Are prospects brightening for Air India, Vistara merger?

A merger between Air India and Vistara, a topic widely speculated in aviation circles ever since Tata Sons acquired India’s oldest airline carrier, could well be a reality soon, airline industry experts said, taking cues from the remarks made by Vistara chief executive officer.

Vistara, the second largest airline in India by market share, is a joint venture between Tata Sons, which owns 51 per cent stake, while Singapore Airlines owns 49 per cent stake.

The possibility of the merger that would lead to the creation of one of the leading airline groups in the region, looks brighter amid speculation that Tata Sons, the holding firm of the Tata group, is reportedly seeking to raise $4 billion to fund its ambitious expansion programme as India’s aviation sector pivots to a turbo-charged growth phase to fly 400 million passengers per year compared to the existing 200 million, and 220 airports by 2030.

Tata Sons also is looking at refinancing costly debt of the debt-ridden Air India which acquired in October 2021 for an enterprise value of $2.3 billion.

Vinod Kannan, CEO of Vistara, has said there would be clarity on the merger in a few months.

“All possibilities are being discussed. Since we are a joint venture, the two shareholders will have to discuss a road-map for the future. Whether it’s going to be a merger, or we will have two separate airlines are all options that are still on the table. To be sure, the discussions have begun and according to me, we should have clarity on this in the next few months," he was quoted as saying by the Indian media.

Air India and Vistara signed a deal earlier this year allowing them to ferry each other’s passengers in the event of flight delays and cancellations.

With four carriers in its fold – Air India, Vistara, AirAsia India and Air India Express, Tata Sons, which currently has a combined fleet strength of more than 230 airplanes of mixed fleet, expects to further consolidate its position with merger, analysts said. The group has chalked out an aggressive expansion plan for Air India and AirIndia Express, inducting six Boeing 777-200 aircraft and 25 Airbus A320 Neos by the first quarter of next year.

The conglomerate is also in the final stages of closing orders for around 200 narrow-body and wide-body jets while also weighing options to take aircraft from the secondary lease market to beef up capacity in the short term, according to industry sources.

India’s Minister of Civil Aviation and Steel Jyotiraditya Scindia said the aviation sector was growing rapidly and the whole fleet size was likely to double in the next five years.

"We are looking at a 1,200 fleet size in the country in five years, which is about double the number of the existing 700 aircraft," the minister said at the CEOs roundtable hosted by industry body Assocham.

— issacjohn@khaleejtimes.com