Air India & Vistara May Merge Into One Brand

Air India & Vistara May Merge Into One Brand

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In October we learned that Air India and Vistara are considering closer cooperation. While nothing has been finalized yet, it sounds like a full-on merger is closer to becoming a reality, and that seems logical enough.

Air India & Vistara plan closer cooperation

In late 2021, plans were announced for Air India to be privatized. Specifically, Tata Group, which was also Air India’s initial owner when the company was first founded, would be taking control of the company again.

Interestingly Tata Group already had a significant investment in Indian aviation, as the company owned 51% of Vistara and 84% of AirAsia India. One major question has been how exactly those different brands would be managed. We now have a better sense of that.

Singapore Airlines owns the other 49% of Vistara, and in October the company announced that it’s in discussions with Tata Group about the future of Air India and Vistara. In a statement, Singapore Airlines stated the following:

In line with its multi-hub strategy, SIA is currently in confidential discussions with Tata to explore a potential transaction in relation to the securities of Vistara and Air India Ltd, a subsidiary of Tata. The discussions seek to deepen the existing partnership between SIA and Tata, and may include a potential integration of Vistara and Air India.

It’s noted that discussions are ongoing, and no final decisions have been made. More recently, Bloomberg is reporting that the plan is for Air India and Vistara to undergo a full merger, with the Air India brand surviving. An official announcement could be made in the coming weeks.

Singapore Airlines would allegedly remain involved in the combined airline. Singapore Airlines currently owns a 49% stake in Vistara, but it’s believed that Singapore Airlines’ stake in the combined airline would be closer to 20-25%.

Vistara & Air India are considering closer cooperation

This would be a very logical development for Indian aviation

I think many were excited when it was announced that Air India would be privatized, as the hope has been that under new management, so many of the things that have been wrong with Air India for years would be fixed. In particular, this includes a lackluster customer experience. The company appointed a new CEO who previously worked at Scoot and Singapore Airlines, which seemed like a smart move.

Admittedly Rome wasn’t built in a day, but I’m sure I’m not the only one who feels like Air India hasn’t had much of a transformation so far:

  • Yes, Air India is benefiting greatly from Russian airspace being closed to many airlines, as the airline is able to more competitively operate flights to the United States, since it can operate routes that US airlines can’t
  • Air India did announce plans to acquire 30 planes, including some former Delta Boeing 777s, which is good news
  • However, we haven’t seen a major order for factory fresh wide body jets, and for that matter we haven’t seen any plans to refresh Air India’s awful long haul product, which is woefully uncompetitive

And that brings us to this development — closer cooperation, or even a full-on merger between Air India and Vistara, makes perfect sense. Currently the two airlines are competing directly with one another in many markets, even though they have the same owner. Vistara has a much better inflight product than Air India.

Air India could use a product upgrade

You’d think a logical move would be to have Air India adopt Vistara’s product going forward, to create a better and more consistent customer experience. It’s anyone’s guess if that actually happens, but I’m rooting for it. I fear the reality may end up being that Air India drags Vistara down, rather than the other way around.

Vistara’s Boeing 787 business class

Bottom line

Talks are taking place for Air India and Vistara to work more closely together, including the possibility of a full merger. Given that the two companies have the same majority owner, and given that Air India is supposed to try to reinvent itself, this seems like a logical progression.

Hopefully this would come with a significant investment in the Air India passenger experience, so that the Vistara experience isn’t worsened too much.

What do you make of the possibility of an Air India and Vistara merger?

Conversations (27)
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  1. Tim Dunn Diamond

    You would think the Indian government might have something to say about greater integration but then they probably should not have allowed Tata to control as much of the airline industry in India as they now have.
    Indian aviation is a chronic underperforming mess but allowing one company to hold so many cards is not the answer regardless of the country

    1. Sarthak Guest

      Not sure if that’s an educated assessment of the Indian aviation market. Capital scarcity and high taxation translate into very high barriers of entry. It’s been 50+ years of the government trying to turn this around but clearly been unable to. You should look at the results when they were sourcing for bids for Air India. No one came forward. I’m not sure how much you know about Tatas but they aren’t your fly by...

      Not sure if that’s an educated assessment of the Indian aviation market. Capital scarcity and high taxation translate into very high barriers of entry. It’s been 50+ years of the government trying to turn this around but clearly been unable to. You should look at the results when they were sourcing for bids for Air India. No one came forward. I’m not sure how much you know about Tatas but they aren’t your fly by night operators - they have successfully operated companies in India with overwhelming market share with an unblemished record as far as price gouging is concerned. So this is a pretty pessimistic assessment.

    2. Sean M. Diamond

      The 4 TATA owned airlines put together still have less than half the domestic market share than Indigo does (as of September 2022). So the TATA group may control a number of airlines, but that doesn't translate into market dominance.

