According to a report by Mint on Friday, Tata Sons, the holding company of the Tata Group, is considering investing between $1.5 billion and $1.8 billion in the newly proposed airline resulting from the merger of Air India and Vistara. The investment will reportedly be sourced from the dividends received by Tata Sons from Tata Consultancy Services (TCS) and other companies within the Tata Group.
According to an individual with knowledge of the matter, the board of Tata Sons will be determining the specific amount to be invested in the merged entity of Air India and Vistara, among other ventures under the Tata Group. It is stated that a substantial portion of the funds may be allocated toward the Air India-Vistara merger.
The funds from the investment are intended to primarily be used for expanding the fleet size, increasing the airline’s market share beyond 30%, enhancing customer service, and securing additional global slot facilities. The infusion of funds may commence in the first quarter of the fiscal year 2023-24 (FY24).
Approximately 80% of Tata Sons’ dividend income is derived from Tata Consultancy Services (TCS). The report further states that the capital being considered for infusion into the merged entity of Air India and Vistara is equivalent to 50-60% of the dividend income received by Tata Sons from TCS in the fiscal year 2023.
In November of last year, Singapore Airlines and Tata Sons jointly announced the merger of Air India and Vistara. Singapore Airlines will hold a stake of 25.1% in the newly merged entity. The merger is expected to be completed by March 2024.
On January 24, Vistara announced that it will not place any new orders for aircraft as it awaits regulatory approval for the merger with Air India. The company stated that it will receive its pending order of 17 aircraft by the end of 2024, bringing its total fleet size to 70 planes.
According to Reuters, the CEO of Vistara, Vinod Kannan, stated that “We have not looked at any orders beyond that.” This statement is likely in reference to the company’s pending order of 17 aircraft, which is expected to be received by the end of 2024 and will bring the company’s total fleet size to 70 planes.
Vistara CEO, Vinod Kannan further added, “There has been the announcement about the merger and integration with Air India. Once we have approval from the relevant authorities…we will have to sit down together with Air India as a joint entity to see what we do,” indicating that the company’s future plans regarding aircraft orders will be decided after the completion of merger and after receiving the approvals from regulatory authorities.
Meanwhile, Air India is expected to finalize a significant order worth billions of dollars for 495 jets from Boeing and engine suppliers General Electric and CFM International on Friday. This order will include 190 Boeing 737 MAX narrowbody planes, 20 Boeing 787s and 10 Boeing 777X aircrafts.