Tea-to-steel conglomerate Tata is buying back the struggling Air India, 89 years after founding it as Tata Air and half a century after its nationalization, the Indian government announced Friday.
The airline was founded in 1932 with the first flight piloted by Tata’s eponymous chairman himself, flying mail and passengers in a single-propeller de Havilland Puss Moth from Karachi to Bombay.
Tata Air expanded around South Asia, offering a slice of the high life with Bollywood actresses in its adverts and at one point commissioning Spanish surrealist artist Salvador Dali to design its ashtrays.
The airline was nationalised by the Indian government in the 1950s and in the decades that followed the “Maharaja of the Skies” became synonymous with the hopes and ambitions of the newly independent country.
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But in the 1990s Air India began to struggle with competition on domestic and international routes from Gulf carriers and no-frills airlines, and the firm started amassing huge losses and debts.
Successive Indian governments tried to privatise the company but its debts and New Delhi’s insistence on retaining a stake put off would-be buyers.
Finally last year Prime Minister Narendra Modi’s government, seeking to sell of a raft of state assets, agreed to take bids for the entire company but to retain some of what the airline owes.
In addition the government is also selling a 50 percent stake in Air India SATS Airport Services, which provides cargo and ground handling services.
Big bet
The government said Friday that a subsidiary of Tata would acquire the airline for 180 billion rupees ($2.4 billion), with the deal set to close by the end of the year.
For Tata, which also owns Jaguar Land Rover as well as Tetley tea, buying back what is now India’s biggest international airline — domestically IndiGo is number one — is part of ambitious plans.
Tata owns 51 percent in Indian airline Vistara — Singapore Airlines holds the remaining 49 percent — as well as an 84-percent stake in AirAsia India, all of which Tata will now try to bring together.
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Air India comes with a fleet of around 120 aircraft in addition to 4,400 domestic and 1,800 international landing and parking slots at domestic airports, and 900 slots at airports overseas.
Air India operates 50 percent of all international flights from India.
As of August 31, the airline had amassed a total debt of 615.62 billion rupees. Tata will take on around a quarter of this, or 153 billion rupees, while the remainder will be transferred to a special-purpose vehicle.
Mark D Martin from Martin Consulting, an aviation consultancy, said that Tata should be able to swallow the additional debt.
“The transition from traditional to modern by the Tatas has been something of a case study and they’ve done a very good job. So, I don’t think they’ll have a problem with handling Air India,” Martin told AFP.
“They’ve got deep pockets, they’re well-positioned and they are very strategic in their approach. You won’t find anyone better than the Tatas when it comes to turning around businesses.”
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Apart from Air India, the government also plans to raise billions of dollars through the privatisation of Bharat Petroleum and a major insurer.
In August, New Delhi said it was seeking to lease state-owned assets to the private sector to raise six trillion rupees to repair public finances battered by the pandemic and fund new infrastructure.
AFP with additional input by GVS News Desk