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After 70 yrs, the Maharaja returns home to the Tatas

The transaction does not include non-core assets including land and building, valued at  ₹14,718 crore, which are to be transferred to Government of India's (GoI) Air India Asset Holding Limited (REUTERS)Premium
The transaction does not include non-core assets including land and building, valued at 14,718 crore, which are to be transferred to Government of India's (GoI) Air India Asset Holding Limited (REUTERS)

  • The Tata Group’s holding company, Tata Sons through its wholly owned subsidiary Talace Pvt. Ltd. submitted a winning bid of 18,000 crore as the enterprise value of the national carrier, against a reserve price of 12,906 crore, and has agreed to retain 15,300 crore airline debt

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New Delhi: Air India will return to its founder Tata group nearly seven decades after it was nationalized, capping years of efforts by the government to privatize the debt-laden airline.

India’s largest conglomerate was on Friday named as the winning bidder for Air India. This will give the group full control of Air India and its low-cost unit Air India Express as well as a 50% stake in ground handling company Air India SATS Airport Services Pvt. Ltd (AISATS), according to a finance ministry statement.

Air India was founded as Tata Airlines in 1932 as the country’s first airline but nationalized in 1953.

The Tata group currently operates full-service airline Vistara, a joint venture with Singapore Airlines, and budget airline AirAsia India, a venture with Malaysia’s AirAsia Group Bhd.

“Welcome back, Air India!" said Tata group’s chairman emeritus, Ratan Tata, saying the conglomerate now has the opportunity to regain the image and reputation enjoyed by Air India in the earlier years —of being “one of the most prestigious airlines in the world".

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

“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," Tata added.

Tata group holding company, Tata Sons Pvt. Ltd, through its wholly owned unit Talace Pvt. Ltd, submitted a winning bid of 18,000 crore as the enterprise value of Air India, against a reserve price of 12,906 crore. The group will also assume 15,300 crore of Air India’s debt with the remaining 46,262 crore taken over by the government’s Air India Asset Holding Ltd (AIAHL), a special company set up to hold half of the airline’s loans, four of its units and non-core assets. The Tata group will also have to pay 2,700 crore in cash to the government.

Air India’s non-core assets comprising land and building, valued at 14,718 crore, will be transferred to AIAHL.

A consortium led by SpiceJet promoter Ajay Singh submitted the only other bid—of 15,100 crore as the enterprise value, retaining 12,835 crore debt.

“I congratulate the Tata group on winning the bid for Air India and wish them all the success. It was my honour and privilege to be shortlisted for bidding for Air India. I am confident that the Tata group will restore the glory of Air India and make all of India proud," Singh said in a statement. “I would also like to congratulate the government on the successful disinvestment of Air India. They ran a transparent and flexible process and gave new impetus to India’s disinvestment programme."

This was the second attempt by the Narendra Modi administration to privatize the national carrier since 2018. An earlier plan to sell a 76% stake found no takers.

A successful sale of Air India is crucial for the government to stop the flow of public money to run the loss-making company and boost its coffers as it sets to revive the pandemic-hit economy.

“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 finance ministry said. “It is expected that the transaction will be completed by December 2021".

The transaction will require approval from the Competition Commission of India (CCI), besides the consent of Air India’s lenders. Other third-party approvals will also 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," Tata Sons’ chairman N. Chandrasekaran said in a statement.

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

Air India, unprofitable since a merger with erstwhile Indian Airlines in 2007 and forcing it to survive on public funds, had a net debt of about 61,562 crore as of August-end, secretary of Department of Investment and Public Asset Management (Dipam), Tuhin Kanta Pandey said.

The government will have to repay the remaining debt, which carries a sovereign guarantee, Pandey said, adding salary dues to Air India staff totalling 1,332 crore will also be paid by the government.

As part of the deal, Tata group will have to retain all Air India employees for at least one year, after which it can offer voluntary retirement schemes.

