Saturday, July 2, 2022

Air India returns to Tata Sons at a winning bid of $2.45bn

India’s Tata Sons has won a competitive bid for acquiring the country’s flag carrier Air India, including its wholly-owned subsidiary Air India Express and 50 per cent stake in Air India SATS, it was announced by the Indian government.

The Tata group’s holding company, Tata Sons through its wholly-owned subsidiary Talace Pvt Ltd submitted a winning bid of Rs18,000 crore ($2.4 billion) as the enterprise value of Air India.

Consequent to the acquisition, the Tatas will own a 100 per cent stake in Air India (a full-service airline operating in domestic and international markets) as also 100 per cent in its subsidiary Air India Express, its low-cost carrier airline and 50 per cent in the joint venture Air India SATS (airport services on ground and cargo handling). The total permanent and contractual employee strength of Air India and AIXL is 13,500.

As on August 31, 2021, Air India had a total debt of Rs61,562 crore, out of that Rs15,300 crore will be taken over by the bidder, said a government official. Rs46,262 crore will be transferred to Air India Assets Holding Limited (AIAHL), an SPV formed by the government. Tata Group will not get the lands and buildings in the name of Air India; they will be transferred to AIAHL.

The government aims to conclude the transaction by December, 2021, when the government shares will be transferred to the Tata subsidiary.

Civil Aviation Secretary Rajiv Bansal said that the winning bidder will not retrench any employee for minimum period of one year and if retrenched after a year, they will have to be offered VRS (voluntary retirement scheme). Gratuity and Provident Fund (PF) benefits will be provided to all employees, he added.

N Chandrasekaran, Chairman, Tata Sons Pvt Ltd, said: “At the Tata group, we are delighted to be declared as the winner of the bid for Air India. This is a historic moment, and it will be a rare privilege for our group to own and operate the country’s flag bearer airline. It will be our endeavour to build a world-class airline that makes every Indian proud. On this occasion, I would like to pay tribute to JRD Tata, pioneer of Indian aviation, whose memory we cherish.”  

The Tatas will get ownership of iconic brands like Air India, Indian Airlines & the Maharajah. Air India has a fleet of 117 wide-body and narrow-body aircraft and AIXL has a fleet of 24 narrow-body aircraft. A significant number of these aircraft are owned by Air India.

Air India provides a unique and attractive international footprint. More than 2/3rd of Air India’s consolidated revenues come from the international market. It is the number one player from India in the international market having a strong footprint across geographies like North America, Europe, and the Middle East with attractive slots and bilateral rights. The Air India frequent flyer programme has more than 3 million members.

With the acquisition, Air India comes a full circle for Tatas, who had set up the airline before its nationalisation in 1953. The founder, JRD Tata continued as the airline’s chairman till 1977.  

Founded by Jamsetji Tata in 1868, the Tata group is a global enterprise, headquartered in India, comprising 30 companies across 10 verticals. The group operates in more than 100 countries across six continents, with a mission ‘To improve the quality of life of the communities we serve globally, through long-term stakeholder value creation based on Leadership with Trust’.

In 2020-21, the revenue of Tata companies, taken together, was $103 billion. These companies collectively employ over 800,000 people.

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