Tata Group Kicks Off Mega-Merger Process To Bring All Its Airlines Together Under Air India

In a move that will make Air India the second largest airline in the country in terms of fleet and market share, Tata Group¡¯s parent company Tata Sons has initiated the merger of all its airline entities Vistara, AirAsia India and Air India Express under Air India.

This was done after a series of discussions with Singapore Airlines (SIA), which is its joint venture partner in Vistara.

For the uninitiated, Tata Sons holds the majority 51% stake in Vistara, and is also the holding company of Tata group. Ever since Tata group brought back Air India into its kitty earlier this year, various Tata group companies have been assisting in Air India's revival.

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With this merger, the Tata group will have a low-cost carrier and a full-service airline under Air India. Air India will be the only airline brand in the Tata group following the merger, said executives with knowledge of the matter, as per ET report. An official announcement is expected within a week, they said.

However, while the two entities will begin commercial cooperation soon, it will take more than a year for them to start functioning as one. Tata Singapore Airlines, which runs Vistara, is being merged into Air India, said the executives.

The Vistara brand may reportedly be dropped, whereas Singapore Airlines will be a minority shareholder in Air India with 20-25% and a few board members of Vistara will be included on the board of Air India, they said on condition of anonymity. SIA owns 49% in Vistara's parent, Tata SIA Airlines.

Earlier this month, the Tata Group had already completed the consolidation of Air India Express and AirAsia India by buying out the remaining 16% stake in Air Asia. The merger process, which is likely to be completed in the next one year, is being led by Air India CEO Campbell Wilson, Chief Commercial Officer Nipun Aggarwal, AirAsia India CEO Sunil Bhaskaran and Air India Express CEO Aloke Singh, as per the report.

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More About The Mega-Merger

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The merger is expected to give Air India a fleet of around 233 aircraft and reduce its operational costs with the airline synergies. It will also give Air India more bargaining power in its dealings with original equipment manufacturers such as aircraft and engine makers. The contours of the merger have been finalised by Tata Group Chairman N Chandrasekaran, and the SIA and Air Asia top management, said the executives.

As per the report, Tata Group had given SIA (Singapore Airlines) enough time to warm up to the idea of a single aviation entity plan, according to people in the know. And SIA agreed to become part of the merged entity since India is an important market for the carrier. "SIA has reaped benefits from Vistara and realises that the cost of scaling up Vistara will be significantly higher as compared to Air India, which already has a significant size. They did not participate in the bidding process for Air India as Covid-19 had a significant impact on their business," said the person with the know-how.

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