In a historic acquisition, the Tata group, after a gap of 68 years, was set to regain control of India’s national carrier Air India, after its bid of Rs 18,000 crore was accepted by the Centre. This was nearly Rs 5,000 crore more than the reserve price of Rs 12,906 crore set by the government. The bid was 19 per cent more than the next rival bidder SpiceJet.
After the deal was announced, Tata Sons chairman emeritus Ratan Tata in an emotional tweet, posted a 1971 photograph of JRD Tata posing with Air India cabin crew and wrote: “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. 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!”.
Tata Sons subsidiary Talace Pvt Ltd will acquire a 100 per cent stake in Air India and Air India Express, and 50 per cent stake in ground handling joint venture Air India SATS.
By taking over Air India, Tatas will acquire 141 aircraft and will have access to a network of 173 cities, including 55 international destinations. Tata group will also own the iconic brand names of Air India, Indian Airlines and Maharajah. According to the terms of sale, the Centre will get Rs 2,700 crore in cash from Tata group, while the balance Rs 15,300 crore will go towards taking over nearly 25 per cent of the government’s total Air India debt of Rs 61,562 crore. Air India is presently incurring a daily loss of Rs 20 crore. The total accumulated loss is nearly Rs 84,000 crore.
The government made it clear that the deal does not include non-core assets like land, buildings, etc. valued at Rs 14,718 crore. The terms of the agreement clearly state that there shall be no retrenchment of Air India staff during the first year of takeover, but from the second year onwards, 8,000 out of 13,500-odd AI and AI Express staff can be offered VRS. The deal clearly stipulates that Tatas can sell 49 per cent stake after the first year, and they can transfer the brand only after five years. The brand name Air India can only be transferred to an Indian company.
By acquiring Air India and AI Express, which have an international market share of 18.3 per cent presently, the Tata group will now become the largest international player from India, and the second largest in domestic aviation. Already, top honchos of Tata group are working on plans to restructure the present management, refurbish older generation aircraft, renegotiate high-cost contracts with vendors and refinance the mountain of debt. Air India’s IT and digital operations will be taken over by TCS, Tata’s flagship software company. This will improve efficiency and reduce operational and maintenance costs. TCS already runs IT systems and applications of many national carriers of other countries, except India.
A brief look at the history of Indian civil aviation. JRD Tata, its pioneer, learnt flying at the age of 15. He got India’s first pilot licence at the age of 24 in 1929. JRD flew Tata Aviation Services’ first airmail flight in 1932 from Karachi to Mumbai. Later it became Tata Airlines and in 1938, the Maharajah mascot was designed, which continues till this day. In 1946, it was rechristened as Air India. In 1953, the government nationalized Air India, but JRD Tata continued to remain as chairman. At that time, JRD Tata strongly protested saying that an airline run by government would one day become unviable. His warning was prophetic and Air India, over the years under government control, continued to bleed.
In 1995, when private airlines took to Indian skies, Tata tied up with Singapore Airlines to launch a joint venture, but the then regime forbade foreign companies from holding stake in Indian air carriers. In 2001, Tata along with Singapore Airlines bid for acquiring Air India, but the plan was shelved. In 2003, Tata formed alliance with Malaysia’s AirAsia and started a budget airline, AirAsia India. In 2013, Tatas launched a full service airline Vistara in collaboration with SIA. In 2019, Centre decided to sell 100 per cent stake in Air India and called for bids. On Friday, October 8, the Centre decided to hand over the family silver back to Tatas.
Civil Aviation Minister Jyotiraditya Scindia welcomed the decision to sell Air India to Tata Sons. “It’s a momentous day for India’s 130 crore people. An airline that has been bleeding Rs 20 crore a day and Rs 7,500 crore a year over the last few years. This disinvestment process has been extremely thorough, extremely rigorous and has resulted in a landmark outcome under the leadership of Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman, DIPAM and the Ministry of Civil Aviation”, Scindia said.
The government had been trying to sell Air India for the last two decades but no buyers came forward because of mounting losses. It had become a white elephant for the government. The daily Rs 20 crore loss that was being incurred by Air India, was being paid for, from our pockets.
From 2009 till now, the Centre has given Rs 1,11,000 crore assistance to Air India. Out of this, Rs 54,000 crore has been given in cash by the government and yet, the financial condition of Air India did not improve. Till August 31, Air India’s accumulated loss stood at Rs 62,000 crore, and, at this moment, the net worth of the airline is minus Rs 33,000 crore.
The government was in a hurry to bid goodbye to the Maharajah. Tatas have an emotional attachment to the Maharajah and they, therefore, decided to buy back the airline. I have a gut feeling that Air India will soon regain its lost glory.
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