Tata Sons owned Air India has approached anti-trust regulator Competition Commission of India for a merger of full service airline Vistara. While Tata Sons holds 51% in Vistara, the remaining 49% is owned by Singapore Airlines (SIA).
After the merger, SIA will be holding a minority stake of 25.1% stake in the entity.
“The proposed transaction relates to consideration of the merger of Tata Singapore Airlines Limited (Vistara) into Air India and the acquisition of shares in the merged entity by Singapore Airlines and Tata Sons, “ a notice filed with CCI said.
While the combined entity will be the full service arm of Air India,CCI had earlier approved a merger of Air India Express with AirAsia India which will be the low cost airline.
The combined entity of the Tata group will have a 25.3% share of India’s domestic passenger market.
Air India in the notice said that the merger will not lead to any change in the competitive landscape or cause any adverse effect on competition in India.
IndiGo, the market leader, has 56.8% share of the domestic market.
The merger is aimed to be completed by FY24 and will also see SIA investing Rs 5,020 crore in the combined entity as additional capital for FY 23 and 24.
People aware of the development said that the merger process will take almost a year to complete as CCI takes around two months to approve a scheme of merger. Following that it will also have to be approved by NCLT and regulators from UAE, Singapore, UK and Germany as both the airline flies to these countries.
Legal experts said that CCI will check if the merger would lead to any adverse effect on competition based on the point of origin and destination. “For instance, Mumbai to Delhi would constitute a separate market and CCI will determine, post the merger, whether the combined entity faces enough competition on such routes or not. If CCI comes to a conclusion that there can be adverse effects on competition due to the merger, then it will have the ability to prescribe certain remedial steps to ensure that entry by new airlines is made possible,” an expert in competition law said.
The Tatas intend to compete in both low cost and full service segments as they feel that there is a vacuum in premium end after the closure of Jet Airways. In the no-frills segment it will merge AirAsia India and Air India Express operations.
