Aviation News

Air India, Vistara creditors to vote on merger proposal this Saturday, ET Infra

Tata-owned Air India and Vistara have sought approval from their creditors for the merger of the two airlines. Creditors will vote on the proposal on September 23, according to a notice seen by ET.

The merger plan has already been approved by the National Company Law Tribunal and the Competition Commission of India. After getting approval from creditors, the entities will move for permission from the Registrar of Companies and aviation regulator Directorate General of Civil Aviation, people involved in the process said.

The merger is an effort to consolidate the Tata Group’s aviation business under which Air India and Vistara will merge to form a single full-service entity and Air India Express and AirAsia India will form a low-cost airline which will be a subsidiary of Air India. Singapore Airlines (SIA), which has a 49% stake in Vistara, will hold 25.1% of the combined company.

Under the proposal, Air India will allot 3,702,338,129 fully paid-up equity shares to SIA at a face value of Rs 4 each at a price of Rs 5.56 each. In total, SIA will invest $267 million in Air India.

According to the notice, approvals will be sought from both secured and unsecured creditors. A secured creditor is any creditor or lender associated with the issuance of a credit product that is backed by collateral. Primarily banks will be secured creditors, while vendors and lessors will come under unsecured creditors.

Tatas are eager to complete the merger by March 2024 to unlock synergy, executives said. Vistara is conducting aptitude tests for its staff and has launched a culture survey to identify people who will handle key roles in the merged entity.

As part of this, the non-flying staff of Vistara have been appraised through a process called Hogan Test, designed by a US-based firm. The test measures normal personality characteristics necessary for job fit, especially leadership roles.

A common salary structure and seniority list have been drawn up for pilots of all the Tata Group airlines.

For SIA, which tied up with Tata in 2014 to form Vistara, the merger provides a bigger opportunity in the Indian market, currently the third largest in the world. Through the combined entity, SIA will also gain a foothold in both the low-cost and full-service segments and will be able to serve its multi-hub strategy.

The merger provides SIA with an opportunity to get a big slice of a market which dwarfs that of its home market, potentially future-proofing its viability.

After including the full amount of the additional capital injection, the total investment will not exceed 20% of the SIA Group’s market capitalisation.

  • Published On Sep 21, 2023 at 08:13 AM IST

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