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Vistara could merge with Air India, decision likely by end of 2023

Tata Sons has held exploratory talks with Singapore Airlines (SIA), its joint venture partner in Vistara, for the airline’s possible merger with Air India, multiple sources said. The Indian Express.

We learn that SIA has asked for time until the end of next year to decide if it wants to move forward. Tata Sons is the holding company of the Tata Group, which took over Air India from the government earlier this year. Vistara is the only other full-service operator in India.

“The Tatas and Singapore Airlines discussed the possibility of a merger earlier this year. SIA had even agreed to join Tata’s bid for Air India but due to the pandemic decided to pull out. given its poor financial situation,” one of the people familiar with the development said on condition of anonymity.

SIA had waived the non-competition clause in Vistara’s contract to allow the Tata group to bid for the national carrier. Air India is now wholly owned by the Tata Group, while Vistara is a 51/49 joint venture between the Tatas and SIA.

“The SIA has requested time until the end of 2023 to decide whether or not they want to go ahead with the merger. What they are looking for is some stability in their financial situation and that of Air India’s operations after divestment,” the source said.

“Discussions on the amount of shares Singapore Airlines will hold in Air India will take place once it finalizes its intention to merge,” the source added.

According to this person, the appointment of the new CEO of Air India is a step in the direction of a possible merger. The Tata Group announced Thursday the integration of Campbell Wilson, a veteran of Singapore Airlines and CEO of its low-cost unit Scoot.

Wilson’s appointment as CEO and Managing Director of Air India was made with the “full blessing” of Singapore Airlines. “Both groups sat down together and took the call to appoint Wilson to Air India. The decision was made with a long-term perspective. Wilson has global aviation experience and is committed long-term to lead Air India’s turnaround,” another source said. Singapore Airlines CEO Goh Choong Phong said on Thursday, “Campbell is one of our most experienced senior executives who has made many significant contributions in key leadership roles within the SIA Group. Although we are sad to lose him, he is going to Air India with all our blessings.”

In his farewell note to Scoot employees on Friday, Wilson wrote: “…There are more mountains to climb, and I am honored to have been chosen by the Air India Board of Directors as the new Airline CEO. This is a fantastic opportunity to lead a historic airline, now owned by the Tata Group, to new heights, and I am grateful to embark on this exciting challenge with the full blessing of the SIA management team. The Tata Group won Air India’s takeover bid in October 2021, and the airline was transferred to its new owner in January. Vistara was launched in 2015.

Responding to a question from The Indian Express about the possible merger of Air India and Vistara, a Singapore Airlines spokesperson said: “We do not comment on any confidential discussions we may or may not have with our partners.”

Tata Sons had not responded to an email seeking comment at the time of this report’s publication on Sunday.

Singapore Airlines Group reported a loss of SGD 4.3 billion (approximately Rs 23,851 crore) for the financial year ending March 2021 as passenger volume fell 97.9% during the period. The group posted its first quarterly profit since the start of the pandemic in October-December 2021.

Air India recorded a net loss of Rs 5,422.60 crore for the first half of 2021-2022. The Tata Group has drawn up a roadmap for the recovery of Air India and to turn it around financially and operationally.

At Vistara, JV partners have built a premium airline brand. In the January-March period, the two airlines together had a domestic passenger traffic market share of 18.7%.

The Tata Group also owns a majority stake in low-cost airline AirAsia India, which could be merged with Air India’s economy subsidiary, Air India Express. Last month, Air India sought approval from India’s Antitrust Competition Commission to acquire AirAsia India.

A merger of Air India and Vistara would articulate Tata Sons chairman N Chandrasekaran’s “synergy” philosophy, as the two airlines complement each other in some ways.

They have identical fleets with Airbus A320 family aircraft in the narrow-body fleet for domestic and short-haul international routes, and Boeing 787s for medium to long-haul international routes. Air India also has Boeing 777 aircraft for its flights to the United States.

While Vistara has established itself as a premium airline brand in the domestic segment, Air India’s strength lies in international markets, particularly in the United States and Europe. Currently, Air India is the only Indian carrier serving the United States. Air India and Vistara are the only ones to serve Europe.