Vistara to merge with Air India on November 12 following government's approval of Singapore Airlines' FDI

By Sunita Iyer | First Published Aug 30, 2024, 11:04 AM IST

In a significant development for the Indian aviation sector, Vistara, India's premier full-service airline, is set to merge with Air India on November 12, 2024.

In a significant development for the Indian aviation sector, Vistara, India's premier full-service airline, is set to merge with Air India on November 12, 2024. This date has been finalized soon after the Indian government approved the foreign direct investment (FDI) by Singapore Airlines (SIA) into Air India, marking a critical milestone in the ongoing consolidation of the two airlines.

Singapore Airlines, which previously held a 49% stake in Vistara, will now acquire a 25.1% stake in the newly merged Air India Group by investing Rs 2,059 crore. In a statement released on Friday, Singapore Airlines confirmed the Indian government's approval of its proposed FDI into the enlarged Air India Group. The statement highlighted that this approval, along with other regulatory clearances from agencies like the Competition Commission of India and the Directorate General of Civil Aviation (DGCA), paves the way for the merger’s completion.

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"SIA and Tata Sons are working to finalize the merger by the end of 2024," the statement read. "Upon completion, SIA will hold a 25.1% stake in the enlarged Air India Group. SIA and Tata Sons are firmly committed to supporting the growth and success of the Air India Group, which post-merger will have a significant presence in all key Indian airline market segments, including full service, low-cost, international, and domestic operations."

With the FDI approval now secured, Air India and Vistara are expected to shortly communicate the merger timeline to passengers. Those who have booked tickets on Vistara flights scheduled to operate after the merger date will be informed that their flights will now be operated by Air India, along with changes in flight numbers and timings.

Vistara currently operates a fleet of 70 aircraft, which will continue to fly in Vistara’s livery until they undergo heavy maintenance checks, at which point they will be repainted in Air India's new livery. Sources within the aviation industry indicate that the decision to retain Vistara's current livery for now is a strategic one, aimed at avoiding any unnecessary reduction in capacity. Additionally, Vistara's aircraft are known for their superior cabin products compared to Air India's older planes, further supporting this interim decision.

Vistara has already started reaching out to its frequent flyers, informing them about the transfer of their loyalty points to Air India's frequent flyer program. The integration of personnel is also underway, with several Vistara employees now operating from Air India’s new headquarters in Gurgaon.

Concerns have been raised about potential disruptions for passengers who have booked seats in Vistara’s premium cabins, such as business or premium economy class, on flights scheduled after the merger date. There is speculation that these passengers could be shifted to lower classes, such as economy, on Air India flights if Air India's business class is fully booked or if the airline does not offer a premium economy class on the specific flight. However, sources have downplayed these concerns, stating that the chances of such occurrences are minimal.

Interestingly, there had been internal discussions within Air India management about postponing the merger. The reasoning behind this was the desire to first upgrade Air India's planes before fully integrating with Vistara, which is considered to offer a superior product. However, concerns from Vistara employees, particularly regarding the allocation of key positions to Air India officials in the merged entity, led to the decision to proceed with the merger as planned.

The merger of Vistara into Air India marks a significant consolidation in the Indian aviation market and is expected to strengthen the competitive position of the Air India Group across various market segments. The combined entity will benefit from a diversified fleet and a broader network, both domestically and internationally. Moreover, Singapore Airlines’ increased stake in the group underscores its commitment to expanding its footprint in one of the world’s fastest-growing aviation markets.

As the merger date approaches, all eyes will be on how the integration is managed and how it impacts the overall passenger experience. The successful merging of operations, fleet, and personnel will be crucial in determining the future trajectory of the Air India Group, which aims to reclaim its position as a leading global airline.

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