Skift Travel News Blog

Tata Sons and Singapore Airlines have agreed to consolidate Air India and Vistara by March 2024.

As part of the merger transaction, Singapore’s flag carrier shall also invest $250 million in Air India for a 25.1 percent share, according to a media release on Tuesday.

Tata Group owns a 51 percent stake in Vistara with Singapore Airlines owning remaining 49 percent.

With this consolidation, Air India shall be India’s largest international carrier and second largest domestic carrier with a combined fleet of 218 aircraft.

Air India had earlier announced its plans to increase its fleet size to 143 by the end of 2023 and also introduce Premium Economy seating. Intrestingly, Vistara is the only airline in the country offering Premium Economy seats.

Post the merger, Air India would offer both full-service and low-cost service across domestic and international routes, said N Chandrasekaran, chairman of Tata Sons.

Air India, the erstwhile Indian state carrier, had been acquired by Tata Sons, via its subsidiary, Talace, early this year as part of a $2.4 billion deal.

Singapore Airlines said it intends to fully fund this investment with its internal cash resources, which stood at $13 billion as of September 30.

The two companies have also agreed to participate in additional capital injections, if required, to fund the growth and operations of the enlarged Air India in financial year 2023 and 2024.

Based on Singapore Airline’s 25.1 percent stake post-completion, the airline said that its share of any additional capital injection could be up to $615 million, payable only after the completion of the merger.

The actual amount would depend on factors including the progress of the enlarged Air India’s business plan, and its access to other funding options.

Speaking earlier to Skift, Vistara CEO Vinod Kannan, while not totally denying reports of a merger between the two airlines, had said, “I tell my team that no matter what, the 54 aircraft that we have will have to be serviced, sold and operated. Until we are told otherwise, we will maintain that we will be operating independently.”

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The European Union and Association of Southeast Asian Nations (ASEAN) have signed a new open skies agreement aimed at recovering and expanding airline links between the two regions.

The agreement is unique as it covers two blocs of countries — the EU has 27 members and ASEAN 10 — rather than two countries or between the EU and, for example, the U.S. The agreement, unveiled Monday, will drop all restrictions on flights between the EU and ASEAN for airlines based in either region. It goes into effect immediately.

“It will support the aviation sector’s recovery after COVID-19 and restore much-needed connectivity,” EU Commissioner for Transport Adina Vălean said. She added that the agreement provides a “platform” for the EU and ASEAN to collaborate on “economically, socially and environmentally sustainable aviation.”

Airlines based in ASEAN, which includes Malaysia, the Philippines, Singapore, and Thailand, are currently the largest in the market. Singapore Airlines and and Thai Airways flew the most passenger capacity between the blocs this year, according to scheduled data from Diio by Cirium. KLM and Lufthansa are third and fourth, respectively.

The agreement also appears to be a way for the EU to offer its own airlines a leg up in competition with the Gulf carriers, which include Emirates and Qatar Airways that carry large numbers of connecting passengers between the two regions. The bloc described the pact as helping “EU and ASEAN airlines to compete with competitors targeting the lucrative EU-ASEAN market.”

Airline capacity between the EU and ASEAN will be down 28 percent compared to 2019 in the fourth quarter, Diio data show.

With a former Singapore Airlines executive at the helm of Air India, it comes with little surprise that the Singaporean airline could take a stake in the Tata Group-owned Indian flag carrier.

Singapore Airlines disclosed Thursday that it was in “confidential discussions” with Tata to “deepen” the companies’ existing partnership, and a potential merger of Air India and Vistara. Indian carrier Vistara is jointly owned by Tata (51 percent) and Singapore Airlines (49 percent).

Singapore Airlines did not say what that deeper partnership could be, but Reuters reported that it could include a minority stake in Air India.

India, with nearly 1.4 billion people, is widely viewed as one of largest growth markets for aviation around the world. However, airlines have long struggled to penetrate the market that suffers from infrastructure and other constraints. Numerous carriers have tried — and failed — including Jet Airways (the first incarnation) and Kingfisher.

Singapore Airlines described India, and its Vistara investment, as an “integral part” of its multi-hub growth strategy. A stake in Air India would give the Singaporean airline even deeper penetration in the market.

Tata Sons has named Campbell Wilson to lead Air India as the group launches its restructuring of the beleaguered flag carrier.

Wilson will join Air India from Singapore Airlines’ budget subsidiary Scoot, which he has led since 2020. He has worked in various roles at Singapore Airlines, a carrier known for high levels of passenger service and quality, since 1996. Wilson’s appointment as CEO of Air India is subject to approval by the airline’s board and regulators.

“Air India is at the cusp of an exciting journey to become one of the best airlines in the world, offering world-class products and services with a distinct customer experience that reflects Indian warmth and hospitality,” Wilson said in a statement. “I am excited to join Air India and Tata colleagues in the mission of realizing that ambition.”

Wilson has his work cut out for him. The Tatas acquired Air India from the Indian government in January after decades of state ownership. The airline has many lucrative assets, including international air route rights to many countries, but has been a perennial loss maker known for poor service under state leadership.