Singapore Airlines and Tata Sons have agreed to merge Air India and Vistara to create one of the leading airlines in the world’s fastest-growing economy.
Under the deal, SIA said will acquire a 25.1% stake in Air India for $250 million. The partners aim to inject fresh capital into Air India, with SIA’s share reaching as much as $615 million, the Singapore carrier said in a statement late Tuesday.
The combination of Air India and Vistara (which is subject to regulatory approvals) will create the country’s largest international carrier and the second-biggest domestic airline with a fleet of 218 aircraft. SIA and Tata established Vistara in 2013 and transformed it into a full-service carrier.
“With this merger, we have an opportunity to deepen our relationship with Tata and participate directly in an exciting new growth phase in India’s aviation market,” Goh Choon Phong, CEO of SIA, said in a statement. “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.”
Tata acquired Air India in January this year, completing the privatization of the loss-making flag carrier. The combination of Air India and Vistara will bring significant synergies by optimizing routes and resources, SIA said.
“Air India is focusing on growing both its network and fleet, revamping its customer proposition, enhancing safety, reliability and on-time performance,” Natarajan Chandrasekaran, chairman of Tata Sons, said. “We are excited with the opportunity of creating a strong Air India which would offer both full-service and low-cost services across domestic and international routes.”
Air India was originally established by the Tata Group in 1932, before it was taken over by the Indian government in the 1950s. Following Tata’s acquisition in January, the airline announced plans to expand its fleet with the addition of 25 Airbus and five Boeing leased aircraft in December. It is also considering ordering as many as 300 narrow-body jets in the next few years.