Indian conglomerate Tata Group is merging Air India with Vistara, its joint venture with Singapore Airlines (SIA), to create a bigger full-service carrier that will strengthen its presence in domestic and international skies.
Car-to-steel conglomerate Tata will hold 74.9 percent of the combined entity, while SIA will own the remaining 25.1 percent, the Indian group said in a statement on Tuesday.
SIA will invest $252m into Air India as part of the deal, Tata said, with the pair aiming to complete the merger by March 2024, subject to regulatory approvals.
Tata Group Chairman Natarajan Chandrasekaran said the merger was an important milestone in efforts to rebuild Air India into a “world-class airline”.
“Air India is focusing on growing both its network and fleet, revamping its customer proposition, enhancing safety, reliability, and on-time performance,” Chandrasekaran said.
The agreement will create a stronger rival to India’s dominant carrier IndiGo and give SIA, which lacks a domestic flying market, a more solid foothold in one of the world’s fastest-growing aviation markets.
IndiGo, a low-cost carrier founded in 2006, is India’s largest passenger airline with a market share of 56.7 percent as of October.
It will also allow the Indian conglomerate to consolidate its brands around the full-service Air India and low-cost Air India Express, which is being merged with AirAsia India after Tata bought out former partner AirAsia.
Air India is India’s largest international carrier and second-largest domestic carrier.
SIA said it and Tata had agreed to participate in additional capital injections into Air India if required to fund growth and operations over the next two financial years.
SIA could spend up to $615m based on its 25.1 percent post-completion stake, payable after the completion of the merger, it said, adding it would fund the plans from internal cash resources.
“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,” SIA Chief Executive Goh Choon Phong said.
The deal will give the new entity a combined Indian market share of 24 percent, making it a stronger competitor to IndiGo, which has a 56 percent share, as well as full-service Middle Eastern rivals that carry a large share of international traffic.
It will give Tata a fleet of 218 aircraft split between plane makers Boeing and Airbus, making it India’s largest international carrier and second-largest domestic airline.
Air India said in September it would lease 30 Boeing and Airbus planes, expanding its fleet by more than 25 percent in the near term. It is also considering a mega-order for up to 300 narrow-bodied and 70 wide-bodied jets, according to industry sources.
Known for its Maharaja mascot, Air India was founded by JRD Tata in 1932 and flies to all leading international destinations in North America, Europe, Asia, Australia and the Gulf. The airline was taken over by the government in 1953.
The Indian conglomerate is a sprawling collection of nearly 100 companies that includes the country’s largest automaker, its largest private steel company and a leading outsourcing firm. The companies employ more than 350,000 people around the world.