Bijetri Roy, Managing Director & Chief Strategy Officer, InsPIRE
Government of India (GoI), by announcing the Tata Group as the winning bidder for the sale of Air India on 8th October 2021, paved the way for the “Maharajah” to go back to the Tatas after seven decades. The bid was submitted by Tata Sons Pvt. Ltd. through its wholly owned subsidiary Talace Pvt. Ltd. At an enterprise value of INR 180 billion (USD 2.39 billion), the Tatas will get Air India, along with its low cost subsidiary Air India Express and a 50% stake in ground handling firm AISATS.
The Tatas will also get ownership of iconic brands like Air India, Indian Airlines, and the Maharajah, besides 141 aircraft and over 7,000 domestic and international airport slots. With the takeover of Air India, Tata Sons, which operates Vistara and AirAsia India, will become the second-largest airline in the domestic market with a market share of about 25%, and the largest Indian airline on international routes.
The bid value of INR 180 billion (USD 2.39 billion), includes INR 27 billion (USD 0.36 billion) to be paid by Tatas in cash for the acquisition, and INR 153 billion (USD 2.04 billion) debt that Tatas will take (to be retained in Air India). Further, Tatas will have to pay around INR 91.85 billion (USD 1.22 billion) towards capitalised lease obligation of 42 leased aircraft primarily the Boeing 787 Dreamliner aircraft.
This deal signifies the firm resolve of GoI to work towards strategic disinvestment, beginning with Air India, and to be followed by BPCL, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam Limited, among others, to be completed in 2021-22, as announced in the Union Budget 2021-22. Privatisation of Air India has been a complex issue and it took two decades to fructify, while GoI has been suffering a daily loss of INR 200 million (USD 2.66 million) and an annual loss of INR 73 billion (USD 0.97 billion) for running Air India. The impact on GoI’s finances after the sale would be INR 446.78 billion (USD 5.95 billion).
The sale of Air India to the Tatas promises to transform the Indian aviation sector, strengthening competition in the domestic market and making Air India a major player in the international aviation market. At the same time, it places India on the right track on disinvestments and economic reforms agenda of the government.