New Delhi: Tata Sons Pvt. was chosen as the winning bidder for India’s flag carrier, ending decades of efforts to privatize a money-losing and debt-ridden airline, and potentially ending years of taxpayer-bailouts. that kept the company alive.
Tata Sons, which originally launched Air India Limited with a well-known branding in 1932, made a bid of Rs 18,000 crore ($2.4 billion) as an enterprise value for Air India, India’s Department of Investment and Public Asset Management top bureaucrat Tuhin Kanta Pandey, said at a briefing on Friday. The government aims to complete the transaction by the end of 2021.
The high-profile sale is a boost for Prime Minister Narendra Modi, who has launched a bold privatization plan to widen the budget deficit, validating his stance to stay away from most businesses in the state. For Tata Sons, Air India adds a third airline brand to its stable, giving it access to over a hundred aircraft worldwide, thousands of trained pilots and crew, and attractive landing and parking slots.
Bloomberg News reported last week that a panel of ministers accepted a proposal from bureaucrats who had recommended the group’s bid before entrepreneur Ajay Singh’s proposal. Pandey said the consortium led by Singh, who is also the chairman of budget carrier SpiceJet Ltd, placed a bid of Rs 15,100 crore.
* Pandey said the Tata group will retain Air India’s debt of Rs 15,300 crore and give Rs 2,700 crore in cash to the government.
* The cash-strapped carrier had a total debt of Rs 61,560 crore as of August 31, and the debt not absorbed by Tata Sons will be taken over by the government.
* The deal does not cover Air India’s non-core assets such as land and buildings, and Tata Sons will have to retain all employees of the airline for at least one year.
* Air India has 117 wide-bodied and narrow-bodied aircraft and Air India Express Limited has 24 narrow-bodied aircraft, the Tata Group said in a statement.
Tata Sons, the holding company of the salt-to-software empire and owner of British luxury car maker Jaguar Land Rover, is looking back at a wealth it started almost 90 years ago. Founded by the legendary industrialist and philanthropist JRD Tata, who was India’s first licensed pilot, the airline originally operated in the 1930s between then-undivided, British-ruled India and Bombay, now known as Mumbai, between Karachi. did.
Once it became commercial and owned by the government in the 1950s, Air India quickly became popular among those who could afford to take to the skies. Its commercials featured Bollywood actresses and passengers were treated to champagne and porcelain ashtrays designed by Surrealist painter Salvador Dali.
“Welcome back, Air India,” Ratan Tata, the successor of JRD Tata and Honorary Chairman of Tata Sons, said in a tweet. “While it is recognized that a considerable effort will be required to rebuild Air India, it is expected that it will provide a very strong market opportunity for the Tata Group’s presence in the aviation industry.”
With the advent of private carriers in the 1990s, and again in the mid-2000s due to the rush of low-cost, no-frills airlines, Air India lost its edge in both domestic and international markets. The carrier, known for its Maharaja mascot, was suddenly not the only option for flying abroad and its reputation for impeccable service and hospitality began to decline.
Gulf carriers, including Emirates Airline and Etihad Airways PJSC, also began offering seamless, and cheaper, connections to Europe and the US through their hubs in Dubai and Abu Dhabi, leaving Air India at an even greater disadvantage.
For the Tata group, Air India adds a third airline brand to its stable, given that the group already holds a majority interest in Vistara, a joint venture with AirAsia India and Singapore Airlines Ltd.
Air India – which hasn’t turned a profit since its merger with Indian Airlines in 2007 – holds prized landing and parking slots at London’s Heathrow Airport, helping Vistara woo business travelers with direct flights to Europe. can.
This procurement will be a test of the aviation prowess of the group. The Tata group has faced criticism for not running its existing aviation businesses efficiently, even though they represent a small portion of the total revenue.
“I congratulate the Tata Group on winning the bid for Air India and wish them all the success,” the runner-up Singh said in an emailed statement. “It is time for the Maharaja to reclaim its position as the world’s leading airline.”