Tata Group takes over Air India
October 8, 2021
The Indian government on Friday closed a deal to sell its national airline, debt-laden India Air, to the country's largest carmaker and steel producer, the Tata Group.
India's oldest conglemorate will pay 180 billion rupees (roughly €2.1 billion/$2.4 billion) to revive India Air, which has been running in the red since 2009 at a cost of 1.1 trillion rupees to the taxpayer.
What are the main details of the deal?
Under the deal reached with Tata, the government will no longer have a share in the airline and Tata will only have to pay a quarter of Air India's debt burden of about 615 billion rupees. The debt which Tata is covering will come out of the purchase price to the government.
Tata's bid beat competition from Spicejet chief Ajay Singh, who offered $2 billion.
Previous attempts to privatize the airline had been deterred by the debt burden and a government desire to keep a share in the airline. India ultimately gave up on retaining a stake and settled for covering only a fraction of the debts in order to offload the losing venture.
'Tata Air' goes back to its roots
The winning bid signifies a return of Air India to its founders, which started the airline as Tata Air in 1932, flying mail and passengers from Karachi to Mumbai (or Bombay, as it was then called).
"Welcome back, Air India," Tata's current chairman emeritus, Ratan Tata, wrote on Twitter.
Though it "would take considerable effort to rebuild the company," he expressed optimism that it "will have the opportunity of regaining the image and reputation it enjoyed in earlier years."
Air India carried 18.36 million domestic passengers in 2019 operating half of India's international flights.
It has a fleet of about 120 aircraft and 4,400 domestic and 1,800 international landing and parking slots, as well as a further 900 slots at airports in other countries.
But Air India suffered from overly bureaucratic management and political interference, combined with the merger with Indian Airlines in 2007, which has triggered losses of $3 million a day.
The airline was nationalized in the 1950s, but after early glory years struggled to keep up with the competition from no-frills carriers domestically and Gulf airlines on international flights.
More recently, limits on international travel during the pandemic turned the screws still tighter for the struggling airline, as for all passenger carriers. The pandemic and the lockdowns and extra government spending required as a result has put the Indian government under considerable financial strain already.
How big is the Tata group?
The Tata group is one of India's largest conglomerates, worth over $250 billion by market capitalization and employing 800,000 people in 100 countries across the globe. Annual turnover for the entire empire exceeded $100 billion in the latest tax year, according to Tata. Some of its biggest arms include Tata Consultancy Services, Tata Steel and Tata Motors, though it also sells software, operates hotels and even makes coffee and other consumer products.
Tata runs two airlines of its own, the budget carrier AirAsia India with Malaysian airline AirAsia Berhad, and full-service carrier Vistara in a partnership with Singapore airlines.
jc/msh (AFP, AP, Reuters)