Air India and Vistara will need approvals from a number of countries in order to complete the merger conditions, according to people familiar with the matter.
Legal teams from both airlines are currently assessing which regions to approach for approval, with Europe and Singapore on their list.
It generally takes six months for approvals to be completed, and both stakeholders are concerned that the merger process should be completed as quickly as possible, the second official explained, adding that a quick transition will also help employees understand their role in the merged company.
On 29 November, Singapore Airlines and Tata Group announced a merger between Air India and Vistara, with Singapore Airlines holding 25.1% of the merged entity. The merger is expected to be completed by March 2024. Vistara is a 51:49 joint venture between Tata Group and Singapore Airlines.
The merger will also need approvals from the Directorate General of Civil Aviation, the Ministry of Civil Aviation, and Reserve Bank of India, besides seeking anti-trust and merger control clearances and approvals from Competition Commission of India, and Competition and Consumer Commission of Singapore. Both parties will also have to comply with relevant provisions of India’s Companies Act and Indian foreign exchange regulations on the fair market value of the shares.
In addition, the parties will need the sanction of the National Company Law Tribunal, and redemption or conversion of certain outstanding liabilities owed by Airports Authority of India to TATA Sons (and/or its affiliates) on or before the filing of the merger scheme.
“The process has been initiated. Paperwork is getting ready and will be filed at the respective agencies for approval,” another person aware of the development said, adding that the transition is expected to be fast tracked as has been seen in the case of AirAsia India and Air India Express.
On 2 November, Air India said that it has signed an agreement to buy a 100% stake in AirAsia India and a consolidation between Air India Express and AirAsia India is underway. On 22 December, it was announced that Aloke Singh, the CEO of Air India Express, will head the combined low-cost platform of Air India Express and AirAsia India with effect from 1 January.
While Air India’s consolidated low-cost platform will have to let go of the AirAsia brand name in a year, the Tata Group and Singapore Airlines are still assessing whether to keep both brand names or consolidate Vistara and Air India under the Air India brand. In case they decide to consolidate both airlines under a single brand, they will also need to approach civil aviation regulator DGCA to amend the air operator certificate of Air India, the official added.
According to the agreement, Singapore Airlines’ 49% interest in Vistara will translate into approximately 20.6% of Air India after the merger. Singapore Airlines will pay cash amounting to ₹2,058 //crore// at the time of completion of the merger to acquire an additional 4.5% stake. It has also agreed to invest up to ₹5,020 crore for the various plans put in place by the Tata group in FY23 and FY24 for fleet modernization, aircraft induction and other purposes related to Air India operations. The Tata group is expected to invest around ₹20,000 crore in the combined Air India group from now until FY24 and Singapore Airlines is expected to invest up to ₹7,078.5 crore.
On the merger, SIA (Singapore Airlines) had said that Vistara has been loss-making and it needs to scale up in order to achieve cost and network efficiency to reach profitability.
“Accordingly, the proposed consolidation of Vistara into the enlarged AI would enable the SIA Group to immediately gain exposure to an entity that is four to five times larger in scale compared to Vistara, which has access to valuable slots and air traffic rights at key domestic and international airports that are currently not available to Vistara, and therefore strengthen its market presence,” Singapore Airlines had said.
