Singapore Airlines (SIA) is set to make a substantial additional investment of ₹3,194.5 crore in Tata Group-owned Air India following the anticipated merger of Vistara and Air India. The merger, originally announced on November 29, 2022, is expected to be finalized by November 11, 2024, at which point SIA will hold a 25.1% stake in the expanded Air India entity. This strategic move underscores Singapore Airlines’ commitment to strengthening its position in the rapidly growing Indian aviation market.
Vistara’s Role in the Merger
Vistara, a full-service airline that began operations on January 9, 2015, was initially launched as a joint venture between Tata Sons and Singapore Airlines, with Tata holding 51% and SIA owning the remaining 49%. The merger between Vistara and Air India will consolidate their operations under a single brand, with Singapore Airlines contributing its 49% stake in Vistara as part of the arrangement. Additionally, SIA will contribute ₹2,058.5 crore in cash, which will result in a 25.1% ownership of the expanded Air India.
Financial Gains and Investment for Singapore Airlines
The merger is expected to generate significant financial benefits for SIA. According to Friday’s announcement, SIA anticipates a non-cash accounting gain of approximately SGD 1.1 billion from this merger. Furthermore, following the merger, SIA will start equity accounting for its share of Air India’s financial results, allowing the company to reflect the performance of the newly expanded Air India entity directly in its financial records.
Additionally, SIA has agreed to fund its share of any capital contributions previously provided by Tata towards Air India’s operations before the merger is finalized. This includes covering any associated funding costs, totaling up to ₹5,020 crore, which will enable SIA to maintain its 25.1% stake in the combined Air India entity.
The immediate capital injection by Singapore Airlines, amounting to ₹31,945 million (approximately SGD 498 million), will be executed following the merger’s completion in November 2024 through a subscription to new shares issued by Air India. The investment signals SIA’s long-term commitment to Air India’s growth, with future capital injections to be evaluated based on Air India’s financial needs and the availability of other funding options.
Strategic Implications for India’s Aviation Market
The merger represents a significant consolidation in India’s highly competitive aviation industry, merging Vistara’s premium services with Air India’s broader operational network, which spans domestic and international routes across both full-service and low-cost segments. SIA believes that the newly consolidated entity will enable it to strengthen its foothold in the Indian market, allowing the airline to capitalize on India’s booming aviation demand.
“The merged entity will have a substantial presence across all key segments of Indian air travel, including domestic, international, full-service, and low-cost operations,” noted SIA in its release. This expanded scope aligns with SIA’s multi-hub strategy, facilitating its active participation in India’s dynamic and fast-growing aviation sector.
Expansion of Codeshare Agreement
Alongside the merger, Singapore Airlines and Air India have also agreed to broaden their code share arrangement, a move that is set to enhance the connectivity and convenience offered to passengers. This expanded partnership will add 11 additional Indian cities and 40 international destinations to the combined network, providing customers with greater flight options and smoother travel experiences between India and numerous destinations worldwide.
Future Outlook for the Merged Air India
The integration of Vistara into Air India is expected to yield operational efficiencies and create a more robust entity capable of competing with established domestic and international airlines in India’s competitive aviation landscape. For Tata Group, the merger marks a crucial step in their ongoing efforts to revitalize Air India, which they acquired from the Indian government in 2021.
This expanded Air India, with backing from a major international player like Singapore Airlines, will not only operate a more diverse fleet but also benefit from enhanced management expertise and a broader operational network. This consolidation effort is likely to benefit travelers through improved service quality, broader connectivity, and a strengthened international presence, reflecting Air India’s ambitions to become a key player in global aviation.
As SIA integrates with Tata Group’s plans, this merger is poised to reshape the Indian aviation industry, positioning Air India to meet the increasing travel demands of a growing middle class while competing with budget carriers and international players. Singapore Airlines’ commitment to ongoing investment in the merged entity indicates confidence in Air India’s future potential and Tata Group’s strategic vision for the brand’s revival and expansion.
In sum, Singapore Airlines’ additional ₹3,195 crore investment into Air India post-merger illustrates the airline’s confidence in India’s aviation growth. This investment, combined with Tata Group’s strategic plans, paves the way for a more comprehensive Air India that aims to offer a range of options for Indian and international travelers alike, with an eye on becoming a formidable player in the global aviation market.