It's been nearly two months since it was confirmed that Vistara and Air India would be merged by March 2024. And now, it＊s been revealed that?Tata Group＊s parent company, Tata Sons, may invest $1.5每1.8 billion?in the proposed airline to be created after the merger of Air India and Vistara.??
The investments will be made from the proceeds received as dividend income from Tata Consultancy Services (TCS)?and other firms in the group.
"The board (of Tata Sons) has to decide on the exact amount to be invested in Air India-Vistara, among other initiatives by?Tata group. A significant portion could be set aside for investment into Air India-Vistara combined," a person aware of the matter said, as per the Mint report.
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The money will be used primarily to?expand the fleet, raise the airline's market share beyond 30 percent, improve customer service, and increase global slot facilities. The infusion may start in the first quarter of 2023每24 (FY24), i.e., the April每June quarter of 2023.
About 80% of Tata Sons' dividend income comes from TCS. The report added that the capital being considered to be infused into the entity is equivalent to 50每60% of the dividend income received from TCS in FY23.
Tata Sons holds over 264 crore shares in TCS, leading to a total dividend income of Rs 19,832 crore in the third quarter of FY23, as per the BQPrime report.
In November last year, Singapore Airlines and Tata Sons announced the merger of?Air India?and Vistara. Singapore Airlines will hold 25.1% of the merged entity.
Vistara earned a profit for the first time in a quarter (the October-December 2022 quarter) since beginning operations in January 2015.
Earlier this week Vistara had reportedly said that as the company awaits regulatory approval for the merger, it will not place any new plane orders.?It will receive its pending order for 17 aircraft by the end of 2024, bringing its total fleet to 70 planes.
"We have not looked at any orders beyond that," its CEO Vinod Kannan said, according to Reuters.
"There has been the announcement about the merger and integration with Air India. Once we have approval from the relevant authorities...we will have to sit down together with Air India as a joint entity to see what we do," he said.
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Air India, on the other hand, is expected to seal half of an order worth billions of dollars for 495 jets with Boeing and engine suppliers General Electric and CFM International today, i.e., on Friday. These will have 190 Boeing 737 MAX narrowbody planes as well as some 20 Boeing 787s and 10 Boeing 777X aircraft.
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