September 24, Kathmandu. The Tata group, which deals in everything from salt to software, has bought 100 per cent ownership of debt-ridden airline Air India.
India’s Department of Investment and Public Asset Management (DIPAM) secretary Tuhin Kant Pandey said Tata had made a bid of Rs 180 crore to buy Air India. According to the same bid, its ownership is with Air India.
Air India’s procurement process will be completed next December. Seven companies had bid to buy Air India, but Tata Sons overtook the SpiceJet promoter. In value terms, Tata Sons will acquire Air India’s debt of Rs 153 billion. He will pay the remaining amount in cash.
According to DIPAM secretary Tuhin Kant Pandey, only two companies had bid more than the fixed amount in the Air India auction. A group comprising Home Minister Amit Shah, Finance Minister Nirmala Sitharaman, Commerce Minister Piyush Goyal and Civil Aviation Minister Jyotiraditya Scindia had allowed Tata Sons to win.
Aviation expert Harsh Vardhan says, “Tata knows that it will take at least five to seven years to get it back on track and the company has the capability. Also, giving Air India to Tata was the best option for the government.
The Tata group has a 51 per cent stake in the aviation sector. The company holds a 49 per cent stake in Singapore Airlines. Similarly, the Tata Group holds 84 per cent stake in Air Asia Limited.
What did Ratan Tata say?
Welcoming the return of Air India, Ratan Tata, Chairman, Tata Sons said, “Winning the Air India bid is great news for the Tata group. We have to work hard to make Air India strong again. We believe that Tata Group’s presence in the aviation industry will create strong business opportunities.
“Emotionally, under the leadership of JRD Tata, Air India was once one of the most prestigious airlines in the world,” he said. The Tata group has the opportunity to achieve the same prestige and respect that it had in the beginning. Had JRD Tata been with us now, he would have been very happy too.
He also shared a photo of JRD Tata with Air India.
‘The government had to sell’
Harsh Vardhan, an aviation expert said, “Air India is one of the best brands India has made, but after nationalisation, the company started having problems and its situation continued to deteriorate.”
“There was one problem with the company, but at the same time, there were more problems with the way the government managed it. After the 1980s, the organization’s red tape grew and they were not allowed to operate on commercial platforms.
According to Harsh Vardhan, the company has stopped buying new aircraft since the time of Prime Minister Narasimha Rao. Earlier, one minister after another refused to fly all the company’s ships without reason.
He says, “Now that Tata has taken over Air India from the government, it has already prepared for it. The government had to sell it in any case and the buyer had to accept the demand of the company. The economy was deteriorating and the government knew it could not be run. So the government had no option but to sell it.
According to Harshvardhan, the condition of the company was already bad but later it got worse. In this way the compulsion of the government increased.
Can Tata bring back Air India now? To this question Harsh Vardhan says, ‘Tata knows that it will take at least five to seven years to get it back on track and the company has the capacity. Also, giving Air India to Tata was the best option for the government.
Why was Air India so attractive?
Despite running in losses, Air India has a lot of assets. The company has its own slot at Heathrow Airport in London. The company has 130 aircraft and thousands of skilled pilots. With the new agreement, the Tata Group will now have 4,400 domestic and 1800 international landing and parking slots at airports in the country and 900 slots abroad.
At the same time, Air India has millions of dollars in real estate. In March last year, it was worth about $ 6 billion. Experts say that the Tata group has a lot of potential in the growing aviation market in India.
Discount on investment terms
The government had earlier tried to sell it to Air India several times. However, no buyer was found. After this, he made many changes in the terms of selling Air India. In 2001, the then Prime Minister Atal Bihari Vajpayee’s government tried to sell 40 per cent stake in Air India.
At the time, Lufthansa, British Airways and Singapore Airlines were keen to buy it. However, the government had said that the company can be bought only in collaboration with an Indian company. At the same time, interested companies withdrew from it.
At present, Air India has a debt of around Rs 600 billion. The government had set up a special loan unit to reduce debt. In 2018, the government said it would sell 76 percent of the shares.
There was an offer to sell 100% of the shares in January 2020. The then Civil Aviation Minister said that the government has no option now. Similarly, the government had given convenience to the buyers by making some conditions flexible.
According to the Indian government, the company that buys Air India should have at least $35 billion in net assets. According to the Bombay Stock Exchange, Tata Sons has assets worth Rs 6.5 lakh crore.
How Tata Airlines became Air India?
Air India was born in April 1932. But its name was Tata Airlines. These airlines have been established by JRD Tata. In 1919, when he was 15 years old, he flew a plane as a hobby. He also had a pilot’s license.
In his first commercial flight, he flew from Ahmedabad to Mumbai. Although there were no passengers on the plane, there was a letter of 25 kg. At that time the British Government did not provide any financial assistance but paid for the delivery of the letter.
The company was started with two ships.
When it rained in India, the land was used as an airport to collect water. At that time the company had two small aircraft, two pilots and three mechanics. 1933 was the first business year for Tata Airlines. The company, set up by Tata Sons at a cost of Rs 200,000, carried 155 passengers and around 11 tonnes of letters this year.
Tata Airlines flew a total of 160,000 miles in a year. British Royal Air Force pilot Homi Bharucha was the first pilot of Tata Airlines and JRD Tata was the second pilot.
After the restoration of the aircraft after World War II, Tata Airlines became a public limited company in July 1946 and was renamed Air India Limited.
After independence, in 1947, India bought a 49 percent stake in Air India. The company was completely acquired by the government in 1953.