Singapore Airlines would invest an additional Rs 3,194.5 crore in Tata Group-owned Air India following the merger of Vistara in November. The merger, announced on November 29, 2022 and scheduled to be finalized on November 11, 2024, will result in Singapore Airlines owning a 25.1% interest in the larger Air India.Singapore Airlines would invest an additional Rs 3,194.5 crore in Tata Group-owned Air India following the merger of Vistara in November. The merger, announced on November 29, 2022 and scheduled to be finalized on November 11, 2024, will result in Singapore Airlines owning a 25.1% interest in the larger Air India.
Vistara, a full-service carrier that began operating on January 9, 2015, is a joint venture between Tatas and Singapore Airlines, with the latter holding a 49 percent stake. Singapore Airlines (SIA) Group announced on Friday that its consideration for the merger includes a 49 percent stake in Vistara and Rs 20,585 million (Rs 2,058.5 crore) in cash in exchange for a 25.1% equity stake in the enlarged Air India. Following the merger, SIA plans to register a non-cash accounting gain of about 1.1 billion Singapore dollars and to begin equity accounting for its part of Air India’s financial results.
According to a release issued on Friday, the merger includes an agreement for SIA to contribute its share of any funding previously provided by Tata prior to the merger’s completion, as well as relevant funding costs of up to Rs 5,020 crore, allowing it to retain a 25.1% stake in Air India. “SIA’s fresh financial investment is projected to be Rs 31,945 million (equal to SGD 498 million), based on Tata’s current funding to Air India. This will happen after the merger is completed, in November 2024, by the subscription of new Air India shares.
“Future capital injections will be considered based on Air India’s requirements and available funding options,” according to a press release issued alongside the airline’s financial performance for the six months ended September 2024. Vistara’s merger with Air India will represent a significant consolidation in the rapidly expanding Indian aviation market. SIA stated that the amalgamated firm will have a considerable footprint in all major Indian air travel segments, including domestic, international, full-service, and low-cost operations.
“This will strengthen SIA’s multi-hub strategy, allowing it to continue participating directly in India’s large and fast-growing aviation market,” according to the announcement. Air India and Singapore Airlines recently decided to considerably expand their codeshare partnership, adding 11 Indian cities and 40 additional international routes to its network.
Singapore Airlines reported a 48.5 percent decline in net profit for the first half of the fiscal year, at SGD 742 million ($561.65 million), compared to SGD 1.44 billion in the same period previous year. Despite robust travel demand, especially in the second half, the airline’s business was hampered by inflationary pressures, geopolitical tensions, and growing costs, particularly for fuel and other non-fuel expenses.
Total expenses for the group, which includes Singapore Airlines and budget carrier Scoot, increased 14.4% to SGD 8.7 billion, placing more pressure on profitability. Revenue increased by a more modest 3.7 percent year on year to SGD 9.5 billion, but passenger yield decreased by 5.6%. Additionally, the airline’s passenger load factor fell to 86.4 percent, down from 88.8 percent in the same period previous year.
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