Tata steps up India’s aviation reboot with Singapore Air deal

Bloomberg

The merger of Tata Group’s joint venture with Singapore Airlines Ltd into Air India Ltd should help consolidate the aviation sector in the South Asian nation and provide fresh growth opportunities for the flag carrier after years of mismanagement and losses.
“India needs a high-quality, dependable long haul and ultra-long haul airline to meet the country’s air connectivity requirements,” CAPA Centre for Aviation said in a statement following the announcement that Vistara will merge with Air India. Singapore Airlines will invest $250 million for a 25% stake in the national carrier, which will become India’s second-biggest airline.
“The combination of Tata Sons and Singapore Airlines will provide Air India with the requisite strategic expertise, industry capabilities, access to capital and determination to create an airline that India will be proud of,” Sydney-based CAPA said.
For Tata, the merger marks the start of yet another chapter in its long and tumultuous history in aviation. The conglomerate set up Air India in 1932, originally flying mail between Karachi and Bombay, now known as Mumbai. It was taken over by the government in the 1950s and only bought back by Tata last year in a win for Prime Minister Narendra Modi’s push for privatisation.
Tata embarked on two other ventures in the middle of the last decade with Vistara and AirAsia India, but both failed to make money even prior to the Covid pandemic.
The conglomerate also owned Air India Express, established in 2005, leaving it with four different airlines in a highly competitive and fragmented market.
All brands combined gave Air India a domestic market share of about 26% in October, far behind market leader IndiGo’s nearly 57%. The Vistara merger should give the formerly state-run airline more firepower to aggressively expand, and a huge order for aircraft is already in the works. Air India Chief Executive Officer Campbell Wilson said last month the airline will triple its fleet of 113 aircraft over five years.
Tata and Singapore Airlines have both agreed to inject fresh capital if needed to help lift Air India back to the highs of decades gone by, when the airline had a glitzier sheen as it sought to reflect India’s rising might. It was famed for its advertisements featuring Bollywood stars.
“We have an opportunity to deepen our relationship with Tata and participate directly in an exciting new growth phase in India’s aviation market,” Singapore Airlines CEO Goh Choon Phong said.
In the meantime, Air India said it would acquire AirAsia’s local venture and merge it with Air India Express into a single low-cost carrier. That consolidation will likely happen by the end of 2023.