Singapore Airlines & The Tata Group Mull Joint Bid For Air India

Air India may be heading back to its origins. The Tata-Singapore Airlines group, who own and operate Vistara, is considering buying Air India under the government’s new terms of sale. If it does choose to bid, and wins, we could see a new landscape develop in the Indian market.

Vistara 787 in flight
Tata and Singapore Airlines currently own Vistara. Photo: Boeing

A long history

Neither the Tatas nor Singapore Airlines are newcomers in the aviation market.

Singapore Airlines is consistently rated one of the best airlines in the world and has been operating for over five decades now. The carrier also has a number of low-cost and full-service subsidiaries such as SilkAir and Scoot, in addition to Vistara, their Indian domestic carrier.

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The Tata Group’s history with aviation stems back to 1930s when they founded India’s first ever airline, then called Tata Airlines. This airline went on to be renamed Air India and was finally nationalised by the government in 1953. In the past decade alone, Tata has been behind two domestic carriers, with it’s majority positions in AirAsia India and Vistara showing it’s appetite for investing big in the growing aviation sector.

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Vistara using the Retro Livery of "Tata Airlines", which was India's first airline.
Vistara celebrates Tata Airlines, India’s first ever airline. Photo: Vistara

Why the sudden interest?

This is not the first time Air India has been up for sale. Back in 2018, the government offered to sell 76% of the carrier. But this bid failed to attract any investors due to the large $5.1bn of debt that had to be undertaken and the possible interference by the government with its 24% stake.

The past year in particular has seen a flurry of information that seems to be positioning Air India for a complete sale. The government recently transferred four VIP 747s to a subsidiary of Air India that is not being sold and the financial situation seems to be pushing the airline to the point of shutdown, with a sale being the final option.

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In late 2019, the government announced a new plan. Under the plan, 100% of Air India is for sale, along with 100% of Air India Express and 50% of Air India SATS. This change marks the solving of the biggest sticking points in last time’s deal and has created a lot of interest in the asset-heavy carrier. The government has also shaved down the amount of debt to $3.3bn, a more realistic number considering Air India’s large fleet.

Part of the grand plan

Vistara’s goal of building a long-haul, international carrier with great service is one that is well known. The central question remains whether an Air India acquisition will help the airline meet these goals and will the cost outweigh the benefits.

Air India’s most valuable asset, in Vistara’s eyes, will be its landing slots at international airports. Air India has slots at London Heathrow, New York, Tokyo, Shanghai, Chicago, Amsterdam, among it’s 45 international destinations. An acquisition of Air India would give Vistara access to all of these slots allow them to fly there much sooner than anticipated.

In addition to slots, Air India also has a large fleet of 27 787s,  15 777s, 79 A320 family, and 25 737-800 (from Air India Express) aircraft. This large fleet, when reconfigured, could allow Vistara to start a rapid international and domestic market expansion and allow them to grow their market share significantly in a short span of time.

We can clearly see that Vistara has a lot of gain from a possible acquisition but problems do still exist in terms of the cost of the deal and possible caveats that might emerge (for example, the government announced recently that the buyer might have to keep on Air India’s bloated staff). Vistara may also choose to take a slower, more stable route of slowly expanding its presence and build its reputation rather than trying to jump the queue using Air India.

air-india-boeing-787-8
An Air India acquisition could give Vistara access to a widebody fleet and slots at airports like Heathrow. Photo: Adrian Pingstone via Wikimedia Commons

Tata and Singapore Airlines clearly have a lot of thinking to do before they decide to embark on this joint bid, but the facts do seem to be favourable. What remains to be seen is who the other players in this deal are and whether or not Tata-SIA is willing to shell out for a debt-stricken airline.

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PowerfulNomad

Syd , there’s something you have written incorrectly , the government placed the condition that the permanent staff will have 5 years of job security.

M. R. Rao

Better to allow the buyer to offer VRS to its staff and have free hand in recruitment…Also take back all the loan burden of the airline and use the sale proceeds to clear those loan burden. Somehow some leaders and some buerocrats do not want the sale to happen, just they do not want to loose their prevoleges

Goutam Kumar Goswami

I think personally it will be VERY GOOD FOR THE INDIAN AVIATION INDUSTRY. BECAUSE SINGAPORE AIRLINES AND TATA AIRLINES BOTH THEY ARE HIGHLY EXPERIENCE WITH GOOD REPUTATION IN THE AVIATION INDUSTRY.

As a common public I think if IT WILL BE HAPPEN THEN IT WILL BE VERY GOOD.I APPRECIATE THEM. BECAUSE THEY ARE PROSPECTIVE BUYER.

stogieguy7

Vistara’s owners would have to fumigate those AI aircraft before reconfiguring them. Air India is infamous for having filthy aircraft.

Matthew in PDX

The bloated staffing of Air India is one of the biggest issues that would likely prevent SIA or Tata Group from buying Air India under the current terms. If Air India is allowed to fail, the valuable assets will be sold off, including landing rights, aircraft and maintenance facilities. SIA has a very strong tradition of high quality customer service, so the likelihood of retaining flight crew or ground staff that cannot or will not adapt to the new standards is highly unlikely.

My guess is that the Air India staff unions put pressure on the government to include the five years of job security, and that is a millstone around any airline owner’s neck. Jobs for life are inconsistent with developing a customer focused airline, as many government owned flag carriers have found.

Gerry S

Matthew in PDX spoke for me. I fully concur.

Doz

Good god that’s a disaster waiting to happen for anyone foolish enough to invest. Look at Etihad as a prime example of how NOT to do things.

Sridhar

It will be great to have TATAs take over.It is home coming for AirIndia.Decline of air India started with nationalisation.Initially the Monopoly and later inefficiency.

Vijay

Shame on India that it can’t even manage one airline. Learn from a small island nation like Fiji which has been running a popular airline for over 50 years.

Gerry S

Another reader commenting on South Africa Airlines said that the former CEO of SAA who was replaced is now managing Fiji Airways. Interesting!

Sergiu Alexei

Even if this company is a newcomer in the aviation market, mainly it is real and affordable for the Singapore Airlines to apply for Air India.
We could came to such a conclusion if we look closer to their 2018 final revenue by sales.
https://www.globaldatabase.com/top-15-public-companies-in-singapore-by-sales-in-2018#7