Tata Sons is likely to offer a stake in Air India to Singapore Airlines (SIA), as part of the negotiations to merge their joint venture carrier, Vistara, with Air India, top executives close to the matter said.
SIA, which owns 49% in Vistara’s parent Tata SIA Airlines, has agreed “in principle” to the proposal to get on board Air India with the Tata Group, they said. The Tata Group is seeking to merge Vistara with the national carrier it recently acquired and have Air India as the only airline brand under its fold, the executives said.
The discussions are being led by Tata Group and Air India chairman N Chandrasekaran and SIA’s top brass, they said. Tata Sons holds the majority 51% stake in full-service airline Vistara.
Tata Sons did not comment. A Singapore Airlines spokesperson said: “We do not comment on any confidential discussions that we may or may not be having with our partners.” SIA, which is trying to get its global businesses on track after Covid, is unlikely to commit any significant funds into Air India yet, the executives said.
The Tata Group had given Singapore Airlines enough time to warm up to the idea of a single aviation entity plan.
Air India is keen to focus on consolidation and scale, and the integration will create the second-largest airline in the country, behind IndiGo. The Tata Group is also merging the other airline in its fold, AirAsia India, with Air India Express, Air India’s no-frills brand that flies primarily to West Asian and Southeast Asian destinations. In June, the Competition Commission of India approved the merger proposal.
Tata Sons chairman Chandrasekaran has consistently stated that the group’s airline businesses, which operate on thin margins, must be consolidated to ensure operational efficiencies and keep control on costs.
“It makes imminent sense to consolidate similar businesses under the same brand,” said Vihang Virkar, partner at Lumiere Law Partners. “Consolidating the three airlines – AirAsia, Vistara and Air India – would not only provide the Tatas with greater operational efficiency, but they will also be able to benefit from better bargaining power in their dealings with OEMs such as aircraft and engine manufacturers.”
Air India is clearly the more dominant brand among the three, having a legacy of over 75 years, he said. “Air India, having been the national carrier for several decades, also enjoys an excellent recall value with travellers in India and overseas. With Vistara and AirAsia having recently commenced international operations, using the brand name ‘Air India’ would most certainly benefit them,” he added.