NEW DELHI: Ratan Tata-headed Tata Sons on Friday acquired the debt-laden national carrier Air India for Rs 18,000 crore; the successful bid will give the conglomerate 100% ownership of an airline that was kept afloat by never-ending taxpayer-bailouts. To that extent, it is also a vindication of Prime Minister Narendra Modi’s ambitious privatization plan.
The reserved price was fixed by the government at Rs 12,906 crore. The Tata Group outbid the only contender – a consortium led by SpiceJet CMD Ajay Singh. With that, Air India completes a full circle: it was founded in 1932 and christened Tata Airlines by family scion and aviation enthusiast Jehangir Ratanji Dadabhoy Tata.
The Tatas will retain ₹15,300 crore of Air India's debt and pay ₹2,700 crore cash to the government; the cash-strapped carrier had a total debt of ₹61,560 crore as of August 31, and the debt not absorbed by Tata Sons will be taken over by the government. The deal, however, doesn't include Air India's non-core assets like land and buildings, and Tata Sons will have to retain all the airline's employees for at least a year.
For the record, Air India has a fleet of 117 wide-body and narrow body aircraft; subsidiary Air India Express Ltd. has 24 narrow body aircraft.
In a tweet, group chairman emeritus Ratan Tata posted an old photograph of JRD Tata disembarking from an Air India aircraft, minutes after Tata Sons wrested control of the government flag carrier, nearly 70 years after its nationalisation.
"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," he tweeted.
Ratan Tata further tweeted: "On an emotional note, Air India, under the leadership of Mr 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. Mr JRD Tata would have been overjoyed if he was in our midst today."
"We also need to recognise and thank the government for its recent policy of opening select industries to the private sector. Welcome back, Air India, he said, adding that the Tata Group winning the bid for Air India is great news,’’ he added.
With private carriers taking to the skies in the 1990s, followed by low-cost, no-frills airlines in the mid-2000s, Air India lost its competitive edge in both domestic and international markets. The Gulf carriers further dented its market share by offering easy connectivity to Europe.
Air India is the third airline in the Tata stable; the group already holds a majority interest in AirAsia India and Vistara, a joint venture with Singapore Airlines Ltd. Air India -- which hasn't turned a penny in profit since its 2007 merger with Indian Airlines -- holds prized landing and parking slots at London's Heathrow airport, which may help Vistara lure business travellers with direct flights to Europe.