Tata Sons has undertaken preliminary conversations with Singapore Airlines (SIA), its Vistara joint-venture partner, over a possible airline merger with Air India.
SIA is said to have requested a deadline of the end of next year to determine whether or not to proceed. The Tata Group’s main firm, Tata Sons, acquired Air India from the government earlier this year. Vistara is India’s only other full-service airline.
“Earlier this year, the Tatas and Singapore Airlines examined the prospect of merging. “SIA had agreed to join the Tata offer for Air India, but due to the pandemic, it chose to withdraw due to its terrible financial status,” one source familiar with the situation said on condition of anonymity.
The non-compete provision in Vistara’s contract had been dropped by SIA to allow the Tata Group to bid for the national airline. The Tata Group presently owns 100% of Air India, whereas Vistara is a 51:49 joint venture between the Tatas and Singapore Airlines.
“SIA has requested till the end of 2023 to determine whether or not to proceed with the merger. “What they want is some financial stability, as well as the functioning of Air India following the disinvestment,” the person added.
“After it has finalised its plan to combine, discussions on how much ownership Singapore Airlines would hold in Air India will take place,” the person added.
According to this source, the nomination of Air India’s new CEO is a step toward a future merger. Campbell Wilson, a Singapore Airlines veteran and CEO of Tata Group’s low-cost business Scoot, joined the Tata Group on Thursday.
Wilson was appointed as Air India’s CEO and MD with Singapore Airlines’ “full approval.” “The two committees met down and made the decision to hire Wilson at Air India. The choice was made with the long term in mind. Wilson has international aviation expertise and a long-term commitment to leading Air India’s recovery, according to another source.
Given that the two airlines complement one other in various aspects, a combination of Air India and Vistara would embody Tata Sons chairman N Chandrasekaran’s ideology of “synergise.”
They have identical fleets, with Airbus A320 family aircraft for domestic and short-haul international flights and Boeing 787 family aircraft for medium to long-haul international routes. For flights to the United States, Air India uses Boeing 777 aircraft.
While Vistara has established itself as a luxury domestic airline, Air India’s strength resides on overseas markets, particularly the United States and Europe. Air India is now the sole Indian airline that travels to the United States, and only Air India and Vistara fly to Europe.