      57.7% - Indigo
      9.6% - Vistara
      9.2% - Air India
      7.9% - GoFirst
      7.3% - SpiceJet
      8.3% - Others (including Air Asia India and Air India Express)

    3. Sarthak Guest

      +1 to Sean.

      @Tim Dunn - So much for being data driven?

    4. Tim Dunn Diamond

      it is precisely because the Indian market is so fragmented that it is not very profitable for anyone.
      But allowing 4 airlines to collectively control such a high percentage of capacity relative to any other is still problematic.
      From an antitrust and consumer standpoint, it would be far better for there to be a series of mergers and consolidations to put multiple carriers into the 15-20% market share than to have one entity...

      it is precisely because the Indian market is so fragmented that it is not very profitable for anyone.
      But allowing 4 airlines to collectively control such a high percentage of capacity relative to any other is still problematic.
      From an antitrust and consumer standpoint, it would be far better for there to be a series of mergers and consolidations to put multiple carriers into the 15-20% market share than to have one entity control nearly half of the market
      My original statement stands.

    5. sarthaksharma New Member

      Another incorrect assessment. Fragmentation has absolutely nothing to do with profitability. 1. Fuel is a major variable cost end, if not the biggest and it sits at a big premium in India which has coincided with the steady depreciation of the rupee. It accounts for about 30-40% of operating costs in India. 2. Indian domestic market is notoriously price sensitive, leading to price wars that limit revenues and yields. Indian government sets price bands based...

      Another incorrect assessment. Fragmentation has absolutely nothing to do with profitability. 1. Fuel is a major variable cost end, if not the biggest and it sits at a big premium in India which has coincided with the steady depreciation of the rupee. It accounts for about 30-40% of operating costs in India. 2. Indian domestic market is notoriously price sensitive, leading to price wars that limit revenues and yields. Indian government sets price bands based on flight duration, which does not help. 3. Civil aviation pays 21% of its revenues to the government in indirect taxes with very little input credit which makes a huge dent in profitability. I'm not sure where that arbitrary "15-20% market share" assessment comes from, but these factors combined with government interference and a simple look at the history going back to Kingfisher and Jet Airways, easily explain why profitability has been extremely hard regardless of an airline's scale.

    6. Sean M. Guest

      @Tim Dunn - you aren't making sense. The proposed "merger" that you are opposed to will do exactly what you are proposing - viz. create an entity with approx. 20% market share. It is actually defragmenting the market by combining multiple players in the 10% range.

    7. Tim Dunn Diamond

      I understand the situation precisely.
      The Government of India has allowed the airline industry to be so heavily concentrated in the hands of a couple players that it isn't much better now under the free market than it was before.
      Cost is only part of the equation and airlines for the most part don't control fuel costs (Delta's refinery strategy and Southwest's hedging are exceptions that have consistently worked to reduce fuel costs).

      I understand the situation precisely.
      The Government of India has allowed the airline industry to be so heavily concentrated in the hands of a couple players that it isn't much better now under the free market than it was before.
      Cost is only part of the equation and airlines for the most part don't control fuel costs (Delta's refinery strategy and Southwest's hedging are exceptions that have consistently worked to reduce fuel costs).
      Concentration in ANY industry DOES increase the ability to raise fares which is what India has needed. They have TOO MANY small players that are all fighting for their lives.
      And a smaller number of those players are in the international market.
      Mature markets like the US and Europe as well as in Latin America (as a less mature market) show that uncontrolled entry of new competitors into the airline industry has not resulted in the best profitability for everyone and uncontrolled concentration has hurt consumers.

      You are free to fail to see my point but my point is still that India is probably going from one extreme to another.

  2. AnishReddi Member

    I think you meant Singapore airlines not air India in 'Air India’s stake in the combined airline'

  3. DC Guest

    Air India will announce a major wide body order eventually, but discussions with Airbus for the A350 have come to standstill, and they’re currently talking to Boeing in hopes that they’ll be more lenient on pricing than Airbus was. Some said that TATA group had a bit of sticker shock when Airbus gave them their offer.

    1. ConcordeBoy Diamond

      I was sorta hoping that Airbus would use AI as an opportunity to get more A330NEOs with a full-service major carrier, in addition to A350s... but apparently, it's all about the Benjis.

      Then again, Boeing really could use some more orders for the 777X family, especially the 777-8 passenger model. This could be their opportunity.

  4. Hiro Guest

    I just flew Air India twice on domestic for the first time since the privatization and oh boy they have TRANSFORMED! The crew were very courteous and professional, enthusiastic, and wonder what happened to the old crew. The lounge in Delhi was supervised by outsourced looking staff and kept going around to make sure things were right (it seemed). The food has improved and other small details have been paid attention to.

