CCI gives green signal for Air India-Vistara merger

In a major development, the competition commission of India (CCI) on Friday approved the merger of Tata SIA Airlines Limited, which operates Vistara, with Air India subject to certain conditions. The development paves way for Tata Group to consolidate all the airlines under one umbrella.

Tata SIA Airlines (TSAL) is a joint venture between Tata Sons Pvt Ltd (TSPL) and Singapore Airlines, with TSPL and SIA holding 51% and 49% of the total shareholding, respectively. TSAL operates under the brand name “Vistara” in India.

In April this year, Tata Group sought CCI’s approval for the merger of Air India and Vistara.

"The proposed combination envisages (a) the merger of Tata SIA Airlines Limited (TSAL/Vistara) into Air India Limited (AIL/Air India), with AIL being the surviving entity (Merged Entity) and (b) in consideration of the merger, the acquisition of shares in the Merged Entity by Singapore Airlines Limited (SIA) and Tata Sons Private Limited (TSPL) and (c) acquisition of additional shares in the Merged Entity by SIA pursuant to a preferential allotment," says the competition regulator.

"The CCI approved the proposed combination subject to compliance of voluntary commitments offered by the parties," it adds.

Following the proposed transaction, Singapore Airlines will infuse ₹2,058.5 crore into Air India, which will give it a 25.1% stake in an enlarged Air India group.

The merger is expected to be completed by March 2024. Both Tata group and SIA have agreed to take part in additional capital injections, if required, to fund the growth and operations of the enlarged Air India in FY23 and FY24. "Based on SIA's 25.1% stake post-completion, its share of any additional capital injection could be up to ₹5,020 crore ($615 million), payable only after the completion of the merger,” a joint statement said earlier.

Notably, Air India as an entity is four to five times larger in scale compared to Vistara. In November 2022, Malaysia-based AirAsia Aviation, the holding company of Capital A's airline group, had also sold the entire remaining 16.33% stake in AirAsia India to Air India.

 In July this year, Air India cornered a market share of 9.9% in July by carrying 11.98 lakh passengers in July. In FY24, Air India’s market share increased from 8.6% in April to 9.9% in July.

Other Tata Group airlines Vistara and Air Asia cornered a market share of 8.4% and 7.5%, respectively in July. 

Air India had previously unveiled a wide-ranging transformation programme to strengthen its foundations and revamp its operations, setting it on the road to recovery and positioning itself for growth. Air India will benefit from Vistara's operational capabilities and customer base. In total, Tata group-owned Air India, including Air India Express and AirAsia India, and Vistara have a total of 218 wide-body and narrowbody aircraft, serving 38 international and 52 domestic destinations.

After the merger, Air India will be the only Indian airline group to operate both full-service and low-cost passenger services. It'll also be able to optimise its route network and resource utilisation, which will help it tap demand across market segments.