Last month, it was reported in the news that Singapore Airlines (SIA) was in talks with Tata Group to bid for the loss-making India’s national carrier, Air India. The Tata Group is SIA’s joint venture partner in the full-service airline Vistara in India.
In its latest quarterly report, Air India incurred a net loss of about Rs2,570 crore (S$465 million) in the first quarter of 2020-21 as compared to a net loss of Rs785 crore (S$142 million) in the corresponding period a year ago.
“Air India Limited has been suffering continuous losses. The COVID-19 pandemic along with its related impact on aviation industry has further worsened the financial position of the company,” Indian Civil Aviation Minister Hardeep Singh Puri has admitted.
Presently, Air India is sitting on a debt of Rs58,000 crore (S$10.5 billion).
An airline analyst commented, “The acquisition of Air India by Vistara could result in a substantial outlay of funds and assumption of risk by the shareholders of Vistara. SIA and Temasek would have to evaluate whether they are willing to make an investment and assume risk of such high magnitude, especially in times when there is a huge slump in the civil aviation space.”
SIA not part of Air India bid in initial stages
However, on Monday (14 Dec), Indian media Business Standard reported that the Tata Group would bid for Air India alone for now.
Quoting inside sources, Business Standard reported, “Singapore Airlines (SIA), with which Tata Sons operates full-service airline Vistara, will not be part of the bid in the initial stages.”
“Tata Sons did not comment on the issue. A spokesperson of SIA also refused to comment on future investment opportunities,” it added.
Varun Ginodia, an analyst with Ambit Capital, commented on the deal, “The likely acquisition of Air India by the Tata group is positive in the long run as it paves way for consolidation.”
“The Tatas may eventually have three wings — a low-cost carrier (by merging Air India Express and AirAsia India), a full-service carrier (by merging Vistara and Air India) and ground handling services. Of course, before this, the Tatas will have to simplify the complex structures with its partners in its existing airlines,” he added. Needless to say, that is the big if in the equation.
Meanwhile, unconfirmed reports have said Tata’s bid is said to have been submitted through AirAsia India and not Vistara, in which SIA has 49% stake.
If Tata successfully acquires Air India and runs it outside of Vistara, it will become a competitor of Vistara and damage SIA’s interests. If Tata later injects Air India into Vistara as a combined full-service carrier, SIA’s stake in Vistara will be significantly reduced.
Either way, SIA is most likely to be on the losing end.