Tata regains control of troubled Air India with $2.4 bln bid

Nilgiri

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Long overdue!:

Tata regains control of troubled Air India with $2.4 bln bid​


NEW DELHI, Oct 8 (Reuters) - Tata Sons will resume control of Air India after bidding $2.4 billion, including equity and debt, the government said on Friday, marking the end of years of struggle to privatise the financially troubled airline.

A successful sale of the loss-making national flag carrier will be a major victory for Prime Minister Narendra Modi as it had cost tax payers an average of nearly $3 million a day for the past decade. It would also bode well for planned stake sales in a slew of state-run firms to bolster government coffers and make India a fully market-driven economy.

Talace Pvt Ltd, a unit of Tata Sons - the holding company for the autos-to-steel Tata conglomerate which owns luxury carmaker Jaguar Land Rover - will acquire 100% of Air India, Tuhin Kanta Pandey, secretary of the Department of Investment and Public Asset Management, said.

The deal, which is expected to be finalised by the end of the year, puts Air India back in the hands of the group which founded it as Tata Airlines in 1932 before it was nationalised in 1953.


The bid amount includes Tata taking on $2 billion of Air India's $8.2 billion total debt, resulting in an equity value for the government of only about $400 million.

Tata currently operates two airlines - Vistara, India's only other full-service carrier, in a venture with Singapore Airlines (SIAL.SI) as well as budget airline AirAsia India, a venture with Malaysia's AirAsia Group (AIRA.KL).

Adding Air India will give Tata a combined share of about 27% of the country's domestic aviation market, second only to IndiGo.

Family scion and emeritus chairman of Tata Sons, Ratan Tata said on Twitter that while it will take "considerable effort" to rebuild Air India's reputation, it would provide Tata with a strong opportunity in the aviation industry.


An Air India Airbus A320neo plane takes off in Colomiers near Toulouse, France, December 13, 2017. REUTERS/Regis Duvignau/File Photo

An Air India Airbus A320neo plane takes off in Colomiers near Toulouse, France, December 13, 2017. REUTERS/Regis Duvignau/File Photo
"Welcome back, Air India!," he said in a tweet.

The acquisition will give Tata an additional 4,400 domestic and 1,800 international slots at Indian airports annually, as well as 900 slots at airports overseas, the most lucrative of which are at London's Heathrow.

"Air India provides a unique and attractive international footprint," Tata Sons said in a statement, adding that more than two-thirds of its revenue comes from international markets like North America, Europe and the Middle East.

Tata will gain 8,000 full-time employees, which it must retain for at least one year under the terms of the deal, and some 120 planes, mostly older narrowbody Airbus (AIR.PA) aircraft but also some newer widebody Boeing (BA.N) planes.


It will also become the sole owner of Air India's low-cost arm, Air India Express, likely giving the group a competitive advantage, said Suman Chowdhury, chief analytical officer at Mumbai-based Acuité Ratings & Research.

"However, the ability to optimise costs, and streamline operations will be a formidable challenge and the key to profitability," he said.

It has taken the Modi administration more than four years to find a buyer for Air India. The latest push began in January 2020, just weeks before the COVID-19 pandemic brought the global airline industry to its knees.

Over the past decade, the government has spent about $15 billion of taxpayer money on Air India, famous for its Maharaja mascot, Pandey said, adding that the deal will plug the outflow of bailout funds.

Reporting by Aftab Ahmed and Aditi Shah; additional reporting by Chris Thomas in Bengaluru; Editing by Edwina Gibbs, Kirsten Donovan
 

Zapper

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I wonder if Tata intends to change the name of the airline to project it as a brand new carrier...even if it doesn't, the logos, design, branding should all be revamped
 

Nilgiri

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I wonder if Tata intends to change the name of the airline to project it as a brand new carrier...even if it doesn't, the logos, design, branding should all be revamped

Well its in their hands now.

It wont be some babu rubbing his hands at taxpayer money calling such shots.
 

Jackdaws

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It's going to be quite a task to unravel the mess. An AI pilot told me there are 22 Unions within Air India. He also used to give me free upgrades to first class on international routes which I now guess might not happen.

If the service of Air Vistara is any indication, we are in for a treat - Starbucks coffee, Taj catering, great customer service.

I think they'd keep the name Air India - it has significant brand equity.
 

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It's going to be quite a task to unravel the mess. An AI pilot told me there are 22 Unions within Air India. He also used to give me free upgrades to first class on international routes which I now guess might not happen.

If the service of Air Vistara is any indication, we are in for a treat - Starbucks coffee, Taj catering, great customer service.

I think they'd keep the name Air India - it has significant brand equity.
Restructuring will happen for sure
 

Rajaraja Chola

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Will be air India for sure. Infact I expect Air Asia India and Vistara to be absorbed into the bigger air India family. But I don't know how long it will take them to make a profit.

Last aircrafts were bought in 2004-2008 circa and they were never renovated. Renovation needs to be done. In addition to the debts Tata would need to pay out slowly.
 

Lonewolf

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Will be air India for sure. Infact I expect Air Asia India and Vistara to be absorbed into the bigger air India family. But I don't know how long it will take them to make a profit.

Last aircrafts were bought in 2004-2008 circa and they were never renovated. Renovation needs to be done. In addition to the debts Tata would need to pay out slowly.
And retire those near retirement air hostess , import some chicks ,like ethiad and Qatar ones
 

Rajaraja Chola

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And retire those near retirement air hostess , import some chicks ,like ethiad and Qatar ones

It's actually an misconception that other airlines have "young" hostesses 😂 but Air India air hostesses are sometime rude. Had faced it twice. Hope they work out the attitude. I understand they are under pressure. So are we for various reasons.
 

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India is a big country with a large population. How can this airline not benefit from its own home advantage? Look at European, American, Chinese or even Turkish airlines. They all grew at home first.
 

Nilgiri

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India is a big country with a large population. How can this airline not benefit from its own home advantage? Look at European, American, Chinese or even Turkish airlines. They all grew at home first.

It was run by a bunch of corrupt thugs and idiots (aka govt) for too long so it atrophied and turned into a taxpayer hobby in the end....since it almost never posted any kind of profit or value-addition to rest of economy.

You see, the govt (in cold war leftie mentality) stepped in and nationalised this formerly private airline in the early 50s....replacing profit-motive with govt-bureaucrat "motives" in probably the worst sector imaginable to do this.

Other (Private) airlines picked up all the slack starting in the 90s (when the sector was liberalised for private players to enter) to now....they are all inevitably doing immensely better....and largely for the reason you mention.

So it is both ironic and fitting the waste of time, effort and money the govt did with this exercise comes full circle and the original owner (Tata pre 1953) re-acquires the enterprise now.
 
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