Indian FSC Air India, which Tata Sons own, has approached the Competition Commission of India, an anti-trust regulator, with a proposal to merge its full-service airline, Vistara.
Tata Sons currently holds a 51% stake in Vistara, while the remaining 49% is owned by Singapore Airlines (SIA).
Tata Air India Merger with Vistara
The notice submitted to CCI stated that Tata-owned Air India has proposed a merger with Vistara. Tata Sons currently holds a 51% stake, and the remaining 49% is owned by Singapore Airlines (SIA).
As part of the merger, SIA’s stake in the merged entity will be reduced to a minority of 25.1%. Further, the notice mentioned that the proposed transaction involves joining Tata Singapore Airlines Limited (Vistara) into Air India. Nonetheless, Tata Sons and Singapore Airlines acquired shares in the merged entity.
The merged entity will be the full-service segment of Air India. While AirAsia India will be the low-cost carrier after its merger with Air India Express was approved by the CCI.
The combined entity resulting from the merger between Tata-owned Air India and Vistara will hold a 25.3% share of India’s domestic passenger market.
In the notice to the CCI, Air India stated that the merger would not have any impact on the competitive environment. Further, it will not pose any detrimental effects on competition in India.
Indian Market Outlook
IndiGo currently holds the domestic market’s largest market share of 56.8%. The merger of Air India and Vistara, aimed to become the full-service arm of Air India, will be completed by FY24. Furthermore, Singapore Airlines invested Rs 5,020 crore in the combined entity for FY23 and FY24.
However, the merger process is expected to take nearly a year to complete. It requires approvals from various regulatory bodies, including the CCI, NCLT, and regulators from UAE, Singapore, UK, and Germany, as both airlines fly to these countries.
Experts predict that CCI will determine the impact of the merger on competition based on the point of origin and destination. If the combined entity is deemed to hurt competition, CCI may prescribe remedial steps to facilitate entry by new airlines.
The Tatas aim to compete in both low-cost and full-service segments. They are filling the vacuum created by the closure of Jet Airways. To achieve this goal, they plan to merge AirAsia India and Air India Express operations in the no-frills segment.
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