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Tata Sons have won the bid to acquire debt-laden state-run Air India offering Rs 18,000 crore

As per the deal, the Tata Sons will take over of Rs. 15,300 crore of debt and rest of the amount will be paid in cash and final transaction is expected to be completed by December this year.

Rakesh Kumar | New Delhi |

Tata sons have today finally won the bid to acquire debt-laden state-run Air India offering Rs 18,000 crore for acquiring 100 per cent shareholding, informed the government today. The bid of Rs. 18,000 crore includes 100 per cent of its stake in the state-owned national airline, Air India’s 100 per cent shareholding in AI Express Ltd and 50 per cent in Air India SATS Airport Services Private Ltd.

As per the deal, the Tata Sons will take over of Rs. 15,300 crore of debt and rest of the amount will be paid in cash and final transaction is expected to be completed by December this year. However, the transaction does not include non-core assets including land and building, valued at Rs 14,718 crore, which are to be transferred to GoI’s Air India Asset Holding Limited (AIAHL).

“An SPV of Tata Sons – the holding company of conglomerate – has emerged as successful bidder. It beats a consortium led by SpiceJet promoter Ajay Singh to bag Air India,” said Tuhin Kanta Pandey, secretary to the Department of Investment and Public Asset Management (DIPAM).

He said the group of ministers, called Air India Specific Alternative Mechanism (AISAM), headed by Home Minister Amit Shah and which included Finance Minister Nirmala Sitharaman, Commerce Minister Piyush Goyal and Civil Aviation Minister Jyotiraditya Scindia, had approved the winning bid on October 4.

The airline was founded by Jehangir Ratanji Dadabhoy (JRD) Tata founded in 1932. It was then called Tata Airlines and in 1946, the aviation division of Tata Sons was listed as Air India. In 1953, Air India was nationalize and for the next over four decades it controlled the majority of the domestic airspace. The airline, also known as Maharaja, started facing problem when the government opened the aviation sector to private players in 1994-95.

The private airlines offered cheaper ticket price, and Air India gradually started losing market share. The last  nail in the coffin was in 2007-08 when it was merged with  Indian Airlines in 2007-08.

“The total debt of Air India as of 31 August 2021 is Rs 61,562 crores. Every day, the airline runs a loss of Rs. 20 crore,” informed Tuhin Kant.  The government has been planning to disinvest the beleaguered airlines for the past two decades. In March 2018, the government invites EoI from investors for buying 76 per cent stake in Air India, remaining 26 per cent to be with the government. The buyer was required to take Rs 33,392 crore or close to 70 per cent of the beleaguered carrier”s debt on its books. However, no bids received for Air India. In January 2020, government floats EoI for Air India privatisation.

The successful bidder will have control of 4,400 domestic and 1,800 international landing and parking slots at domestic airports, as well as 900 slots at airports overseas.

The decision of acquiring the beleaguered Airline welcomed by Ratan Tata, and he said it would take considerable effort to rebuild the debt-laden carrier. “Air India, under the leadership of Mr J R D Tata had at one time gained the reputation of being one of the most prestigious airlines in the world,” said Ratan Tata in a statement. “Mr J R D Tata would have been overjoyed if he was in our midst today,” he added.

About the employees, the Civil Aviation Secretary Rajiv Bansal said Tatas will retain all employees of Air India for one year and can offer VRS in the second year. Right now, the airline has 12,085 employees – 8,084 permanent and 4,001 contractual. Besides, Air India Express has 1,434. In the next five years, about 5,000 permanent employees will be retiring, he said.