SIA and Tata aim to complete the merger by March 2024, subject to regulatory approvals, which would see SIA emerge from the process with a 25.1% stake in the group.
Tata currently owns Air India outright, which also operates low-cost subsidiaries Air India Express and AirAsia India, and a 51% stake in Vistara. Vistara was founded in 2013 as a joint venture between SIA and Tata.
Both parties are also ready to participate in additional capital raising initiatives to fund the group’s operations and growth ambitions over the next two years.
This could amount to around US $615 million further SIA investment in the group based on its one-quarter stake, which it said on Tuesday (29 November) it would fund using existing internal cash reserves.
The deal would created a combined entity around four to five times larger than Vistara, boosting SIA’s presence in India. SIA said it would also strengthen its multi-hub strategy and help it gain a greater foothold in a "large and fast-growing aviation market".
“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," said Goh Choon Phong, SIA chief executive.
"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.”
Natarajan Chandrasekaran, Tata Sons chair, added: "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."
India’s aviation market is the third largest in the world, with passenger traffic expected to more than double over the next 10 years. Together, Air India and Vistara – inclusive of subsidiaries – operates a fleet of 218 aircraft serving 38 international and 52 domestic destinations.
