Tata Sons has won the bid to acquire national carrier Air India for Rs 18,000 crore and will now take over the airline again more than half a century after it was nationalised by the government.
Apart from 100 per cent stake in Air India and its low-cost subsidiary Air India Express, the winning bid also includes a 50 per cent stake in ground-handling company Air India SATS Airport Services Private Limited (AISATS).
Tata Group’s special purpose vehicle Talace Pvt Limited emerged as the winning bidder, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey said.
As on August 31, 2021, Air India has a total debt of Rs 61,562 crore, out of which Rs 15,300 will be taken over by the bidder, Mr Pandey said. Which means Rs 46,262 crore will be transferred to Air India Assets Holding Limited (AIAHL), he added. AIAHL is a special purpose vehicle formed by the government to manage the debt of the loss-making airline.
The transaction 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 holding company AIAHL. These could be used by the government to clear a portion of the debt burden.
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The government was also losing more than Rs 20 crore every day in running the airline and this financial draining will now come to an end.
Civil Aviation Secretary Rajiv Bansal said that the winning bidder will not retrench any employee for a minimum period of one year and if retrenched after a year, they will have to be offered VRS (voluntary retirement scheme).
Gratuity and Provident Fund benefits will be provided to all employees, he added.
Mr Bansal also said, "As of today, there are 12,085 employees in Air India out of which 8,084 are permanent and 4,001 are contractual. Besides this, Air India Express has an employee strength of 1,434."
Air India has turned into a chronic loss-maker as it has to service a huge debt burden incurred due to the massive purchase of planes during the UPA government at a time when there was a slump in the airlines industry.
The government’s dilemma has been that it has to infuse nearly Rs 650 crore each month merely to keep the airline running.
However, the big positive for Air India is that it still controls more than 4,400 domestic and 1,800 international landing and parking slots at domestic airports, and 900 slots overseas.
The Tata Group had put in a higher bid than SpiceJet promoter Ajay Singh, the only other contender for buying the loss-making airline. At present, the Tata Group operates Vistara airline in partnership with Singapore Airlines and AirAsia India in partnership with Malaysia's AirAsia.
The committee of ministers, formed for the disinvestment of Air India, headed by Home Minister Amit Shah is likely to meet soon to approve the winning bid for the national carrier.
If the Tata bid is finally approved, events will have come full circle for the Mumbai-based group which owned Air India before it was nationalised 67 years ago.
This was the second attempt by the Narendra Modi government to sell Air India.
The centre made an attempt in March 2018 but its expression of interest – to sell a 76 percent stake good not attract any bids due to the huge debt burden of the airline. The government was forced to hive off a major chunk of the debt so that the airline could attract bids.
