CCI Greenlights Merger Deal Between Air India and Vistara

02 Sep, 2023

CCI Greenlights Merger Deal Between Air India and Vistara

After encountering numerous obstacles, the Competition Commission of India (CCI) granted approval on September 1 for the merger of Vistara, a Tata Group airline, with Air India. However, this approval is subject to specific conditions. This development paves the way for Air India to potentially become the nation's largest international carrier and the second-largest domestic airline, trailing only IndiGo in terms of domestic market share.

In a statement, the CCI stated, "CCI approves the merger of Tata SIA Airlines into Air India, and acquisition of certain shareholding by Singapore Airlines (SIA) in Air India subject to compliance with voluntary commitments offered by the parties." The announcement was made via Ion X, previously known as Twitter. The agency also indicated that additional details would follow regarding the merger.

This approval from the CCI arrives after several months of scrutiny. In June, the CCI issued a show cause notice to Air India, seeking clarification on why its proposed merger with Vistara should not be investigated due to concerns about potential anti-competitive practices in the aviation sector.

This development marks a significant stride for the Tata Group in its efforts to consolidate its presence in the aviation sector. Vistara and Air India, both full-service carriers, are integral components of the Tata Group's aviation portfolio. Singapore Airlines (SIA) holds a substantial 49 percent stake in Vistara.

As part of the merger arrangement, SIA will inject Rs 2,059 crore into the expanded share capital of Air India in exchange for a 25.1 percent stake. The remaining 74.9 percent stake in the combined entity will be held by Tata Sons.

Tata Sons and SIA formally submitted a merger application to the CCI in April of the same year. Their application emphasized that the proposed merger between Vistara and Air India would not significantly alter the competitive landscape or have adverse effects on competition within the Indian aviation industry. They expressed optimism that the merger would be finalized by March 2024.

This transaction represents a strategic move by SIA to strengthen its partnership with Tata and acquire an immediate stake in an entity that is four to five times larger in scale compared to Vistara. The merger is expected to enhance SIA's presence in India, reinforce its multi-hub strategy, and enable it to maintain direct participation in the substantial and rapidly expanding Indian aviation market.

In the meantime, CAPA India, an aviation research and advisory firm, previously asserted that the merger would "redefine market dynamics and shift the balance of power in the international arena towards Indian carriers." Historically, foreign carriers have dominated this arena. Following the completion of the merger, CAPA India anticipates the emergence of Air India as a global network carrier within the next six years, marked by substantial growth in size, scale, and service quality. Furthermore, the airline is expected to capture a significant 50 percent market share in international air traffic.