To fund this acquisition, SIA is planning to use its internal cash resources. Credit: Troy Mortier / Unsplash.

Singapore Airlines (SIA), the flag carrier airline of Singapore, and Tata Sons have decided to merge Air India and Vistara airline companies, with SIA agreeing to invest $250m in Air India as part of the transaction.

Vistara is a 51:49 joint venture (JV) between Tata Sons and Singapore Airlines.

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It was set up in 2013 and is a full-service carrier in India, with overseas operations in the Middle East, Asia and Europe. 

With this investment, SIA will get a 25.1% stake in the merged entity, Reuters reported.

In addition to the stake in the enlarged Air India group, SIA will also have its presence in all key market segments.

To fund this acquisition, SIA is planning to use its internal cash resources, which were S$17.5bn as of 30 September 2022, according to Times of India.

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Subject to regulatory approvals, the two companies intend to complete the merger l by March 2024.

The two companies have also agreed to infuse additional capital, if required, to support the growth of the enlarged Air India in fiscal year (FY) 2023 and FY2024.

Tata Sons chairman N Chandrasekaran was quoted by various media sources as saying: “The merger of Vistara and Air India is an important milestone in our journey to make Air India a truly world-class airline.

“We are transforming Air India with the aim of providing great customer experience, every time, for every customer. As part of the transformation, Air India is focusing on growing both its network and fleet, revamping its customer proposition, and enhancing safety, reliability, and on-time performance.

“We are excited about the opportunity of creating a strong Air India which would offer both full-service and low-cost service across domestic and international routes.  We would like to thank Singapore Airlines for their continued partnership.”

Following this merger, Air India will be the country’s leading domestic and international carrier, with a total fleet of 218 aircraft.