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History repeats itself and with Air India, it cannot be truer. With the Tata’s winning the bid session of Air India, this state-run airline again returns to its roots. Tata Sons won the bid at a value of Rs.18,000 crore for 100% equity shares on Friday, October 8. This debt amount included `15,000 crore by the airline and the rest of Rs.2700 crore will be paid by the government. In total, Air India had a debt of Rs. 61,562 crore and after the clearance of the debt, the centre will be left with a debt amount of Rs.46,262 crore. Talace, a subsidiary concern of Tata, will be acquiring the airlines.

Background

The journey of Air India, previously known as Tata Air services, started in the year 1932. It was established by Jehangir Ratanji Dadabhoy Tata, India’s first licensed pilot. India was then undivided and ruled by the British government and the airlines provided services from Karachi to Bombay. It flew mail and passengers, the name of the first plane of the company being Havilland Puss Moth. In the year 1934, this plane was developed into a superior one with the name de Havilland Leopard Moth DH-85. The very next year, the airlines introduced de Havilland Fox Moth DH-83 which was a 4-seater bi-plane. After the end of World War II, in 1946, Tata Airlines was renamed Air India Limited. Finally, in the year 1953, all Indian airlines, including Tata Airlines, were nationalised and it was renamed Air India. It was then split into two parts, one part being domestic and the other international. The domestic route was named Indian Airlines Corporation and the international route was named Air India International.

In the early 2000s, India was under the NDA government led by Prime Minister Atal Bihari Vajpayee and he was the first person to take a step towards selling off the airline. After that, a lot of attempts were made and finally in 2021, the central government asked all qualified and interested bidders, along with Tata and SpiceJet, to produce their final bids. Tata won the final bid.

Details of Acquisition

As of August 31, 2021, the total debt of Air India stood at Rs. 61,562 crore. When the sale was initiated, the central government fixed the bid price at Rs.12,906 crore. On September 15, Tata Sons submitted the final bid at rupees Rs.18,000 crore which was nearly `3000 crore more than the price fixed by the government. As per sources, SpiceJet owner Ajay Singh had also submitted quotations in this selling process. PTI reports said that the government has asked the Tata group to retain all Air India employees for a minimum period of one year. Beyond that, the employees will be offered Voluntary Retirement Scheme (VRS).

Challenges

Though the acquisition of Air India is a milestone in the history of the Tata group, there are numbers of unresolved issues. Tata’s have their shares in both Vistara and AirAsia and after taking Air India, it is likely to go under the same wing with Vistara. This can create some issues as both Air India and Vistara are full-service airlines. Moreover, the Tata group has a connection with Singapore Airlines who has not shown any interest in this bid. Taking of Air India can create some obstacles in the relationship between Singapore Airlines and Tata. Air India was running at a loss of Rs.28 crore per day. Overcoming this loss and bringing a positive fortune for the airline will also be a challenge for the Tata group.

Advantages

There are a lot of positive sides of this acquisition as well. The Tata group will become the owner of a hundred planes and at least a thousand of trained employees. In addition to that, they will also have some money-making lucrative parking and landing slots all over the world. In total, they will acquire 4400 domestic and 1800 international landing slots. Reflecting the emotional significance of this deal, Ratan Tata tweeted ‘Welcome Back Air India!’ as soon as the bid was finalised.