Air India Returns to Tata Group's Fold After 68 years

Oct. 9—NEW DELHI — Over six decades after Tata Group's then flagship carrier Air India was nationalized by the government, the airline is set to be back into the group's fold as the government on Friday announced the winning bid in favour of the salt to software conglomerate.

The Tata Group's holding company, Tata Sons through its wholly owned subsidiary Talace Pvt. Ltd. submitted a winning bid of INR18,000 crore as the enterprise value of the national carrier, against a reserve price of INR12,906 crore, and has agreed to retain INR15,300 crore airline debt. The cash component for the transaction stands at INR2,700 crore.

The winning bid entitles the conglomerate, which already operates two airlines — Vistara, in joint venture with Singapore Airlines and no-frill carrier AirAsia India — the control of 100% stake in Air India and its low-cost subsidiary Air India Express and a 50% stake in ground handling company Air India SATS Airport Services Private Limited (AISATS).

The transaction does not include non-core assets including land and building, valued at INR14,718 crore, which are to be transferred to Government of India's (GoI) Air India Asset Holding Limited (AIAHL).

A consortium led by SpiceJet's promoter Ajay Singh submitted the only other bid of INR15,100 crore as the enterprise value of the airline, and agreed to retain INR12,835 crore debt.

This was the government's second attempt in privatizing the national carrier since 2018, with an earlier plan to sell 76% in Air India finding no takers.

"The next step will be to issue the Letter of Intent (LoI) and then sign the Share Purchase Agreement following which, the conditions precedent would need to be satisfied by the successful bidder, the company and Government," the Ministry of Finance said in a statement.

"It is expected that the transaction will be completed by December 2021," it added.

The transaction will however require approval from Competition Commission of India (CCI), apart from consent of the airline's lenders, and other third-party approvals will need to be obtained.

"At the Tata group, we are delighted to be declared as the winner of the bid for Air India. This is a historic moment, and it will be a rare privilege for our Group to own and operate the country's flag bearer airline," said N. Chandrasekaran, Chairman of Tata Sons Pvt. Ltd, in a statement.

"It will be our endeavour to build a world-class airline which makes every Indian proud," he added.

Air India, which has been largely a loss-making company and surviving on public money, had a net debt of about INR61,562 crore at the end of 31 August, secretary of Department of Investment and Public Asset Management (DIPAM), Tuhin Kanta Pandey said at a press conference on Friday.

After Tata Group's payout, remaining debt of INR46,262 crore will be taken over by AIAHL.

The government will have to repay the remaining debt, which holds sovereign guarantee, to the lenders, Pandey said, adding that it will also pay off an outstanding salary dues to Air India staff amounting to INR1,332 crore.

As a part of the deal, Tata Group will have to retain all Air India employees for a minimum period of one year, and offer a voluntary retirement scheme (VRS) after that.

While provident fund and gratuity dues of the employees will be given to them, the government will also provide for the post-retirement medical benefit for the airline's staff, Pandey added.

Air India at present has 12,085 employees, including 8, 084 permanent employees, and 4,001 contractual employees. Air India Express has 1,434 employees on its rolls.

Air India has an aircraft fleet of about 121 aircraft mainly comprising Airbus and Boeing aircraft such as A-319, A320, A-321, B-777 and B-787 out of which 65 are owned/ on finance lease/bridge

loans, 21 are on sale and leaseback model and remaining 35 are on operating lease. Meanwhile, Air India Express had 25 Boeing 737- 800 NG aircraft in its fleet.

The announcement by the government was welcomed by Ratan Tata, Chairman Emeritus of Tata Group, who said that the conglomerate will have an opportunity to regain the image and reputation enjoyed by Air India in the earlier years.

"Mr J.R.D Tata (founder of Air India) would have been overjoyed if he was in our midst today," he said on social media platform Twitter.

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