Tata takes back control of struggling Air India with $ 2.4 billion bid

NEW DELHI, October 8 (Reuters) – Tata Sons will take back control of Air India after offering $ 2.4 billion, including equity and debt, the government said on Friday, marking the end of years of struggles to privatize the struggling airline.

A successful sale of the loss-making national carrier will be a major victory for Prime Minister Narendra Modi, as it has cost taxpayers an average of nearly $ 3 million per day over the past decade. It would also bode well for planned sales of stakes in a large number of state-owned enterprises to bolster government coffers and make India a fully market-driven economy.

Talace Pvt Ltd, a unit of Tata Sons – the holding company of the autos-to-steel conglomerate Tata which owns the luxury car maker Jaguar Land Rover – will acquire 100% of Air India, Tuhin Kanta Pandey, secretary of the ministry of ‘Investment and Public Asset Management, said.

The deal, which is expected to be finalized by the end of the year, puts Air India back into the hands of the group that founded it as Tata Airlines in 1932 before it was nationalized in 1953.

The bid amount includes Tata’s assumption of $ 2 billion of Air India’s total $ 8.2 billion debt, resulting in a government equity value of approximately $ 400 million only.

Tata currently operates two airlines – Vistara, India’s only other full-service carrier, in partnership with Singapore Airlines (SIAL.SI) as well as low-cost airline AirAsia India, in partnership with Malaysian group AirAsia (AIRA.KL ).

The addition of Air India will give Tata a combined share of around 27% of the country’s domestic aviation market, just behind IndiGo.

Ratan Tata, descendant of the family and Chairman Emeritus of Tata Sons, said on Twitter that while it will take “considerable effort” to rebuild Air India’s reputation, it would provide Tata with a solid opportunity in the industry. aviation.

“Welcome, Air India!” He said in a tweet.

The acquisition will give Tata an additional 4,400 domestic slots and 1,800 international slots at Indian airports each year, as well as 900 slots at foreign airports, the most lucrative of which is at Heathrow in London.

“Air India offers a unique and attractive international footprint,” Tata Sons said in a statement, adding that more than two-thirds of its revenue comes from international markets such as North America, Europe and the Middle East.

Tata will gain 8,000 full-time employees, which it is to retain for at least a year under the terms of the agreement, and some 120 aircraft, mostly older narrow-body Airbuses (AIR.PA), but also Boeings. newer widebody (BN) airplanes.

He will also become the sole owner of Air India’s low-cost arm, Air India Express, which will likely give the group a competitive advantage, said Suman Chowdhury, chief analyst at Mumbai-based Acuity Ratings & Research.

“However, the ability to optimize costs and streamline operations will be a formidable challenge and the key to profitability,” he said.

It took more than four years for the Modi administration to find a buyer for Air India. The latest surge began in January 2020, just weeks before the COVID-19 pandemic brought the global airline industry to its knees.

Over the past decade, the government has spent around $ 15 billion in taxpayer dollars on Air India, famous for its mascot Maharaja, Pandey said, adding that the deal would block the release of bailout funds.

Reporting by Aftab Ahmed and Aditi Shah; additional reporting by Chris Thomas in Bengaluru; Editing by Edwina Gibbs, Kirsten Donovan

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