Tata Sons has initiated consolidation of its airline entities Vistara, AirAsia India and Air India Express under Air India, following a series of discussions with Singapore Airlines (SIA), its joint venture partner in Vistara, a move that will make Air India the second largest airline in the country in terms of fleet and market share.
The group will have a low-cost carrier and a full-service airline under Air India, which will be the only airline brand in the group following the merger, said executives with knowledge of the matter. An official announcement is expected within a week, they said.
However, while the two entities will begin commercial cooperation soon, it will take more than a year for them to start functioning as one. Tata Singapore Airlines, which runs Vistara, is being merged into Air India, said the executives.
The Vistara brand may be dropped, they added. SIA will be a minority shareholder in Air India with 20-25% and a few board members of Vistara will be included on board of Air India, they said on condition of anonymity. SIA owns 49% in Vistara’s parent, Tata SIA Airlines.
Tata Sons and Vistara did not comment on the matter.
Earlier this month, the Tata Group completed the consolidation of Air India Express and AirAsia India by buying out the remaining 16% stake of the Malaysian airline. The merger process, which is likely to be completed in the next one year, is being led by Air India CEO Campbell Wilson, chief commercial officer Nipun Aggarwal, AirAsia India CEO Sunil Bhaskaran and Air India Express CEO Aloke Singh.
The consolidation will give Air India scale and heft with a fleet of around 233 aircraft and lead to a reduction in operational costs with the airline synergies. It will also give Air India more bargaining power in its dealings with original equipment manufacturers such as aircraft and engine makers. The contours of the consolidation have been finalised by Tata Group and Air India chairman N Chandrasekaran, and the SIA and Air Asia top brass, said the executives.
Tata Sons holds the majority 51% stake in full-service airline Vistara.
The Tata Group had given SIA enough time to warm up to the idea of a single aviation entity plan, according to people in the know. SIA agreed to become part of the merged entity since India is an important market for the carrier, said one of the persons. “SIA has reaped benefits from Vistara and realises that the cost of scaling up Vistara will be significantly higher as compared to Air India, which already has a significant size. They did not participate in the bidding process for Air India as Covid-19 had a significant impact on their business,” said the person.
The Tata Group had given SIA enough time to warm up to the idea of a single aviation entity plan, according to people in the know. SIA agreed to become part of the merged entity since India is an important market for the carrier, said one of the persons. “SIA has reaped benefits from Vistara and realises that the cost of scaling up Vistara will be significantly higher as compared to Air India, which already has a significant size. They did not participate in the bidding process for Air India as Covid-19 had a significant impact on their business,” said the person.
Air India has been the more dominant brand among the three, having a legacy of over 75 years with huge recall value with travellers in India and overseas.
