Tata Emerges As The Successful Bidder To Air India's Divestment
A unique change or say new chapter of India’s aviation industry started, on 4th October 2021, when a Tata group’s subsidiary, Tatalace, won a bid for Air India. As part of this deal, Tata group will hold 100 percent of Air India, formerly known as Tata Airlines, for INR 18,000 cr.
Originated in 1932, as Tata air services, Air India was founded by Late J. R. D. Tata an Indian aviator and business tycoon. With the acquisition of two single-engine de Havilland Puss Moths, the aviation department of Tata Sons was created in April 1932 to carry mail for Imperial Airways. Nevill Vintcent, a former Royal Air Force pilot and friend of Tata, flew the Puss Moth from Karachi to Mumbai) and on to Chennai on 15 October 1932. The airline's initial fleet consisted of a Puss Moth and a de Havilland Leopard Moth.   Weekly airmail services were offered between Karachi and Madras via Ahmedabad and Bombay. During its first year of operation, the airline handled 155 passengers, 9.72 tonnes of mail, and logged a profit of $600 (600 miles).
Air India was nationalised as part of the Government of India's nationalisation scheme in 1953. Further, nine other carriers were also nationalised, under Nehru's government, becoming part of two Public Sector Enterprises - Indian Airlines and Air India International.
The national carrier has been losing money since it merged with Indian Airlines in 2007 and relies on taxpayer-funded bailouts to stay afloat. To run the airline, the government reported losing nearly 200 million rupees ($2.6 million) every day.
For its poor financial performance over the years, the airline has cited high aviation fuel prices, high airport usage charges, competition from low-cost carriers, as well as a high interest burden.
Air India "suffered for its inconsistent service standards, low aircraft utilisation, dismal on-time performance, antiquated productivity norms, lack of revenue generation skills and unsatisfactory public perception", according to Jitender Bhargava, a former executive director of the airline.
In 2001, the government led by Atal Bihari Vajpayee tried to sell its 40 per cent stake and several major players showed their interest, but the deal did not materialise.
Worried with same performance failures, the Narendra Modi-led government tried to sell the airline in 2017, but reports suggest it held onto 24 percent of the stake, which prevented any potential buyers from entering the market.
For the third time, the Government invited and fixed the 17 September 2021 as the last date, to put the bid for Air India. On 4 October 2021, government announced Tata’s as the winner of the bid to acquire the indebted Air India, which offered Rs 18,000 crore in lieu of 100 percent stakes acquisition.
The Department of Investment and Public Asset Management(DIPAM), announced Tata's bid of Rs 18,000 crore comprises taking over 15,300 crore of debt and paying the rest 2,700 cr in cash. This bid for Air India was higher than the reserve price of Rs 12,906 crore set by the government, the officials added. The transaction was said to be closed by the end of December 2021.
The deal has received key approvals, but the transfer cannot be completed due to a delay in finalising Air India's balance sheet, and some approvals from international regulators as Air India has international operations.
As the airline is going to be privatised, the government has found an apt solution to give a huge relief to retired Air India employees. "Retired employees will get CGHS facility for their OPD requirement and National Health Insurance Scheme for their hospitalisation requirements," said a top government official, who did not want to be identified.
At present, Air India has about 50,000 retired employees, of which 30,000 have opted for the post-retirement medical scheme. Additionally, more than 10,000 are presently working for the company, of which, 5000 will retire in the next five years.
Upon handover of the airline, the Tata Group will operate three airlines - Air India, Air India Express, and Vistara. These will be some other changes supposed to happen along with this acquisition
- Tata will acquire 100 per cent stake of the low-cost arm Air India Express and 50 percent of AISATS, which provides cargo and ground handling services at major Indian airports.
- Air India has 12,085 employees -- 8,084 permanent and 4,001 contractual while Air India Express has 1,434. All existing employees will be retained.
- Air India will give Tata's access to more than a hundred planes, thousands of trained pilots and crew, and lucrative landing and parking slots all around the world.
- The airline will give Tata’s successful control of 4,400 domestic and 1,800 international landing and parking slots at domestic airports.
- It will also get 900 slots at airports overseas, the most lucrative of which are at London's Heathrow.