Friday, December 02, 2022

SQ and TATA agree on Air India – Vistara merger

Singapore:  Singapore Airlines and Tata Sons will merge Air India and Vistara in a financial deal that sees SIA investing INR20,585 million (SGD360 million, USD250 million) in Air India.

According to the joint press statement, the agreement will give SIA a 25.1% stake in an enlarged Air India group with a significant presence in all key market segments (1).

SIA and Tata aim to complete the merger by March 2024, subject to regulatory approvals.

SIA intends to fully fund its investment from its internal cash resources, which stood at SGD17.5 billion as of 30 September 2022 (2).

SIA and Tata have also agreed to participate in additional capital injections, if required, to fund the growth and operations of the enlarged Air India during the fiscal years 2022/23 and 2023/24. Based on SIA’s 25.1% stake post-completion, its share of any additional capital injection could be up to INR50,200 million (SGD880 million, USD615 million), payable only after the completion of the merger.

The actual amount will depend on factors including the progress of the enlarged Air India’s business plan and its access to other funding options. SIA intends to fully fund additional capital injections from its internal cash resources.

Through the transaction, SIA will reinforce its partnership with Tata and immediately acquire a strategic stake in an entity that is four to five times larger in scale compared to Vistara. The merger would bolster SIA’s presence in India, strengthen its multi-hub strategy, and allow it to continue participating directly in a large and fast-growing aviation market.

Singapore Airlines CEO Goh Choon Phong said: “Tata Sons is one of India’s most established and respected names. Our collaboration to set up Vistara in 2013 resulted in a market-leading full-service carrier, which has won many global accolades in just a short time.

“With this merger, we can deepen our relationship with Tata and participate directly in an exciting new growth phase in India’s aviation market. We will work together to support Air India’s transformation programme, unlock its significant potential, and restore it to its position as a leading airline on the global stage.”

Tata Sons chairman Natarajan Chandrasekaran said: “The merger of Vistara and Air India is an important milestone in our journey to make Air India a truly world-class airline…As part of the transformation, Air India focuses on growing its network and fleet, revamping its customer proposition, and enhancing safety, reliability, and on-time performance.

Following its acquisition by Tata in January 2022, Air India unveiled a wide-ranging transformation programme to strengthen its foundations and revamp its operations, setting it on the road to recovery and positioning it for growth5.

The combination of Air India and Vistara would bring significant synergies. Air India has valuable slots and air traffic rights at domestic and international airports that are unavailable to Vistara. With Vistara widely recognised as India’s leading full-service carrier, Air India will benefit from its operational capabilities, customer base, and strong focus on customer service and product excellence.

02/12/22 TTR Weekly

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