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Indian software-based tea giant Tata is buying Air India, 89 years after its creation as Tata Air and half a century after its nationalization, the government announced on Friday.
The 180 billion rupee ($ 2.4 billion) deal marks the end of a long drive to privatize the heavily indebted national carrier that the government says has eaten up 1.1 trillion rupees (14.7 billion dollars) of public money since 2009.
The airline was founded in 1932 with the first flight piloted by Tata’s eponymous president himself, JRD Tata, carrying mail and passengers in a single-propeller de Havilland Puss Moth from Karachi to Bombay, as the city was then known.
Tata Air offered a slice of the high life with Bollywood actresses in his commercials and at one point asked Spanish surrealist artist Salvador Dali to design his ashtrays.
The airline was nationalized in the 1950s and in the decades that followed the “Maharaja of Heaven” became synonymous with the hopes and ambitions of the newly independent country.
“Welcome, Air India,” Tata Patriarch President Emeritus Ratan Tata tweeted on Friday, admitting that “it would take considerable effort to rebuild” the company.
The airline at one point “gained a reputation as one of the most prestigious airlines in the world. Tatas will have the opportunity to regain the image and reputation it enjoyed in previous years”, did he declare.
– No frills, no profits –
In the 1990s, Air India began to fight competition on domestic and international routes from Gulf carriers and no-frills airlines, and the company began to rack up huge losses and debts.
Successive Indian governments have attempted to privatize the company, but its debts and New Delhi’s insistence on retaining a stake have deterred potential buyers.
Finally, last year the government of Prime Minister Narendra Modi, seeking to sell a series of state assets, agreed to take offers for the whole of the company but to keep some of what the airline must.
As part of the deal announced on Friday, Tata will assume about a quarter of Air India’s dues of Rs 615 billion, while the rest will be transferred to a special vehicle.
– Big bet –
Tata Group, one of India’s largest and oldest companies, employs more than 800,000 people in 100 countries.
Founded in 1868 by Jamsetji Tata, the “father of Indian industry”, Tata owns Jaguar Land Rover, software giant TCS, Tata Steel as well as interests in chemicals, hospitality, consumer goods and communications.
Its subsidiaries include 29 listed entities, including software giant TCS, Tata Motors, parent company of Jaguar Land Rover, Tata Steel and others, which have a combined market capitalization of over $ 250 billion.
The takeover of India’s largest international airline – nationally, IndiGo is number one – is part of ambitious plans.
Tata owns 51% of Indian airline Vistara – Singapore Airlines owns the remaining 49% – as well as an 84% stake in AirAsia India, which Tata will now try to muster.
Air India has a fleet of approximately 120 aircraft, in addition to 4,400 domestic and 1,800 international landing and parking spaces at domestic airports, and 900 seats at overseas airports.
Air India operates 50 percent of all international flights departing from India.
Mark D Martin of Martin Consulting, an aviation consulting firm, said Tata should be able to swallow the additional debt.
“The transition from traditional to modern by the Tatas has been kind of a case study and they have done a very good job. So I don’t think they will have a problem with the Air India treatment,” he said. Martin told AFP.
“They have deep pockets, they are well positioned and they are very strategic in their approach. You won’t find anyone better than the Tatas to turn things around.”
Besides Air India, the government also plans to raise billions of dollars through the privatization of Bharat Petroleum and a major insurer.
In August, New Delhi said it was looking to lease state-owned assets from the private sector to raise six trillion rupees to repair public finances affected by the pandemic and finance new infrastructure.
ng-bb-stu / ser
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