Tata Sons has begun consolidating its Vistara airlines, AirAsia India and Air India Express under Air India, following a series of discussions with Singapore Airlines (SIA), its Vistara joint venture partner, in a move that will make Air India the second largest airline companies in the country in terms of fleet and market share.
The group will have a low-cost carrier and a full-service airline under Air India, which will be the single airline brand in the group after the merger, executives with knowledge of the matter said. An official announcement is expected within a week, they said.
However, while the two entities will soon begin commercial cooperation, it will be more than a year before they begin operating as a single entity. Tata Singapore Airlines, which operates Vistara, will merge into Air India, executives said.
The Vistara brand may be dropped, they added. SIA will be a minority shareholder of Air India at 20-25% and several Vistara board members will be included on Air India’s board, they said on condition of anonymity. SIA owns 49% in Vistara’s parent company, Tata SIA Airlines.
Tata Sons and Vistara did not comment on the matter.
Earlier this month, Tata Group completed the consolidation of Air India Express and AirAsia India by buying the remaining 16% stake in the Malaysian airline. The merger process, which is likely to be completed next year, is led by Air India CEO Campbell Wilson, Chief Commercial Officer Nipun Aggarwal, AirAsia India CEO Sunil Bhaskaran and Air India Express CEO Aloke Singh.
The consolidation will give Air India scale and strength with a fleet of approximately 233 aircraft and will lead to lower operating costs due to airline synergies. Air India will also provide greater bargaining power in dealing with original equipment manufacturers such as aircraft and engine manufacturers. The contours of the consolidation have been finalized by Tata Group and Air India chairman N Chandrasekaran and top executives from SIA and Air Asia, executives said.
Tata Sons holds a majority 51% stake in full-service airline Vistara.
The Tata group has given SIA plenty of time to warm to the idea of a single airline entity plan, according to people familiar with the matter. SIA agreed to become part of the merged entity because India is an important market for the carrier, one of the people said. “SIA has reaped the benefits of Vistara and recognizes that Vistara’s expansion costs will be significantly higher compared to Air India, which is already of significant size. It did not bid for Air India as Covid-19 has had a significant impact on their business.” the person stated.
Air India has been the more dominant brand among the three, having a legacy of over 75 years with tremendous value to recall to travelers in India and overseas.