Vistara merger to help Air India achieve 30% domestic market share faster

Representative Image

The next 16 months could turn out to be the most interesting for Indian aviation. Singapore Airlines announced the merger of Vistara, its joint venture with the Tata Group, with Air India.

As part of the merger with Air India, which the Tata Group acquired in January, SIA will invest Rs 2,059 crore in Air India. Once the transaction is complete, SIA will hold 25.1 percent in Air India.

Quick succession

The Tata Group had already announced the merger of AirAsia India with Air India Express earlier in November. Once the merger takes place by November 2023, it could lead to the cessation of the AirAsia India brand and leave Air India Express as the sole low-fare entity for domestic and international flights.

While the AirAsia India entity was involved in court cases and faced allegations of funding unscrupulous elements, the relationship with Singapore Airlines has been without any public bickering.

The deadline for the Vistara-Air India merger is set for March 2024, which is 16 months away. But this union could be smoother primarily because Air India has inducted many former Vistara employees and, more importantly, CEO and MD Campbell Wilson has worked with both SIA and its low-cost carrier Scoot.

Also Read: How the Air India-Vistara merger will be completed in 16 months by March 2024

Vihaan.AI plan

The Vihaan.AI plan unveiled by Air India in September with the aim of reaching 30 percent market share in the domestic market and significantly growing international routes over the next five years, among other goals, had the merger decision written all over it.

How much significance does the airline give to Vihaan.AI?

Vihaan was also the name Air India gave the first Boeing 777-200 LR (VT-AEF) that it inducted into its fleet. The airline shied away to using the names of states for its B777 fleet.

But how will the merger be? The livery on the VT-AEF is a mix of the ones used on the B777 and B787. After the United and Continental merger in the US, the United name continued, with the tail being that of Continental’s livery.

After both Singapore Airlines and the Tata Group put in significant efforts to build the Vistara brand, will they just let it pass into memory or integrate some portions with the Air India designs?

Going by the current market share, the airline is likely to achieve its target of 30 percent domestic market share as a group much faster than five years.

Fleet decision?

The merger announcement could well be followed by the much-awaited fleet renewal deal. Considering how new the Airbus A320neo of Vistara are, could there be an order for both Airbus and Boeing narrowbody aircraft, with the Airbus planes part of Air India and the Boeing aircraft with Air India Express?

All indications are that the order was on hold for this merger, among a few others, but with now with the major decision taken, the order could come soon.

Also Read: Merger of Vistara with Air India: Read the full text of Vistara CEO Vinod Kannan's email to employees

Tail Note

One wonders if such a quick timeline for the merger would have been possible had the group’s original choice for CEO, Ilker Ayci, been in charge. Would it have been possible to get both groups to an agreement this early?

But speed is important. Vistara has not been able to break even since its inception, the same as AirAsia India. Air India has been losing money, too.

A combined entity will help simplify the network. In terms of domestic passenger numbers, there is a difference of a few thousand between Vistara and Air India. It makes more sense to club them together and take on the competition than compete with each other for the second spot.

The most interesting thing to see would be how the lessons of Vistara’s Premium Economy class are incorporated in the new fleet. Globally, Premium Economy is the most talked about product in the skies.