Mon. May 23rd, 2022

The agreement is a homecoming for Air India, originally introduced in 1932 by Tata Group former chairman JRD.

By Bloomberg

Tata Sons Pvt has formally taken control of the debt-laden Air India Ltd, which ended years of failed attempts to sell the money-losing airline that was going on with billions of dollars in taxpayers’ money.

“It is indeed remarkable that the disinvestment process of @airindiain has been brought to a successful conclusion in a time-bound manner,” Aviation Minister Jyotiraditya Scindia said in a Twitter post. It demonstrates the government’s ability and “determination to carry out effective disinvestment in non-strategic sectors in the future.”

The successful conclusion of the agreement, India’s first major privatization in almost two decades, is a major victory for Prime Minister Narendra Modi, who has promised to steer the state away from running businesses while its administration tries to tackle a budget deficit. The move is also a homecoming for Air India, which was originally launched in 1932 by Tata Group’s former chairman JRD Tata as the country’s first carrier, holding mail between Karachi, then part of undivided British-controlled India, and Bombay. flying.

“This is a very historic day because Air India is getting a new life under Tata’s control,” said Jitender Bhargava, a former executive director at Air India who wrote a book on the airline’s downfall. Air India has weaknesses, Bhargava said, but the Tatas have the means to reverse them. “Air India will not only give Tata the scale, but also the number one position because of its large network of international operations and a large number of trained pilots and aircraft maintenance engineers,” he added.

The disinvestment of Air India was concluded with the transfer of 100% shares of Air India to Tata Sons along with the management control, the Department of Investment and Public Asset Management said in a tweet. A new board has taken control of Air India, it said, without expanding.

The revival of Air India – whose market share more than halved last year to less than 10% – will be a challenging task for the largest conglomerate in India, which already manages two other unprofitable airlines. While Air India’s regional branch, Alliance Air, is not part of the deal, the group also gains control of the low cost, short-distance international airline Air India Express and an equal interest in a land management company with SATS Ltd.

The group was selected as the winning bidder in an auction in October, in which it bid 180 billion rupees as an enterprise value for Air India, including the adoption of 153 billion rupees from the airline’s debt. Air India also comes with a highly unionized workforce with a history of disrupting schedules for claims, and an aging and mixed fleet of more than 150 aircraft, potentially complicating a revival.

“We are excited to have Air India back in the Tata Group and are committed to making it a world-class airline,” N. Chandrasekaran, chairman of Tata Sons, said in a statement. “I warmly welcome all the employees of Air India, Air India Express and AI SATS to our Group, and look forward to working together.”

Tata Sons has yet to spell out its plans for Air India, which loses 200 million rupees ($ 2.7 million) every day. Potential options include merging the flagship with one of its other airlines – Vistara Company with Singapore Airlines Ltd. and AirAsia India Ltd. with AirAsia Bhd. – or to keep it independent. The terms of the transaction prevent the new owner from dismissing any employee for at least a year.

Competition for Tata’s airline business will also intensify with bankrupt Jet Airways India Ltd. getting ready to fly again, and billionaire investor Rakesh Jhunjhunwala’s newly formed airline, Akasa, getting ready to start operations.

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