Monday, October 17, 2022

What does the merger of Vistara and Air India mean for Tata's aviation biz?

New Delhi: Singapore Airlines confirmed last week that it was in talks with Tata Group about a potential merger of full-service carriers Vistara with Air India.

The Singapore national airline owns 49% of Vistara. Tata holds the rest.

Vistara is India’s second-biggest domestic airline and held a market share of 9.7% in September, far behind IndiGo’s 57.7%.

Air India, with 8.5% domestic market share is at fourth spot -- just behind GoFirst.

Tata Group also has an 83.67% shareholding in AirAsia India, which is in the process of being merged with Air India. The conglomerate had acquired Air India from the India government in January. It then roped in Singapore Airlines Group veteran Campbell Wilson as Air India’s CEO to lead its turnaround plan.

In September, two months after Wilson took over, Air India announced a five-year transformation plan to take its domestic market share to at least 30%.

The plan itself was an indication of merger of all group airlines. Cumulatively, Tata’s four airlines including Air India Express rule 24% of domestic skies.

Meanwhile, Singapore Airlines has cautioned its investors that there is no certainty of a deal. But it said the discussions are in line with its multi-hub strategy of getting access to important sources that complement its strong Singapore hub.

The International Air Transport Association has noted that India will become the third-largest aviation market in the world-- including international and domestic traffic - by around 2024.

Any potential merger would create a more formidable competitor to India’s dominant airline IndiGo as well as Middle Eastern rivals that carry a large share of the country’s international traffic.

Singapore Airlines said India had strong domestic and international traffic flows that were expected to double over the next 10 years.

Air India recently said it will lease 30 Boeing and Airbus aircraft, expanding its fleet by more than 25%, as its new owner faces a tough task to upgrade the carrier’s ageing fleet and turn around its financials and service levels after years of losses.

It is also looking at growing the international routes significantly to put the airline “on a path of sustained growth, profitability and market leadership’’.

Air India is launching more services to North America, where its use of Russian airspace gives it a shorter flight time than rivals that have avoided it since Moscow began its invasion of Ukraine.

Singapore Airlines has a chequered track record in mergers and acquisitions. It owned a 20% stake in Virgin Australia that was wiped out after the Australian carrier entered voluntary administration in 2020.

17/10/22 Krishna Veera Vanamali/Business Standard

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