Homecoming For Air India: Tata Sons Emerge Winner With Rs 18,000 Cr-Bid

It was informed that the reserve price for the bid was set at Rs 12, 906 crore. The transaction is expected to be closed by December 2021.?

A consortium led by Spicejet promoter Ajay Singh came second with his bid of Rs 15,000 crore.?

"Air India Specific Alternative Mechanism (AISAM) approved the highest price bid of M/s Talace Pvt Ltd, a wholly-owned subsidiary of M/s Tata Sons Pvt. Ltd for sale of 100% equity shareholding of Government of India in Air India along with equity shareholding of Air India in AIXL and AISATS," the government release stated.?

Chairman Emeritus of Tata Sons, Ratan Tata tweeted about the development, "Welcome back, Air India".?

The debt position

DIPAM secretary Tuhin Kanta Pandey stated the national carrier's total debt as of August 31, 2021, stood at Rs 61, 562 crores. The winning bidder viz., Tata Sons would now have to take over Rs 15,300 crore of the debt.?

Air India is presently operating at a loss of Rs 20 crore every day.?

Employees of national carrier won't be retrenched for one year

As part of the transfer agreement, Tata Sons would not be able to retrench employees of the national carrier for one year. All government benefits accrued to current employees will continue for one year. Post which, the airline would be allowed to carry out retrenchment with the provision of voluntary retirement scheme enabled.?

At present, Air India?has 12,085 employees in total and 8,084 permanent employees.?

Additionally, a compulsory clause stipulating work travel for government employees on Air India only would be done away with.?

Operational flexibility

The business continuity clause would continue for three years, however, the winning bidder would have complete operational freedom.?

Eight logos or brands of the national carrier would not be transferable for a period of five years. The DIPAM secretary added that even after the stipulated five years, no transfer of the logos or brands would be permissible on foreign land. It would be restricted to Indian soil only. This implies, Tata would not be able to transfer or alter the brand names or logo after five years for foreign entities and operations. It would be limited to operations within India only.?

It's Coming Home!

It was Tata Group that launched Air India in pre-independence days. In 1932 when industrialist and India’s first commercially licensed pilot Jehangir Ratanji Dadabhoy launched the national carrier. The airline launched its passenger services in 1938 and started international flights. It was through the Air Corporations Act in 1953, that the Union government took over the company from Tata Sons and nationalised it.

However, over the years, the national carrier has been incurring huge losses, due to which the government has tried to sell it off to a private player for over a decade now. Reports suggest that the total debt of Air India has risen to around Rs 43,000 crore. However, resistance from political quarters and employee union had forced the government to delay its plans many times. In 2020, the government invited bids for strategic disinvestment of 100 per cent of its stake in the airline. The plan also included a 100 per cent stake sale in Air India Express Ltd and a 50 per cent stake in Air India SATS.?