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 the flag carrier of India, 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.”