Singapore Airlines on Thursday said it is in confidential discussions with the Tatas for a possible merger of Vistara and Air India.

In a regulatory filing, SIA said discussions with Tatas are ongoing and no definitive terms have been agreed upon between the parties.

“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 ‘potential transaction’). The discussions seek to deepen the existing partnership between SIA and Tata, and may include a potential integration of Vistara and Air India,” the filing to the Singapore Stock Exchange said.

SIA said India was integral to its multi-hub strategy as the country has strong domestic and international traffic flows, which is expected to more than double over the next 10 years.

Vistara. File picture

The airline said “the discussions are on-going and no definitive terms have been agreed upon between the parties. There is no certainty or assurance whatsoever that (a) any definitive agreement will be entered into or (b) the Potential Transaction will materialize or proceed to completion arising from these discussions. Even if a transaction were to materialize, it would be subject to the relevant regulatory approvals, amongst other matters.”

Tatas has a 51 per cent stake in Vistara and the rest is with Singapore Airlines (SIA). Tatas are also the owner of Air India and can invite another airline to buy a stake in the former national carrier, provided they hold a majority 51 per cent share.

Sources said SIA could pick up at least 26 per cent that will make it a strategic partner and have a say in future business decisions.

The merger, which could take a year to complete, is part of a bigger consolidation drive by Tata Sons to save costs, create synergies by optimising aircraft utilisation and routes and increase market share to compete with IndiGo, India’s largest airline with a market share of 59 per cent.

In addition to offering economies of scale to both Vistara and Air India, a merger may give Singapore Airlines access to dozens of new slots globally and aid Tata Sons in the consolidation of its aviation business balance sheets.

Tata owns all of Air India after completing its purchase of the erstwhile national carrier in January.

SIA, which was focused on repairing its balance sheet, did not take part in the bidding process, but Campbell Wilson, a former senior executive at the Singaporean carrier, started as Air India’s new chief executive in July.

The Indian airline is rebuilding its fleet and targeting a domestic market share of at least 30 per cent over the next five years.

It is also launching more services to North America, where its use of Russian airspace gives it a shorter flight time than rivals that have avoided it since Moscow began its invasion of Ukraine in February.

“SIA converting its stake in Vistara into a stake for the Tata-led airline group makes sense,” said Brendan Sobie, an independent analyst based in Singapore. Air India and Tata did not immediately respond to requests for comment.

With inputs from Reuters