After Air India buy, Tata Sons asks govt to ease regulatory process

Tata Sons, which won the bid to acquire Air India on Friday, has approached the government for expediting the regulatory process for the consolidation of its airlines.

People with knowledge of the matter said the Tatas wanted assurance that during the time the necessary approvals from lessors and the Directorate General of Civil Aviation (DGCA) were obtained for the merger, aircraft would not be stranded and would be allowed to operate.

“The government has assured that there will be faster approvals. Through an executive order from the DGCA, approvals will be given so that the aircraft are not grounded while the necessary approvals come,” a government official said.

The Tata group currently operates two airlines -- Vistara and AirAsia India. After the latest transaction, it will acquire two more brands -- Air India and its subsidiary Air India Express.

According to the Aircraft Rules, 1937 -- the rules governing civil aviation in India -- during a change in the ownership of registered aircraft, the new owner should notify the Directorate General of Civil Aviation (DGCA) of the change. Until such an application is made and the certificate of registration is granted to the new owner, it is illegal for any person to fly or assist in flying.

For consolidation, the Tatas will have to merge one of their airlines’ air operator permit (AOP) with that of Air India.

Before applying to the DGCA, the group will also have to take approval from lessors for the Airbus A320 neo aircraft as they are on sale and leaseback model. The permission from aircraft lessors is necessary as the title deed of the aircraft is being changed from government ownership to that of the Tata group.

The share purchase agreement of Air India has a provision restricting Tata Sons from transferring its shares directly or indirectly to any person for one year from the date of closing the transaction. A merger is, however, allowed, provided the new owner holds more than 51 per cent in the carrier during the one-year lock-in period.

Sources said the process of consolidation of the Tata group’s airlines would start early next year after the Tatas acquire 100 per cent in AirAsia India.

Last year, the Tatas increased their stake in AirAsia India to 83.67 per cent from 51 per cent, buying 32.67 per cent stake from AirAsia Berhad at Rs 276.29 crore. The group also has a call option on the remaining 16.33 per cent stake that its partner holds in the airline. AirAsia Berhad has valued its remaining stake at $18.8 million.