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Air India and Vistara merger: A game-changer in Indian aviation

The aviation industry faces persistent challenges, with some airlines experiencing financial difficulties. How can this merger contribute to a more stable industry overall?

The aviation sector in India is buzzing with excitement as the National Company Law Tribunal (NCLT) has given the green light to the merger of Air India and Vistara. This merger, announced in November 2022, is set to create one of the largest airline groups globally. Let’s dive into the details and see what this means for the industry, investors, and the future of Indian aviation.

About Air India

Founded by the legendary JRD Tata, Air India has been a pioneer in India’s aviation sector since its first flight in 1932. It boasts an extensive domestic network and an impressive international reach, covering destinations across the USA, Canada, UK, Europe, Far-East, SouthEast Asia, Australia, and the Gulf.

 In January 2022, Tata Sons, through its subsidiary Talace Private Limited, acquired 100% stake in Air India, bringing it back into the Tata fold after 69 years of government ownership.

About Vistara

Vistara, established in 2013, is a joint venture between Tata Sons (51%) and Singapore Airlines Limited (49%). It commenced operations in January 2015 and quickly became India’s leading full-service carrier, known for its exceptional service and hospitality.

Vistara operates a fleet of 70 aircraft and serves destinations across India and internationally in the Middle East, Asia, and Europe.

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Air India and Vistara merger details

The merger of Air India and Vistara, approved by the Chandigarh bench of the NCLT, is a landmark event in Indian aviation. Here’s a closer look at the key aspects:

Key highlights of the merger

  1. Combined fleet: The merged entity will have a combined fleet of 218 aircraft, making it India’s largest international carrier and second-largest domestic carrier.
  2. Regulatory approvals: The merger has received necessary approvals from shareholders, creditors, the Competition Commission of India (CCI), and the Directorate General of Civil Aviation (DGCA). It also secured conditional approval from Singapore’s competition regulator in March 2023.
  3. Finalisation: Air India expects the merger to be finalised by the end of 2024 or early 2025, with Vistara dissolving without the winding-up process.

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Competitors

In the global arena, the American Airlines Group leads with a fleet of 1,521 aircraft. Domestically, IndiGo is the largest carrier, with a fleet of 350 aircraft. The Air India-Vistara merger positions the new entity as a formidable competitor in both international and domestic markets.

Air India and Vistara financials

As part of the merger transaction, Singapore Airlines will invest Rs 2,059 crore in Air India. This infusion of capital will aid in expanding the network, upgrading the fleet, and enhancing overall service quality. 

The merged entity aims to capitalise on the growing aviation market in India, which is expected to see significant growth in both passenger and cargo traffic.

What’s in It for investors?

For investors, this merger brings several potential benefits:

  • Increased market share: The combined market presence and enhanced fleet capacity position the new entity to capture a larger share of the aviation market.
  • Operational synergies: Streamlining operations and integrating networks, human resources, and fleet deployments will likely result in cost efficiencies and improved profitability.
  • Enhanced customer experience: A focus on revamping customer service, safety, reliability, and on-time performance promises a superior travel experience, which could attract more passengers and boost revenue.

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Air India and Vistara shareholding pattern

Post-merger, the shareholding pattern will be as follows:

  • Tata Sons: 74.9%
  • Singapore Airlines: 25.1%

This strategic partnership leverages the strengths of both Tata Sons and Singapore Airlines, promising a robust and competitive airline entity.

Conclusion

The merger of Air India and Vistara marks a significant milestone in the Indian aviation industry. With a combined fleet of 218 aircraft, substantial investment from Singapore Airlines, and the backing of Tata Sons, the new entity is set to become a powerhouse in both domestic and international markets. 

For investors, this merger represents a promising opportunity to capitalise on the growing aviation sector. As the integration process unfolds, the aviation landscape in India is poised for a major transformation, offering exciting prospects for passengers and stakeholders alike.

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