SINGAPORE Airlines (SIA) has received approval from India’s government for foreign direct investment (FDI) into the entity resulting from the merger of SIA’s 49 per cent-associated company, Tata SIA Airlines – operating as Vistara – and Air India.
On Friday (Aug 30), the flag carrier said that the completion of the merger is now expected by end-2024.
When the group first announced its plan to merge Vistara and Air India in November 2022, this was expected to be completed in March 2024, subject to regulatory approvals.
SIA said that the FDI approval, together with the other governmental and regulatory clearances and approvals received to date, represented a “significant development” towards the completion of the merger.
It added that both SIA and Vistara were in discussions to extend the long-stop date, previously indicated as Oct 31, in view of the transaction’s latest expected completion date.
Shares of SIA were trading S$0.03 or 0.5 per cent higher at S$6.24 as at the midday break on Friday, after news of the approval given for the FDI under the deal.
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Obtaining FDI clearance for the enlarged entity represented the final regulatory hurdle for the proposed merger between Vistara and Air India.
The completed transaction will result in SIA holding 25.1 per cent of the enlarged entity, which is expected to be four to five times larger than Vistara.
SIA also expects it to boost the group’s presence in India, strengthen its multi-hub strategy, and allow it to continue participating directly in a large and fast-growing aviation market.
Analysts had initially responded with mixed opinions about the group’s prospects for expansion in India, given the country’s highly competitive aviation scene and its historical lack of profitability.
Citi equity analyst Kaseedit Choonnawat, however, anticipated the combination to be favourable for SIA in the long haul. This is because the combined entity should have a higher capacity, and certain levels of frequency or destination dominance, especially on international routes, he said in a November 2022 report.
SIA has, in recent years, sought to expand its reach beyond Singapore’s market through partnerships and joint ventures with the likes of Malaysia Airlines, Garuda Indonesia and All Nippon Airways.
Air India, which includes low-cost carriers Air India Express and AirAsia India, is wholly owned by Tata Sons. Vistara is a 51:49 joint venture between Tata Sons and SIA. It makes SIA the only foreign airline with a direct stake in an Indian carrier.
While India’s antitrust body approved the deal in September 2023, the Competition and Consumer Commission of Singapore (CCCS) identified certain competition concerns. One was that both parties possessed the majority of market share among airlines operating direct flights along four routes between Singapore and the Indian cities of New Delhi, Mumbai, Chennai and Tiruchirappalli.
To address these issues, SIA and Tata have proposed to maintain capacity on these flights at pre-Covid levels, appoint independent auditors to monitor compliance with capacity commitments, and submit annual and interim reports. The competition watchdog said that it considered these suggestions “sufficient to address the competition concerns arising from the transactions”, so it gave its green light for the deal, but it is subject to conditions.
