Tata regains Air India control with Rs 18,000 cr winning bid
New Delhi: Tata Sons will retake Air India — the airline it founded nearly 90 years back — as the government accepted its winning bid of Rs 18,000 crore to acquire 100 per cent of the debt-laden state-run carrier.
Talace Pvt Ltd, a unit of the holding company of salt-to-software conglomerate, made the winning bid of Rs 2,700 crore cash and Rs 15,300 crore in debt takeover, Tuhin Kanta Pandey, Secretary in the Department of Investment and Public Asset Management, said at a briefing on Friday.
Tatas beat the Rs 15,100-crore offer by a consortium led by SpiceJet promoter Ajay Singh and the reserve price of Rs 12,906 crore set by the government for the sale of its 100 per cent stake in the loss-making carrier. The transaction is targeted to be closed by December, Pandey said.
As per the terms of the transaction, Tatas cannot lay off any employee for one year and can offer a VRS in the second. Gratuity and Provident Funds benefits will be provided to all employees. It is free to do mergers but cannot sell the Air India brand or logo for five years, thereafter can do so only to an Indian entity.
Pandey said the group of ministers, called Air India Specific Alternative Mechanism (AISAM), headed by Home Minister Amit Shah and which included Finance Minister Nirmala Sitharaman, Commerce Minister Piyush Goyal and Civil Aviation Minster Jyotiraditya Scindia, had approved the winning bid on October 4.
While this will be the first privatisation since 2003-04, Air India will be the third airline brand in the Tatas' stable - it holds a majority interest in AirAsia India and Vistara, a joint venture with Singapore Airlines Ltd.
Air India will give it access to a fleet of 117 wide-body and narrow-body aircraft and Air India Express Ltd another 24 narrow-body aircraft besides control of 4,400 domestic and 1,800 international landing and parking slots at domestic airports, as well as 900 slots at airports overseas such as London's Heathrow.
Besides, the bidder would get 100 per cent of the low-cost arm Air India Express and 50 per cent of AISATS, which provides cargo and ground handling services at major Indian airports.
With Air India, Vistara, and Air Asia having current combined market share of 26.9 per cent, the Tata Group will emerge as the second-largest domestic airline after Indigo once the consolidation of the operations of all three airlines is completed.
Air India has been in losses since its 2007 merger with Indian Airlines. It has the dubious distinction of having the highest number of employees on its rolls per aircraft - its 221 employees per aircraft compared with 127 per plane at Lufthansa, 140 at Singapore Airlines and British Airways 178 employees per aircraft.
Air India has 12,085 employees - 8,084 permanent and 4,001 contractual. Besides, Air India Express has 1,434. In the next five years, about 5,000 permanent employees will be retiring, he said.
The transaction with Tatas does not include non-core assets including land and building, valued at Rs 14,718 crore, which are to be transferred to the government's Air India Asset Holding Limited (AIAHL).
AIAHL will also hold Rs 46,262 crore remaining debt of the airline (Rs 61,562 crore total debt, of which Rs 15,300 crore will go to Tatas).
"Right now Air India is having losses of Rs 20 crore/day. So those losses after handover will not come to the taxpayers. The question is that when you have excessive debt and your equity value is deeply negative at (-)Rs 32,000 crore. So unless and until you reconstruct the balance sheet, the only option would have been to actually close down the company," Pandey said.
Over the last decade, more than Rs 1.10 lakh crore was infused by way of cash support and loan guarantees in the loss-making airline to keep it afloat.
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.
"Welcome Back, Air India," he said. "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."
Tatas, he said, will have the opportunity of regaining the image and reputation it enjoyed in earlier years.
Civil Aviation Minister Jyotiraditya Scindia said Air India's return to Tatas marks a new dawn for the airline. "I hope the airline will continue to deliver on its mission of bringing people closer through its successful operations."
Several Air India employees unions welcomed the takeover of the airline by Tatas.
