Singapore Airlines (SQ, Singapore Changi) is swapping its 49% stake in Vistara (UK, Delhi International) for a 25.1% stake in Air India (AI, Delhi International), with the deal paving the way for Tata Sons to merge its two full-service India-based airlines within 18 months. Singapore Airlines says it is getting an instant stake in an airline entity four to five times larger than Vistara.
Details of the highly anticipated deal were confirmed on November 29, with the Vistara/Air India merger timetabled to be concluded by March 2024 and Singapore Airlines and Tata committing significant future capital injections towards Air India. Singapore Airlines says it will immediately invest INR2.585 billion rupees (USD252 million) as part of the agreement and up to INR5.2 billion (USD614.5 million) once the merger is complete.
"We have an opportunity to deepen our relationship with Tata and participate directly in an exciting new growth phase in India’s aviation market," said Singapore Airlines CEO Goh Choon Phong in a statement. "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."
The ch-aviation PRO airlines module reveals Air India has 119 aircraft and flies to 87 destinations in 28 countries while Vistara's 56 aircraft fly to 44 destinations in 13 countries. Tata Sons took control of Air India in January 2022 in a USD2.4 billion privatisation deal. Included in the sale was the 51% stake in Vistara as well as control of Air India Express (IX, Delhi International). More recently, Tata Sons also secured 100% ownership of AirAsia India (Bengaluru International).
Flush with cash once again, Singapore Airlines says it will use its existing internal cash reserves to fund both capital injections but notes the post-merger funding is contingent on the progress of Air India's business plan and its access to other forms of capital. As of September 30, 2022, Singapore Airlines was sitting on internal cash reserves of SGD17.5 billion (USD12.7 billion).
"We are transforming Air India," said Tata Group chairman Natarajan Chandrasekaran. "The merger of Vistara and Air India is an important milestone in our journey to make Air India a truly world-class airline." The chairman adds that the merger will bring significant synergies, with Vistara getting access to Air India's slots and air traffic rights at domestic and international airports it doesn't otherwise have access to. Simultaneously, Air India will benefit from access to Vistara's operational capabilities and superior customer service and cabin products, potentially adding some sorely needed polish to the Air India passenger experience.