Air India returns to Tata founder after 68 years

New Delhi: The prodigal son is back.
The government on Friday announced the Tata Group as the winning bidder for Air India, paving the way for the cash-strapped Maharaja’s founder to go back just 68 years after India nationalized its private airlines in 1953 .

Tata’s wholly owned subsidiary Tales Pvt Ltd made an enterprise value (EV) bid of Rs 18,000 crore, with debt of Rs 15,300 crore and cash component of Rs 2,700 crore.
This was higher than the Ajay Singh-led consortia’s enterprise value (EV) bid of Rs 15,100 crore, with debt of Rs 12,835 crore and cash component of Rs 2,265 crore.

The satellite group from Salt will now acquire AI’s 50% stake in Air India (the merged AI-Indian Airlines entity), AI Express and AI’s ground handling firm AI-SATS before the end of this fiscal. Tata’s bid, in the government’s lucky third attempt to sell AI, was more than a consortium of SpiceJet promoter Ajay Singh.
The Tatas are now going to strengthen their airline business as they now have two budget airlines – AI Express and AirAsia India – and several full-service ones – AI and Vistara.
The first three airlines are likely to be integrated. Singapore Airlines (SIA), Vistara’s 49% stake, will decide in the coming months on its next move – whether to merge with the AI ​​fold or remain a separate airline.

This biggest ever consolidation in the Indian airline industry means an end to the uncertainty over the existence of AI as the government made it clear that it would have to shut down Maharaja – who has a debt-cum-loss of nearly Rs 1 lakh crore and one loses extra Rs 20-25 crore per day – if no one buys it.
JRD Tata predicted to PM Nehru against nationalization of airlines in 1952 because he was “sincerely convinced that the nationalization plan (was) not correct and would not result in the creation of an efficient and self-supporting air transport system…”

For travelers, the return of the prodigal son means AI will continue nonstop around the world. It is also expected that the poor onboard experience will improve over time.
Struggling to survive for years, the government-owned AI couldn’t spend long on cabin upgrades.

While its aircraft can safely do the longest nonstops such as Delhi-San Francisco/Auckland, most inflight entertainment screens do not function.
The seats are in urgent need of repair as part of an overdue cabin upgrade.
Whether Tata decides to refurbish the existing fleet or replace some of the old ones with new fuel-efficient planes cheaply available during the pandemic.Tata will get AI’s intangible assets such as 4,400 domestic and 1,800 international landing and parking slots at Indian airports; and 900 slots at airports abroad. AI had a total debt of Rs 60,074 crore as on March 31, 2019. The new owner will have to take a loan of Rs 23,286.5 crore.
The balance amount will be transferred to an SPV, Air India Assets Holding Limited (AIAHL). The SPV will monetize AI assets and assets such as land banks and use those funds to repay loans.

(Except for the headline, this story has not been edited by News East India staff and is published from a syndicated feed.)

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