Aiming to optimize resources and challenge industry leader IndiGo, Tata group and Singapore Airlines Ltd. on their way to merging their airline businesses Air India and Vistara and housing them under a new joint venture
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 own a minority stake of as much as 25 per cent 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.
The merger may take about a year to complete and is a part of Tata Sons’ consolidation 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 per cent market share, according to the report.
SIA may hold a minority stake worth Rs 5,000 – Rs 10,000 crore in the new JV, according to the current combined valuation of Air India and Tata SIA Airlines, the people added.
“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.
Earlier this month, Vistara CEO Vinod Kanan told Hindustan Times that all possibilities of a merger between Air India and Vistara were being discussed. However, he did not provide any further clarity to the matter.
Earlier, regarding the AirAsia India and Air India merger, official sources told The India Express that the process will begin with the integration of information technology and passenger booking system.
“Issues like cabin crew dress, branding (likely to be called Air India Express or something similar) are still being discussed at various levels. There are complexities since both airlines are different in terms of service, crew attire, etc,” the source told the newspaper.
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.
“Due to cases, there could also be a requirement to keep the AOP (flying permit) valid till a decision is taken; one plan also is to keep the AOP of AirAsia India alive by operating a cargo aircraft,” the source quoted above told the newspaper. The sources also said that the AI Express top management, especially the CEO, has started working from the Air India head office in New Delhi.
The Tata Group earlier this year acquired Air India from the government at a cost of 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 per cent ownership in AirAsia India and a holds 51 per cent shares in Vistara.
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