Besides provident fund and gratuity dues, the government will also provide for the post-retirement medical benefit for staff, Pandey said.

Air India has 12,085 employees, including 8,084 permanent employees and 4,001 contractual employees. Air India Express has 1,434 employees.

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New Delhi: Air India will return to its founder Tata group nearly seven decades after it was nationalized, capping years of efforts by the government to privatize the debt-laden airline.

India’s largest conglomerate was on Friday named as the winning bidder for Air India. This will give the group full control of Air India and its low-cost unit Air India Express as well as a 50% stake in ground handling company Air India SATS Airport Services Pvt. Ltd (AISATS), according to a finance ministry statement.

Air India was founded as Tata Airlines in 1932 as the country’s first airline but nationalized in 1953.

The Tata group currently operates full-service airline Vistara, a joint venture with Singapore Airlines, and budget airline AirAsia India, a venture with Malaysia’s AirAsia Group Bhd.

“Welcome back, Air India!" said Tata group’s chairman emeritus, Ratan Tata, saying the conglomerate now has the opportunity to regain the image and reputation enjoyed by Air India in the earlier years —of being “one of the most prestigious airlines in the world".

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

“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," Tata added.

Tata group holding company, Tata Sons Pvt. Ltd, through its wholly owned unit Talace Pvt. Ltd, submitted a winning bid of 18,000 crore as the enterprise value of Air India, against a reserve price of 12,906 crore. The group will also assume 15,300 crore of Air India’s debt with the remaining 46,262 crore taken over by the government’s Air India Asset Holding Ltd (AIAHL), a special company set up to hold half of the airline’s loans, four of its units and non-core assets. The Tata group will also have to pay 2,700 crore in cash to the government.

Air India’s non-core assets comprising land and building, valued at 14,718 crore, will be transferred to AIAHL.

A consortium led by SpiceJet promoter Ajay Singh submitted the only other bid—of 15,100 crore as the enterprise value, retaining 12,835 crore debt.

“I congratulate the Tata group on winning the bid for Air India and wish them all the success. It was my honour and privilege to be shortlisted for bidding for Air India. I am confident that the Tata group will restore the glory of Air India and make all of India proud," Singh said in a statement. “I would also like to congratulate the government on the successful disinvestment of Air India. They ran a transparent and flexible process and gave new impetus to India’s disinvestment programme."

This was the second attempt by the Narendra Modi administration to privatize the national carrier since 2018. An earlier plan to sell a 76% stake found no takers.

A successful sale of Air India is crucial for the government to stop the flow of public money to run the loss-making company and boost its coffers as it sets to revive the pandemic-hit economy.

“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 finance ministry said. “It is expected that the transaction will be completed by December 2021".

The transaction will require approval from the Competition Commission of India (CCI), besides the consent of Air India’s lenders. Other third-party approvals will also 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," Tata Sons’ chairman N. Chandrasekaran said in a statement.

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

Air India, unprofitable since a merger with erstwhile Indian Airlines in 2007 and forcing it to survive on public funds, had a net debt of about 61,562 crore as of August-end, secretary of Department of Investment and Public Asset Management (Dipam), Tuhin Kanta Pandey said.

The government will have to repay the remaining debt, which carries a sovereign guarantee, Pandey said, adding salary dues to Air India staff totalling 1,332 crore will also be paid by the government.

As part of the deal, Tata group will have to retain all Air India employees for at least one year, after which it can offer voluntary retirement schemes.

Besides provident fund and gratuity dues, the government will also provide for the post-retirement medical benefit for staff, Pandey said.

Air India has 12,085 employees, including 8,084 permanent employees and 4,001 contractual employees. Air India Express has 1,434 employees.

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Air India has a fleet of about 121 aircraft, mainly Airbus and Boeing aircraft such as A319, A320, A321, B777 and B787. Of these, 65 are either owned by the airline or on financial lease or bridge loans, and the remaining 56 are on lease. Air India Express has 25 Boeing 737-800 NG planes.

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