Ownership Change

The union government officially handed over control of
Air India, the iconic but debt ridden national carrier, to
the Tata Group on January 27. The ceremonial transfer
of Air India was preceded by a meeting between Prime
Minister Narendra Modi and Natarajan Chandrasekaran,
chairman, Tata group. Though the transaction was
originally expected to be completed by December 2021,
the deadline was extended to January 2022 on account
of the “longer-than-expected time taken to complete
procedural work”. Air India will be the third airline brand
in the Tatas’ stable-AirAsia India, in which the Tata group
holds a majority interest, and Vistara, a joint venture
with Singapore Airlines Ltd. Almost seven decades after
ceding control of the airline, the Tata group has regained
Air India. Last year, the group had emerged as the winning
bidder for the airline, with a bid of Rs 18,000 crore. With
this acquisition, the Tatas will gain 100 per cent
ownership in Air India, Air India Express, and a 50 per
cent stake in the ground handling firm AI-SATS. This
sale marks the first major outright privatization of a public
sector entity in recent years. Though there has been
criticism of the pace and manner of the government’s
privatization programme, the symbolism of this sale is
hard to ignore. The Tatas will now face the arduous task
of turning around the airline. This will be challenging,
more so at a time when the aviation industry is grappling
with the fallout from the pandemic. It will also have to
deal with a plethora of legacy issues, ranging from an
ageing fleet to human resources. According to the
bidding conditions, the Tatas will have to retain all
employees for a one-year period. The group must also
contend with claims on international assets of Air India
by Devas Multimedia and its investors who are trying to
enforce its arbitration awards.
Reportedly, Air India is seeking an end to the case
on grounds that the ownership change prevents any
claims of recovery of arbitration awards. Then there is
the issue of the group’s other competing airlines –
Vistara and AirAsia India – to contend with. It is possible
that the Tatas will at some point consider integrating
their aviation ventures under a single entity. Though this
is a milestone, by itself, it does little to shore up the
government’s disinvestment proceeds. Talace Pvt. Ltd,
a subsidiary of the conglomerate, had made a
successful bid last October for Air India inking the deal
for Rs.18,000 crore. As per the agreement, the Tata
Group would pay Rs.2, 700 crore by way of cash and
take over Rs.15, 300 crore of the airline’s debt.

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