The deal marks a homecoming for Air India, which was originally launched in 1932 by Tata Group former Chairman JRD.
By Ruchi Bhatia and Ragini Saxena / Bloomberg
Tata Sons Pvt formally took charge of debt-laden Air India Ltd., ending years of failed attempts to sell the money-losing airline that has been kept afloat with billions of dollars of taxpayer money.
“It is indeed noteworthy that the disinvestment process of @airindiain has been brought to a successful conclusion in a time-bound manner,” aviation minister Jyotiraditya Scindia said in a Twitter post. That proves the government’s ability and “the resolve to carry out disinvestment effectively in non-strategic sectors in the future.”
The successful conclusion of the deal, India’s first major privatization in nearly two decades, is a big victory for Prime Minister Narendra Modi, who has vowed to steer the state away from running businesses as his administration tries to plug a budget deficit. The move also marks a homecoming for Air India, which was originally launched in 1932 by Tata Group’s former Chairman J.R.D. Tata as the nation’s first carrier, flying mail between Karachi, then a part of undivided British-ruled India, and Bombay.
“It’s a very historic day because Air India gets a fresh lease of life under Tata’s control,” said Jitender Bhargava, a former executive director at Air India who’s written a book on the carrier’s downfall. Air India has weaknesses, Bhargava said, but the Tatas have the wherewithal to turn it around. “Air India will not only give Tata the scale, but also the number one position because of its vast network of international operations and a huge chunk of trained pilots and aircraft maintenance engineers,” he added.
The disinvestment of Air India concluded with the transfer of 100% shares of Air India to Tata Sons along with the management control, the department of investment and public asset management said in a tweet. A new board took charge of Air India, it said, without elaborating.
Reviving Air India — whose market share more than halved to less than 10% last year — will be a daunting task for the biggest conglomerate in India, which already runs two other unprofitable carriers. While Air India’s regional arm, Alliance Air, is not a part of the deal, the group is also gaining control of low-cost, short-haul international carrier Air India Express and an equal stake in a ground handling company with SATS Ltd.
The group was selected as the winning bidder in an auction in October, in which it bid 180 billion rupees as an enterprise value for Air India, including taking on 153 billion rupees of the airline’s debt. Air India also comes with a highly unionized workforce with a history of disrupting schedules for demands, and an aging and mixed fleet of more than 150 aircraft, potentially complicating a revival.
“We are excited to have Air India back in the Tata Group and are committed to making this a world-class airline,” N. Chandrasekaran, chairman of Tata Sons, said in a statement. “I warmly welcome all the employees of Air India, Air India Express and AI SATS to our Group, and look forward to working together.”
Tata Sons has yet to spell out its plans for Air India, which loses 200 million rupees ($2.7 million) every day. Potential options include merging the flag carrier with one of its other airlines — Vistara venture with Singapore Airlines Ltd. and AirAsia India Ltd. with AirAsia Bhd. — or keeping it independent. The terms of the deal prevent the new owner from firing any employee for at least a year.
The competition for Tata’s airline business will also intensify with bankrupt Jet Airways India Ltd. preparing to fly again, and billionaire investor Rakesh Jhunjhunwala’s newly formed carrier, Akasa, gearing up to start operations.
SOURCE: BLOOMBERG / Al Jazeera
