Tata group and Singapore Airlines Ltd. are planning to merge their airline companies, Air India and Vistara, to build a new joint venture. Two sources aware of this development have said on the condition of anonymity that both entities have a combined goal to optimise their resources and compete with industry leader IndiGo.
According to the sources, Singapore Airlines may retain a minority interest of up to 25%, worth 5,000 to 10,000 crore, as part of the merger.
“Singapore Airlines is Tata Sons’ current JV partner in Vistara. Talks are going on between the two JV partners on how best to leverage the future India opportunity in aviation. What corporate structure will emerge is still under discussion,” one of the two anonymous sources said.
The merger, which might take a year to complete, is part of Tata Sons’ larger consolidation effort to save money, generate synergies by optimising aircraft use and routes and raise market share to compete with IndiGo, India’s largest airline with a 59% market share.
“According to a recent internal exercise, the combined valuation of Air India and Vistara could be at least ₹30,000 crores,” one of the sources said.
Regardless of this, authorised spokespersons of Vistara and Tata Sons have denied commenting on the merger. A representative of Singapore Airlines said, “We do not comment on any confidential discussions that we may or may not be having with our partners.”
Air India and Vistara are expected to maintain their brand’s self-identity, though eventually, one brand may handle the joint venture.