  5. DCharlie Guest

    What this article failed to mention is that the talks include the mergers of AI, UK and I5. This would allow the airline to have a complete offering of long-haul and domestic full service as well as ULCC.

    1. Sean M. Diamond

      Don't forget IX - there are currently 4 brands owned by the TATA Group in India.

    2. John Guest

      @Sean M

      IX......drool

  6. Emily Guest

    The Air India brand should remain as the flag-ship airline. I think the two airlines need to standardize their hard products, but there should be a distinct difference in the intent on onboard soft products. A logical step would be to focus Vistara on the domestic and some select foreign routes whereas Air India, bearing the name of the country, be the flagship for long haul.

    For all internal purposes such as ticketing and...

    The Air India brand should remain as the flag-ship airline. I think the two airlines need to standardize their hard products, but there should be a distinct difference in the intent on onboard soft products. A logical step would be to focus Vistara on the domestic and some select foreign routes whereas Air India, bearing the name of the country, be the flagship for long haul.

    For all internal purposes such as ticketing and miles redemption, it should be revamped such that it uses the same platform with 100% reciprocity.

    There is indeed a lot of exciting news coming from the aviation industry here - not just through the major carriers but also through private chartered carriers.

    1. PV Guest

      God no! Vistara basically becomes Indian Airlines circa early 2000s? Merger fully is the way to go, unless they have radically different cost structure!

    2. sarthaksharma New Member

      That's an interesting take, Emily. With the stop gap capacity enhancement that TATA is pursuing (presumably by picking up DL hardware), the configurations are going to be quite non-standard. Then you throw in UK vs AI fleet configurations, I wonder how easy it would be to maintain structure.

      I am personally very curious if the airline pursues a multi-hub strategy, particularly for long haul routes. For a country of this size, the overwhelmingly Delhi centric...

      That's an interesting take, Emily. With the stop gap capacity enhancement that TATA is pursuing (presumably by picking up DL hardware), the configurations are going to be quite non-standard. Then you throw in UK vs AI fleet configurations, I wonder how easy it would be to maintain structure.

      I am personally very curious if the airline pursues a multi-hub strategy, particularly for long haul routes. For a country of this size, the overwhelmingly Delhi centric approach makes no sense.

  7. Eskimo Guest

    Need Tim Dunn to analyze the Indian aviation industry.

    1. Never In Doubt Guest

      TLDR Tim Dunn:

      If these airlines mimic what Delta’s done in similar circumstances they’d be on the way to fame and fortune.

      Unfortunately, no airline operates at the level of genius that Delta does, so it’s likely to turn out badly.

  8. Rita Rana Guest

    Yes please merging both companies makes the most sense.better facilities foods will be better. Hopefully Will be the best airline in the world.
    Better business for India.✈️

  9. Rita Rana Guest

    Yes please merging airindia and Vistara makes the most sense.better facilities foods will be better. Hopefully Will be the best airline in the world.
    Better business for India.✈️

  10. joltedjots New Member

    Yes, replacing the air india product with what Vistara offers makes the most sense.

    1. Eric Guest

      Unfortunately I think we all know which hard & soft products will win
      Hint: it's not the spendy one

  11. Utkarsh Soni Guest

    I book air india tickets often and 1 change I have noticed is the website. Air india updated its website and now is more user friendly, they also adopted a baggage tracking feature and email updates on gate change/flight details. These are not radical changes, but it might be a sign of a positive direction.

  12. Marcus Guest

    To combines Vistara culture and service that rivals SQ with Air India that fights Pakistan Air for the worst airline in the world is a tragedy.

    1. Nate nate Guest

      Makes as much sense as combining JetBlue culture and service with Spirit...

Featured Comments Most helpful comments ( as chosen by the OMAAT community ).

The comments on this page have not been provided, reviewed, approved or otherwise endorsed by any advertiser, and it is not an advertiser's responsibility to ensure posts and/or questions are answered.

Sean M. Guest

@Tim Dunn - you aren't making sense. The proposed "merger" that you are opposed to will do exactly what you are proposing - viz. create an entity with approx. 20% market share. It is actually defragmenting the market by combining multiple players in the 10% range.

4
Sean M. Diamond

The 4 TATA owned airlines put together still have less than half the domestic market share than Indigo does (as of September 2022). So the TATA group may control a number of airlines, but that doesn't translate into market dominance. 57.7% - Indigo 9.6% - Vistara 9.2% - Air India 7.9% - GoFirst 7.3% - SpiceJet 8.3% - Others (including Air Asia India and Air India Express)

4
Never In Doubt Guest

TLDR Tim Dunn: If these airlines mimic what Delta’s done in similar circumstances they’d be on the way to fame and fortune. Unfortunately, no airline operates at the level of genius that Delta does, so it’s likely to turn out badly.

3
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