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An Air India Boeing 787-8 departing (Photo: Steve Walsh / Flickr)
Tata Group completes takeover of Air India

After 69 years, Tata Group controls Air India once again

Summary

  • Tata to absorb Air India’s 15,300 crore debt
  • AirAsia India to merge with Air India Express

Tata Group has once again gained control of Air India (AI) after 69 years, bringing the struggling airline into private hands.

Formalities of the handover have just been completed, with Tuhin Kant Pandey, secretary to the Department of Investment and Public Asset Management (DIPAM) saying that the Air India divestment has been closed, with all shares transferred to Talace Private Limited.

At the same time, almost all existing Air India board members have resigned and are replaced by nominees of Tata Group.

In October 2021, Tata Group’s wholly subsidiary, Talace Private Limited won its bid to gain 100 percent control of Air India, including 100 percent stake in low-cost airline Air India Express and 50 percent stake in ground handler AISATS for 18,000 crores, beating out SpiceJet chairman Ajay Singh by 5,000 crores.

The bid would also be 3,000 crores higher than the government reserve price between 13,000 to 20,000 crore. Out of the 18,000 crores, it will absorb 15,300 crores of Air India’s debt while the remaining money will be paid to the government of India in cash for the sale.

The deal was made possible because the government sweetened the deal in October 2020, offering potential buyers the flexibility to choose how much debt they want to absorb.

Part of the deal includes having access to 117 Air India aircraft such as the Airbus A319, A320, A321 and Boeing 747, 777 and 787, and 24 Air India Express aircraft comprising of Boeing 737-800. The Group would also have control of around 4,400 domestic slots and 1,800 international landing and parking slots at domestic airports and 900 slots at airports overseas.

Excluded from the deal are its non-core assets including land and building valued at 14,718 crores, which will be transferred to Gol’s Air India Asset Holding Limited (AIAHL).

In preparation for Air India’s takeover, Tata Group has begun to introduce a slew of improvements, starting with improving the airline’s On-Time Performance by closing aircraft doors 10 minutes before departure, addressing passengers as guests, and investing in new fleet and cabin upgrades.

A consortium of lenders, including Bank of Baroda, Punjab National Bank, and Union Bank of India, and led by State Bank of India has agreed to provide both term and working loans to Tata Group for Air India’s operations.

“Totally delighted that Air India takeover process is complete … We look forward to working with everyone to create a world-class airline”

N. Chandrasekaran, Tata Sons Chairman

Air India has been making losses since its ill-fated merger with local airline Indian Airlines in 2007, pushing its debt further into the red, with its debt standing at almost 62,000 crores as of August 31, 2021.

Tata Group currently has a 51 percent stake in full-service airline Vistara, with the remainder 49 percent being held by Singapore Airlines and a 100 percent stake in low-cost carrier AirAsia India which will be folded into Air India Express in the near future.

Neither AirAsia India nor Vistara has made a profit in seven to eight years.

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