- Reports in the public domain indicate that TATA group will merger Vistara and Air India in the near future
- Vistara’s strength is in domestic segment while Air India core capacity lies in international market
- If the merger is finalise, then it will lead to increased competition, efficiency which will result in low cost airlines
The TATA group is on a roll. At the time when Adani and Ambani group were busy expanding themselves, TATA was strengthening its core unit. Its first big resurgence was witnessed in its decision to transform Air India. Now, it looks all set to go ahead with another bold decision of merging Vistara with the new operator under its belt
Vistara merger with Air India on cards
According to an Indian Express report, Vistara may soon be collaborating with Air India for both domestic as well as international flight operations. Currently, the ownership of Vistara lies with TATA and Singapore Airlines (SIA). Interestingly, TATA group holds the majority share with 51 percent stake while SIA holds 49 percent share.
TATA Sons is exploring whether SIA is ready to go ahead with the merger or not. Apparently, SIA is currently not ready for the merger. According to the source quoted by the newspaper, currently the financial state of SIA does not allow it to go ahead with the merger process. It is recovering from the losses it incurred during Covid crisis. During the pandemic, its passenger volume fell 97,9 percent which resulted in accumulated loss of 4.3 billion Singaporean Dollar for the company.
“SIA has asked for time till the end of 2023 to decide whether it wants to go ahead with the merger or not. What they’re looking for is some stability in their financial condition, and that of Air India’s operations post the disinvestment. Discussions on how much equity Singapore Airlines will hold in Air India will be held once it has finalised its intention to merge” said the Indian Express source
Read more: Air India is done. BSNL should be next!
Air India is making appointments keeping in mind the possible merger
The speculations around the possible merger have been fueled by a recent appointment made by TATA group on its Air India panel. Air India’s new chief executive is Campbell Wilson, a veteran of SIA and CEO of Scoot, a wholly owned subsidiary of Singapore Airlines. Sources said that TATA group and SIA were on board with Air India snatching one of the best employees of SIA.
Regarding his appointment, SIA CEO Goh Choong Phong said, “Campbell is one of our most experienced senior executives who has made many important contributions in key management roles within the SIA Group. While we are sad to lose him, he goes to Air India with our full blessings.”. Moreover, Wilson is believed to be hired by Air India for a long term basis.
“The two groups sat together and took the call to appoint Wilson at Air India. The decision has been taken with a long-term perspective. Wilson has global aviation experience and comes with long-term commitment to lead Air India’s turnaround,” said another source quoted by Indian Express.
Merger will provide huge boost to India’s aviation
By all indications, it seems that the merger will be finalised way before the stipulated date of end of 2023. Vistara Airlines has rebounded in a tremendous fashion in a post pandemic business environment. One indication of this bounce back is Vistara’s decision to reinstate the monthly bonus of all pilots from the month of April 2022. Moreover, Vistara has also witnessed an increase in its share of the domestic passenger traffic market.
If both companies decide to go ahead with the merger process, then it will provide a huge boost to India’s aviation sector. Currently, Air India holds its major clout in the international market, while Vistara mainly carries India’s domestic passengers from one place to another. According to Statista estimation, in the financial year 2020, Vistara held about 5.8 percent share in domestic passenger traffic, while Air India held 11.6 percent share in international passenger traffic. Air India’s massive share of 10.9 percent of domestic passenger service will act as icing on the cake in the wake of the final merger of both airlines.
Increased efficiency and cost reduction
Moreover, Vistara’s fleet of upgraded passenger planes will add more capacity to Air India. Currently, its fleet size is 51, which consists of Airbus A320, Airbus A321, Boeing 737 NG/ max, Boeing 787. It will add to Air India’s fleet size of 125 planes, which also consists of Airbus and Boeing, albeit of different capacities.
The proposed merger comes at a crucial juncture in the history of Indian aviation. India needs to act fast towards realising late Shri Arun Jaitley’s dream of ‘a person wearing Hawai chappal boarding a Hawai Jahaj’. The merger is expected to increase competition, leading to reduction in passenger fares.