Tatas, Air India Staff Join Race for Airline

Dec. 15—The Tata group and a consortium consisting of Air India employees and a financial investor have shown interest in buying the national carrier that last reported a profit in 2007, two people familiar with the developments said.

The expressions of interest (EoIs) will give the Tata group, and the consortium consisting of New York-based Interups Inc. and a group of Air India employees, access to all records of the airline.

The bid by the country's largest conglomerate, if successful, will mark the return of Air India, founded by industrialist J.R.D. Tata as a mail carrier in 1932, to the Tata fold. The government took control of Air India in 1953 after Tata proposed the government take 49% of the airline.

The Tata group is perhaps the only Indian conglomerate that can invest, sustain and revive Air India under the current circumstances, said Mark Martin, chief executive, aviation consulting firm Martin Consulting LLC. "Tata group has the right technical expertise to make the airline successful. It also has a fine legacy, since it started Air India before it was nationalized by the government. I think employees will be glad if Tata group does end up taking over the airline due to the group's legacy in the airline sector," Martin added.

The department of investment and public asset management (Dipam), the arm of the finance ministry that oversees asset sales, said it got multiple interests at the end of the deadline on Monday, without giving details.

"The transaction will now move to the second stage," Dipam secretary Tuhin Kanta Pandey said in a post on Twitter.

The government will now evaluate EoIs and select the ones that qualify on 5 January, according to the department's proposal to privatize the national carrier.

In the proposal submitted by the consortium, a group of 219 Air India employees will own a 51% stake, and Interups will hold 49%, the New York-based company's chairman Laxmi Prasad said in an interview. Interups manages the retirement corpus of 27,635 accounts owned by US-based Indians.

"Willing and continuing employees will be offered 51% in the consortium that acquires the airline. No capital investment is required (from them)," Prasad said, adding that if his planned acquisition of Air India was successful, his company would set up an aviation infrastructure investment trust to monetize the airline's assets.

"We are actively advocating airline routes, ground handling, training and other facilities into infrastructure placement. This leaves the current company to remain lean and operational," he added.

Spokespeople for Air India and Tata Sons declined to comment. A spokesperson for the civil aviation ministry didn't respond to queries.

The Tata group is trying to persuade Singapore Airlines, with whom it operates an airline joint venture (JV), Vistara, to waive a non-compete clause in the JV agreement to allow it to bid for rival carriers and partner the company in its bid for Air India, The Economic Times reported on 14 December.

The government has been looking for a buyer for the state-run airline since 2017 but has drawn a blank so far as investors have been deterred by the money-losing airline's huge debt load.

The government has since sweetened the deal to make the asset more attractive.

This time around, the Indian government plans to sell 100% of Air India, including unit Air India Express Ltd and 50% in Air India SATS Airport Services Pvt. Ltd, after failing to sell it two years ago, when it sought to sell 76% in the carrier.

The government also allowed bidders to decide how much of the airline's debt they want to absorb as part of the sale.

Air India had current liabilities and provisions, including short-term loans and trade payables, of INR70,686.6 crore and net debt of INR58,255 crore at the end of March 2019.

However, the government has since transferred INR29,464 crore of this debt from Air India to a government-owned special purpose vehicle, Air India Assets Holding Co. Ltd.

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