SIA Airlines will invest $250 million in Air India as part of the transaction, giving it a 25.1 per cent stake in the Indian airline, giving Air India group a significant presence in all key market segments. SIA intends to fully fund this investment with its internal cash resources, which stood at S$17.5 billion as of September 30, 2022.11.30
Through this transaction, SIA will reinforce its partnership with Tata and immediately acquire a strategic stake in an entity that is four to five times larger in scale compared to Vistara. The merger would bolster SIA’s presence in India, strengthen its multi-hub strategy, and allow it to continue participating directly in a large and fast-growing aviation market.
Goh Choon Phong, Chief Executive Officer, Singapore Airlines, said: “Tata Sons is one of the most established and respected names in India. Our collaboration to set up Vistara in 2013 resulted in a market-leading full-service carrier, which has won many global accolades in a short time.
“With this merger, we have an opportunity to deepen our relationship with Tata and participate directly in an exciting new growth phase in India’s aviation market. We will work together to support Air India’s transformation program, unlock its significant potential, and restore it to its position as a leading airline on the global stage.”
Natarajan Chandrasekaran, Chairman, Tata Sons, said: “The merger of Vistara and Air India is an important milestone in our journey to make Air India a truly world-class airline. We are transforming Air India, with the aim of providing great customer experience, every time, for every customer. As part of the transformation, Air India is focusing on growing both its network and fleet, revamping its customer proposition, enhancing safety, reliability, and on-time performance.
“We are excited with the opportunity of creating a strong Air India which would offer both full-service and low-cost services across domestic and international routes. We would like to thank Singapore Airlines for their continued partnership.”
India is the fastest growing global economy, and is projected to become the third largest in the world by 2027. It is also the world’s third largest aviation market. Demand for air travel is surging with passenger traffic expected to more than double over the next 10 years, supported by rising income levels and ongoing investments in its aviation infrastructure. However, India also remains underserved with low international seats per capita, signifying significant growth potential4 .
Following its acquisition by Tata in January 2022, Air India unveiled a wide-ranging transformation programme to strengthen its foundations and revamp its operations, setting it on the road to recovery and positioning it for growth5.
The combination of Air India and Vistara would bring significant synergies. Air India has valuable slots and air traffic rights at domestic and international airports that are not available to Vistara. With Vistara widely recognised as India’s leading full-service carrier, Air India will benefit from its operational capabilities, customer base, and a strong focus on customer service and product excellence.
Today, Air India (including Air India Express and AirAsia India) and Vistara have a total of 218 widebody and narrowbody aircraft, serving 38 international and 52 domestic destinations. With the integration, Air India will be the only Indian airline group to operate both full-service and low-cost passenger services. It can optimize its route network and resource utilization, be flexible and agile in capturing demand across market segments, and tap on a larger consumer base to strengthen its loyalty program.
This would reinforce its position as India’s largest international carrier and second largest domestic carrier, allow it to offer more options and connectivity for business and leisure customers, and enable it to compete as a leading global airline. It will also provide Singaporean airlines, which lacks a domestic flying market, a more solid foothold in one of the world’s fastest-growing aviation markets.
It will also allow the Indian conglomerate to consolidate its brands around full-service Air India and low-cost Air India Express, which is being merged with AirAsia India after Tata bought out former partner AirAsia. SIA holds a 49 per cent stake in Tata SIA Airlines, which operates Vistara, while the Indian conglomerate owns the rest.