Tata Group and Singapore Airlines have announced plans to merge Air India with Vistara to create a larger airline capable of operating both full-service and low-cost passenger services.

Vistara is a joint venture between the Tata Group and Singapore Airlines, with SIA owning 49 per cent of the carrier, and Air India was acquired by Tata in January 2022.

Singapore Airlines is investing US$250 million in Air India as part of the transaction, giving it a 25.1 per cent stake in the enlarged Air India group. The deal, which is subject to regulatory approvals, is set to be completed by March 2024.

SIA and Tata have agreed to participate in additional capital injections in the coming two years, if required, to fund the growth and operations of the enlarged Air India. SIA said that it could spend up to US$615 million, payable only after the completion of the merger.

Singapore Airlines said in a statement that the deal would enable it to “immediately acquire a strategic stake in an entity that is four to five times larger in scale compared to Vistara”, with the merger set to bolster its presence in India.

SIA also highlighted the benefits of Air India’s valuable slots and air traffic rights at domestic and international airports, while adding that Air India will gain Vistara’s “operational capabilities, customer base, and a strong focus on customer service and product excellence”.

Air India and Vistara currently have a total of 218 wide-body and narrow body aircraft, serving 38 international and 52 domestic destinations.

Goh Choon Phong, CEO of Singapore Airlines, said:

“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.

“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. 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, Chairman of Tata Sons, added:

“The merger of Vistara and Air India is an important milestone in our journey to make Air India a truly world-class airline. We are transforming Air India, with the aim of providing great customer experience, every time, for every customer. As part of the transformation, Air India is focusing on growing both its network and fleet, revamping its customer proposition, enhancing safety, reliability, and on-time performance.

“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.”