air India. Apart from this, the Tata Group owns 83.67 percent ownership in AirAsia India and holds 51 percent shares in Vistara.