Tata Sons is negotiating with its Vistara (Delhi International) joint-venture partner Singapore Airlines (SQ, Singapore Changi) about bidding together for heavily indebted Air India (AI, Delhi International), sources have told the Economic Times.

According to the plan, the bid would be made through full-service carrier Vistara. But even if the Singaporean carrier backs out, the Indian conglomerate is likely to pursue a bid on its own and then consolidate its airline businesses including Vistara under a single entity, the sources said.

Such a move would require the waiver of a non-compete clause between the two partners, as according to this clause only Vistara - a direct competitor of Air India - has an exclusive right to undertake “full-service carrier” services within Tata Sons.

“Our group chairman has clearly stated that the airline businesses have to be consolidated, and there cannot be multiple airlines. So Air India being a full-service carrier, it is only sensible that it will come under the Vistara business, which is a full-service carrier too. So we are hopeful that our partner will be willing to participate in the future plans that include Air India,” one of the sources explained.

A bid via Vistara would also need the consent of the Singaporean government vehicle Temasek, which holds a 55.5% stake in Singapore Airlines. Media reports in September alleged that Temasek was reluctant about Tata considering a bid for the ailing flag carrier.

However, the Indian government has reportedly been keen on Tata Sons making a bid for Air India. According to media reports, Tata has been considering doing so since April and has hired law firms and consultants to evaluate a potential offer.

“Acquisition of Air India by Vistara could result in a substantial outlay of funds and assumption of risk by the Vistara shareholders. Singapore Airlines and Temasek would have to evaluate whether they are willing to make an investment and assume risk of such high magnitude, especially in times of a huge slump in civil aviation,” an analyst told the Economic Times.

Singapore Airlines, Tata Sons, and Vistara have declined to comment on the issue.