Post Air India takeover, Tata Sons chief promises a 'world class airline'

The group also said it philosophically agrees with 'the Prime Minister's vision for the aviation sector, of making it affordable and ensuring it contributes to boosting 'Ease of Living' for citizens'

The government on Thursday officially handed over Air India to the Tata Group. Tata Sons chairman N Chandrasekaran said the group is very happy to have Air India back in its fold.

Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey told reporters that Air India has been handed over to Talace Private Limited, a subsidiary of the Tata Group's holding company, which is the successful bidder.

"Now, the new owners (of the airline) are Talace," Pandey noted.

"Totally delighted that the takeover process of Air India is complete. We are very happy to have Air India back in the Tata Group. We look forward to working with everyone in creating a world class airline," Chandrasekaran told reporters in New Delhi.

"I warmly welcome all the employees of Air India to our Group, and look forward to working together," Chandrasekaran said in a statement.

Tata Group also said it philosophically agrees with "the Prime Minister's vision for the aviation sector, of making it affordable and ensuring it contributes to boosting 'Ease of Living' for citizens".

The Group also acknowledged Prime Minister Narendra Modi's commitment to reforms and faith in India's entrepreneurship spirit, which made the "historic transition" possible.

Chandrasekaran called on Prime Minister Narendra Modi on Thursday ahead of the official handover of Air India to the Tata Group.

Later, Chandrasekaran also visited the Air India headquarters. "Shri N Chandrasekaran, the Chairman of Tata Sons called on PM @narendramodi," the Prime Minister's Office tweeted, along with a photograph of the meeting.

After a competitive bidding process, the government had on October 8 last year sold Air India to Talace Private Limited, a subsidiary of the Tata Group's holding company, for Rs 18,000 crore.

Tatas beat the Rs 15,100-crore offer by a consortium led by SpiceJet promoter Ajay Singh and the reserve price of Rs 12,906 crore set by the government for the sale of its 100 per cent stake in the loss-making carrier.

Air India was started by the Tata Group in 1932. However, after the country got independence, the airline was nationalised in 1953 by the then prime minister Jawaharlal Nehru.

"It is indeed noteworthy that the disinvestment process of Air India  has been brought to a successful conclusion in a time-bound manner. This proves the govt’s ability, and the resolve to carry out disinvestment effectively in non-strategic sectors in the future.

"Best wishes to the new owners. I am confident that the airline will bloom under their wings, and pave the way for a thriving & robust civil aviation industry in India," tweeted Civil Aviation Minister Jyotiraditya Scindia.

"The strategic disinvestment transaction of Air India successfully concluded today with transfer of 100% shares of Air India to Talace Pvt Ltd along with management control. A new Board, led by the Strategic Partner, takes charge of Air India," tweeted Secretary, DIPAM.

The successful conclusion of the deal, India’s first major privatisation in nearly two decades, is a big victory for Prime Minister Narendra Modi, who has vowed to steer the state away from running businesses as his administration tries to plug a budget deficit. The move also marks a homecoming for Air India, which was originally launched in 1932 by Tata Group’s former Chairman J.R.D. Tata as the nation’s first carrier, flying mail between Karachi, then a part of undivided British-ruled India, and Bombay.

Reviving Air India -- whose market share more than halved to less than 10% last year -- will be a daunting task for the biggest conglomerate in India, which already runs two other unprofitable carriers. While Air India’s regional arm, Alliance Air, is not a part of the deal, the group is also gaining control of low-cost, short-haul international carrier Air India Express and an equal stake in a ground handling company with SATS Ltd. 

The group was selected as the winning bidder in an auction in October, in which it bid Rs 18,000 crore as an enterprise value for Air India, including taking on Rs 15,300 crore of the airline’s debt. Air India also comes with a highly unionized workforce with a history of disrupting schedules for demands, and an aging and mixed fleet of more than 150 aircraft, potentially complicating a revival.

Tata Sons has yet to spell out its plans for Air India, which loses Rs 20 crore every day. Potential options include merging the flag carrier with one of its other airlines -- Vistara venture with Singapore Airlines Ltd. and AirAsia India Ltd. with AirAsia Bhd. -- or keeping it independent. The terms of the deal prevent the new owner from firing any employee for at least a year. 

The competition for Tata’s airline business will also intensify with bankrupt Jet Airways India Ltd. preparing to fly again, and billionaire investor Rakesh Jhunjhunwala’s newly formed carrier, Akasa, gearing up to start operations. 

The government has failed twice in the past to sell the airline. More than two decades ago, Singapore Airlines Ltd. gave up a joint bid with Tata for a stake in Air India, citing political opposition as one of the reasons. IndiGo, India’s biggest airline, dropped out of the running in 2018, saying it didn’t have the means to buy the carrier in its entirety and make it profitable.