Tata Sons, India's oldest and largest conglomerate, will be the new owner of the country's debt-laden national carrier Air India, the government announced on Friday. Talace Pvt Ltd, a wholly-owned subsidiary of Tata Sons, won the bid for acquiring Air India, marking the end of the process to privatise the national carrier with the government approving its disinvestment.
Its winning bid of 180 billion rupees ($2.4 billion or Dh8.8 billion) beat India's SpiceJet chief Ajay Singh, who offered 151 billion rupees (Dh7.38 billion) in his private capacity to acquire the airline, said Tuhin Kanta Pandey, secretary at the Department of Investment and Public Asset Management. Both bids, the only bids in the final stage, were much higher than the government's stipulated reserve price of Rs 129 billion (Dh6.3 billion).
An initial sale attempt by the government in 2018 failed to attract any bidders. A successful sale of the loss-making national flag carrier is a major government victory since it cost taxpayers an average of nearly $3 million (more than Dh11 million) a day for the past decade, Reuters reported. It would also bode well for planned stake sales in a slew of state-run firms to bolster government coffers and make India a fully market-driven economy.
Air India's assets and debt
On Friday, the government told reporters that Tata would absorb 153 billion rupees (Dh7.48 billion) of the airline's more than 615 billion rupees ($8.2 billion or Dh30.2 billion) debt burden. The excess amount in the bid, leftover after acquiring this debt, will be the amount payable by the company in cash, which is around Rs 27 billion (Dh1.32 billion). This debt amounts to 24.8 per cent of Air India's total debt.
The government will be responsible for the rest of the debt of around Rs 462.6 billion. Besides, the transaction does not include non-core assets including land and building, valued at Rs 147.18 billion, which are to be transferred to the central government's Air India Asset Holding Ltd (AIAHL).
The government is selling 100 per cent of its stake in the state-owned national airline, including Air India's 100 per cent shareholding in AI Express Ltd and 50 per cent in Air India SATS Airport Services Private Ltd.
Air India carried 18.36 million domestic passengers in 2019, and has suffered from overly bureaucratic management and political interference as privately owned low-cost carriers gained market share. AP reported that it has also been incurring losses since its 2007 merger with a state-owned domestic carrier, Indian Airlines.
AP reported that the new owner will be taking on a fleet of 121 Air India aircraft and 25 planes from its subsidiary Air India Express, which operates low-cost flights to more than 30 destinations in India, the Middle East and Southeast Asia.
Staff retention for one year
The government said on Friday that Tata Sons would retain all employees for one year and the group will need to offer a voluntary retirement scheme if it decides on retrenchment after the period.
"The winning bidder (Tata Sons) will retain all employees for the period of one year. In the second year, if they aren't retained, they will be offered VRS by the winning bidders," Rajiv Bansal, Secretary, Civil Aviation told reporters.
He said gratuity, pension fund, and post-retirement medical benefits will also be honoured by the company. The government added that the interest of the employees and retired employees would be taken care of in the disinvestment process
Full circle for the Tatas: 'Welcome back, Air India'
The group's chairman emeritus Ratan Tata on Friday tweeted a vintage photograph of the company's former chairman JRD Tata stepping down from an Air India flight.
"The Tata Group winning the bid for Air India is great news! While admittedly it will take considerable effort to rebuild Air India. It will hopefully provide a very strong market opportunity to the Tata Group's presence in the aviation industry," said Ratan Tata in a press statement.
"On an emotional note, Air India under the leadership of JRD Tata had at one time gained the reputation of being one of the most prestigious airlines in the world. Tatas will have the opportunity of regaining the image and reputation it enjoyed in earlier years. JRD Tata would have been overjoyed if he was in our midst today. We also need to recognize and thank the government for its recent policy of opening select industries to the private sector. Welcome Back Air India!" he added.
Jehangir Ratanji Dadabhoy (JRD) Tata founded the airline in 1932. It was called Tata Airlines then. In 1946, the aviation division of Tata Sons was listed as Air India and in 1948, Air India International was launched with flights to Europe.
The international service was among the first public-private partnerships in India, with the government holding 49 per cent, the Tatas keeping 25 per cent and the public owning the rest.
In 1953, Air India was nationalised. Now, in 2021, the airline is back with the founding family.
What else does Tata group own?
The Tata group is a sprawling collection of nearly 100 companies that includes the country's largest automaker, the largest private steel company, and a leading outsourcing firm. The companies employ more than 350,000 people around the world. Tata bought Jaguar and Land Rover for $2.3 billion from Ford in June 2008.
It also runs a budget airline, Air Asia India, in cooperation with Malaysian carrier Air Asia Berhad, and full-service carrier Vistara with Singapore Airlines.