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SIA to invest up to $1.24 billion for 25.1% stake in Air India with Vistara merger

SIA intends to fully fund this investment with its internal cash resources, which stood at $17.5 billion as at Sept 30.

Fresh from emerging from the pandemic with all pistons firing, flag carrier Singapore Airlines has worked out an appetite to venture overseas again.

The airline, together with Indian conglomerate Tata, has agreed to merge Air India and Vistara.

Tata earlier this year gained control of Air India while Vistara is an existing joint venture between Tata and SIA.

By doing so, SIA can gain a bigger foothold in what is the world’s third largest aviation market and where passenger traffic is seen to double in the coming decade.

As part of the deal, SIA will be investing INR 20.6 billion ($360 million) in Air India, giving SIA a 25.1% stake in an enlarged Air India group.

In addition, SIA and Tata will inject further capital if need be, to fund Air India in the current FY2023 ending March 2023 and the subsequent FY2024.

Based on SIA’s 25.1% stake post-completion, its share of any additional capital injection could be up to INR 50.2 billion ($880 million). This means a total investment on SIA's part of up to $1.24 billion.

SIA intends to fully fund this investment with its internal cash resources, which stood at $17.5 billion as at Sept 30.

SIA and Tata aim to complete the merger by March 2024, subject to regulatory approvals.

According to SIA, this transaction will reinforce its partnership with Tata and immediately acquire a strategic stake in an entity that is four to five times larger in scale compared to Vistara.

The merger would bolster SIA’s presence in India, strengthen its multi-hub strategy, and allow it to continue participating directly in a large and fast-growing aviation market.

“Tata Sons is one of the most established and respected names in India. Our collaboration to set up Vistara in 2013 resulted in a market-leading full-service carrier, which has won many global accolades in a short time,” says SIA CEO Goh Choon Phong.

“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,” he says.

“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,” adds Goh.

Natarajan Chandrasekaran, chairman of Tata Sons calls the merger of Vistara and Air India an important milestone in our journey to make Air India a truly world-class airline.

“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. We would like to thank Singapore Airlines for their continued partnership.”

According to SIA, the combination of Air India and Vistara would bring significant synergies.

For one, Air India has valuable slots and air traffic rights at domestic and international airports that are not available to Vistara.

Air India, on the other hand, will benefit from Vistara’s operational capabilities, customer base, and a strong focus on customer service and product excellence.

The two airlines have a total of 218 widebody and narrowbody aircraft, serving 38 international and 52 domestic destinations.

SIA shares closed on Nov 29 at $5.47, up 0.18% for the day, and up 9.18% year to date.

 

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