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Historic Moment in Indian Aviation Industry: Air India is going back to the Tata Group

It is now official: Air India is going in the hands of the Tata Group, marking a historic moment in the Indian Aviation Industry.

Official

The government of India, in a press conference on 8th October 2021, announced that Tata Sons has won the bid for Air India, pricing the debt-saddled carrier at ₹18,000 crores ($2.39 billion approximately).

While rumours had already begun to fly earlier in the week that the Tata Group had won the bid, the government of India on Friday announced it officially. The decision closes the 21-month long divestment process that has been beset with delays due to the COVID-19 pandemic, forcing extensions and price cuts for the airline.

Tata Sons valued Air India at ₹18,000 crores ($2.39 billion), taking on ₹15,300 crores as debt for the airline and paying ₹2,700 crores ($358.5 million) in cash to the government. SpiceJet’s CEO Ajay Singh’s consortium put in a bid for ₹15,100 crores ($2 billion approximately) losing the bid narrowly. Both the bids were above the government’s reserve price of ₹12,906 crores ($1.71 billion).

As I previously mentioned, this is a historic moment for the Indian Aviation Industry. The Indian government can proudly say that it has turned a chapter in Indian aviation by finally privatising Air India and removing its debt from the books which has long been a priority for the government. The government has been trying to privatise Air India since 2017.

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Conditions

Privatising a national asset like Air India is no small task. Tata’s accession to the helm comes with some conditions, mainly in terms of ownership and employee rights.

Tata Group cannot fire any employees in the first full year and can only engage in voluntary retirements for removals from the second year. All of the benefits will be covered by the government.

This is a full circle for Air India, as the Tata Group was the one who founded the airline in 1932. Back then, it was known as Tata Airlines before the Indian government took ownership of the airline in 1953 and renamed it as Air India. After 68 years, Air India is once again going in the hands of the one who founded the airline.

Ratan Tata, Chairman emeritus, Tata Group, tweeted:

N. Chandrasekaran, Chairman, Tata Sons, 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 out Group to own and operate the country’s flag bearer airline. It will be our endeavour to build a world-class airline which makes every Indian proud. On this occasion, I would like to pay tribute to J.R.D. Tata, pioneer of Indian aviation, whose memory we cherish.

December deadline

The Indian government states that the official transfer of ownership will happen in December 2021, giving the Tatas a 2-month window to do its preparations.

Tatas will now have 4 airlines in India – Air India, Vistara, Air India Express and Air Asia India. The group owns a 51% stake in Vistara (Singapore Airlines owns the other 49%) whereas the Tatas own a 83.67% stake in AirAsia India (16.33% is owned by AirAsia Investment Limited). If the Tatas decide to merge all of the airlines into one, then the group can have one dominating airline in India giving Indigo a strong competition.

For now, the entire aviation industry is closely watching the future of Air India and how it will disrupt the status quo. Can the Tatas bring back Air India’s glorious days again? Can the Tatas turn Air India profitable? Can the Tatas bring back Air India’s pride? Will it struggle in a price-sensitive market? Only time will tell.

Featured image by JetPhotos

What do you think of Air India returning to the Tata Group? What do you think of Air India’s future? Let me know in the comments section below.

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