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How Air India will deal with the Tatas? What do we know so far

On friday, the government announced that the country’s debt-laden national carrier Air India will be taken over by Tata Sons, India’s largest and oldest conglomerate. Tata Sons’ subsidiary Tamalace Pvt Ltd has won bids for Air India, marking the end of its privatization process now that the government has approved its disinvestment. Tuhin Kanta Pandey, secretary for the Department of Investment and Public Asset Management, told Al Arabiya that India’s SpiceJet chief Ajay Singh offered 151 billion rupees (Dh7.38 billion) in his private capacity to acquire the airline.

Both bids in the final round exceeded the government’s reserve price of Rs 129 billion (Dh6.3 billion). The government’s initial sale attempt in 2018 failed to attract any bidders. Reports from Reuters claim that selling the loss-making national flag carrier is a major victory for the government since it cost taxpayers over $3 million (more than 11 million dirhams) a day for over a decade. Furthermore, it will bode well for planned stake sales in a slew of state-owned companies to bolster government coffers and make India a fully market-driven economy.

Assets and liabilities of Air India
As of friday, the government informed reporters that Tata will absorb 153 billion rupees (Dh7.48 billion) of the airline’s debt burden of more than 615 billion rupees ($8.2 billion or Dh30.2 billion). In addition to the debt, the company will be required to pay about Rs 27 billion (Dh1.32 billion) in cash extra as part of the bid, which will be the excess amount in the bid. Air India owes 24.8 percent of its total debt. The remaining debt of about Rs 462.6 billion will be borne by the government. In addition, the deal excludes non-core assets including land and buildings, valued at Rs 147.18 billion, which will be transferred to the central government’s Air India Asset Holding Ltd (AIAHL).

Government plans to sell 100 percent of its stake in the state-owned airline, including Air India’s 100 percent stake in AI Express Ltd. Low-cost carriers have gained market share from overly bureaucratic management and political interference as Air India has suffered. In 2007, it merged with a state-owned domestic carrier, Indian Airlines. AP reported that the new owner would take over 121 AAir India aircrafts, 25 of which are Air India Express aircraft offering cheap flights to dozens of destinations in India, the Middle East, and Southeast Asia.

One-year retention of staff
The government said on friday that Tata Sons would retain all employees for a year. If the group decides to retrench after that time, it must offer a voluntary retirement program. Rajiv Bansal, the secretary for civil aviation, said that if the winning bidder (Tata Sons) does not maintain all employees after the first year, they would be offered a voluntary retirement plan. The company will also honor gratuity, pension fund, and post-retirement medical benefits. In the disinvestment process, the government assured employees and retired employees that their interests would be protected

‘Welcome back, Air India!’
Ratan Tata, the group’s emeritus chairman, tweeted a vintage photograph of JRD Tata stepping down from an Air India flight on friday. ‘The Tata Group winning the bid for Air India is great news! While admittedly it will take considerable effort to rebuild Air India,  will hopefully provide a very strong market opportunity for the Tata Group’s presence in the aviation industry,’ said Ratan Tata in a press statement. On a poignant note, Air India was renowned at one time for being one of the most prestigious airlines in the world under JRD Tata.

Tatas will be able to reclaim the image and reputation it enjoyed in the past. ‘JRD Tata would have been overjoyed if he was in our midst today. We also need to recognize and thank the government for its recent policy of opening select industries to the private sector. Welcome Back Air India!’ he added. The airline was founded in 1932 by Jehangir Ratanji Dadabhoy (JRD) Tata. It was then called Tata Airlines. Air India, Tata Sons’ aviation division, was listed in 1946, and Air India International was launched in 1948 with flights to Europe. India’s international service was among the first public-private partnerships, with the government owning 49 percent, the Tatas 25 percent, and the public owning the rest. Air India was nationalized in 1953. Now it is returning home in 2021.

Read more: Do Durga Puja and Navaratri celebrate the same festival? How are they similar and different?

Other assets owned by Tata group
Tata Group consists of nearly 100 companies, including the country’s largest automaker and largest private steel corporation, and the country’s largest outsourcing company. The group employs over 350,000 people around the globe. Ford sold Jaguar and Land Rover to Tata for $ 2.3 billion in June 2008. The company also operates a budget airline, Air Asia India, with Malaysian carrier Air Asia Berhad, and a full-service airline, Vistara, with Singapore Airlines.


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