LONDON – India’s Tata Group is moving forward with its plans to merge its airlines under the Air India branch name. The move would effectively make it the second-largest airline in India.
The merger airlines
The airlines Air India is keen on consolidating are Vistara, AirAsia India, and Air India Express under Air India, after a series of discussions with Singapore Airlines (SIA), which is a major shareholder of Vistara.
This will eventually make itthe second-biggest airline in India in terms of fleet and market share. The group will have a low-cost carrier and a full-service airline under the one airline name, 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.
While both entities will begin commercial cooperation soon, it will take more than a year for both entities to work as one. Tata Singapore Airlines, also known as Vistara, is being into Air India, said the executives.
The Vistara brand may be dropped, they added. SIA will be a minority shareholder in the conglomerate with 20-25% and a few board members of Vistara will be included on the board of Air India, they said on condition of anonymity. SIA owns 49% of 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 in 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 the amalgamated airline scale and heft with a fleet of around 233 aircraft and reduce operational costs with the airline synergies. It will also give it more bargaining power in its dealings with original equipment manufacturers such as aircraft and engine manufacturers.
Tata Group chairman N Chandrasekaran finalized the contours of the consolidation, together with the SIA and Air Asia top brass, said the executives. Tata Sons holds the majority 51% stake in full-service airline Vistara.
According to people in the know, the Tata Group had given SIA enough time to warm up to the idea of a single aviation entity plan. SIA agreed to become part of the merged entity since India is an important market for the carrier, said one of the spokespersons.
“SIA has reaped benefits from Vistara and realizes 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 spokesperson.
Air India has been the more dominant brand among the three, having a legacy of over 75 years with huge recall value with travellers both domestically and overseas.