Air India to Merge with Vistara, Create a Full-Service Carrier

Indian conglomerate Tata Group has unveiled plans to merge its new acquisition Air India with Vistara, the carrier it co-owns with Singapore Airlines (SIA), to create a full-service domestic and international carrier.

As part of the deal, Singapore Airlines will invest an additional $252 million and take a 25.1 percent stake in the joint venture. Tata Group will retain 74.9 percent of the airline.

A merger between the two Indian carriers has been anticipated since Tata Group took control of Air India in January in a long-awaited privatization of the struggling national carrier, which has failed to make a profit since 2007 and this year controlled just 10 percent of the domestic and 12 percent of the international markets. Tata Group pledged to raise $1 in investment and push those figures to 30 percent in the next five years to take on the market leader, the Indian low-cost carrier IndiGo. Air India’s merger with stablemate Vistara will go some way to achieving that goal.

Photo: Air India Boeing 787-8 Dreamliner. Courtesy of Daniel Eledut / Unsplash

Vistara, which means “limitless expanse” in Sanskrit, was founded as a joint venture between Tata Group and Singapore Airlines in 2013. Both companies hold 51 percent and 49 percent stakes, respectively. Since then, Vistara has grown to become the country’s second-largest domestic carrier, offering medium- and long-haul flights on a young fleet of 54 planes, composed of Airbus A320/321neo, Boeing 737-800, and 787-9 Dreamliner planes. 

The merger between Vistara and Air India will create a “truly world-class airline,” according to Tata Sons chairman Natarajan Chandrasekaran. “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.”

The merger will help Air India expand its network and fleet, revamp customer offerings, and improve safety, reliability, and on-time performance. The combined carrier, which will fly under the Air India brand, will operate 218 aircraft and serve 38 international and 52 domestic destinations.

“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,” said Singapore Airlines CEO Goh Choon Phong. “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.”

Photo: Courtesy of Praveen Thirumurugan / Unsplash

Vinod Kannan, Vistara’s CEO, added that his team takes “immense pride in embarking on this journey. Vistara is a fine manifestation of its parent brands Tata Sons and Singapore Airlines, and we are delighted that we will continue to be guided by their legacies as we merge with Air India.”

“Vistara, within a short span of almost eight years, has created a unique space for itself, setting new standards in the Indian aviation market and earning extensive goodwill from millions of customers around the world,” Kannan said.

The merger between both carriers is scheduled to be completed by March 2024, subject to approval from regulators. In the meantime, “it will be business as usual for our stakeholders, including customers,” Kannan said. Singapore Airlines and Air India may make additional cash injections into the airline to finance this growth once the merger is approved and finalized. 

Tata Group already consolidated Air India’s low-cost subsidiaries, Air India Express and AirAsia India, after acquiring AirAsia’s remaining stake earlier this year. With the low-cost offerings and a more prominent Air India, the steel giant will control 23.4 percent of India’s rapidly growing aviation market.

Air India operates direct flights to Chicago, New York, Newark, Washington D.C., San Francisco, and Los Angeles. Last week, the airline announced a new nonstop route between New York (JFK) and Mumbai (BOM), starting in February 2023.