Singapore Airlines said on Thursday it is in talks with India’s Tata Group about a possible merger of their Vistara joint venture with Air India to give the Singaporean carrier greater support in South Asia.
“Discussions are aimed at deepening the existing partnership between SIA and Tata and may include the possible integration of Vistara and Air India,” SIA said in a statement.
He said the final terms of the deal, which would create a more formidable competitor for the country’s dominant carrier, IndiGo, as well as competitors in the Middle East, which carries much of India’s international traffic, had not been agreed upon.
SIA said India has strong domestic and international traffic flows, which are expected to double over the next 10 years compared to the more mature domestic market.
The Singapore airline owns 49 percent of Tata SIA Airlines, which operates the full-service airline Vistara, while the Indian conglomerate owns the rest.
Tata owns all of Air India after buying India’s formerly state-owned national carrier in January. SIA, focused on improving its balance sheet, did not participate in the offer, but in July, Campbell Wilson, the former head of the Singapore airline, became the new chief executive of Air India.
As it seeks to improve its image after years of losses, the Indian airline is upgrading its fleet and aims to achieve at least a 30% domestic market share in the next five years. It is also launching more services to North America, where its use of Russian airspace gives it shorter flight times than rivals, which have avoided it since Moscow launched its invasion of Ukraine in February.
“The conversion of Vistaras from SIA to an investment in the Tata-led airline group makes sense,” said Singaporean independent analyst Brendan Sobie. “The creation of this group will enhance the position of all Tata airlines and SIA’s investment in the Indian market.” Air India and Tata, which also controls budget carrier AirAsia India, did not immediately respond to requests for comment.
Shukor Yusof, director of Malaysia-based aviation consultancy Endau Analytics, said SIA does not have a good track record in mergers and acquisitions.
He owned a 20% stake in Virgin Australia, which was dissolved after the Australian airline went into voluntary administration in 2020.
In 2012, SIA sold its 49% stake in Virgin Atlantic to Delta Air Lines for $360 million, well below its investment price 600 million pounds in 2000.
“While the Vistara deal with Tata appears to be working well, Air India may be biting off more than it can chew,” Shukor said. “But India is the next aviation frontier with China closing and slowing down, and SIA can afford to take a hit and lose millions if it doesn’t work.”
