Tata group has emerged as the frontrunner for the Air India bid as the government is looking forward to closing one of the biggest disinvestment projects. Government is yet to confirm the news that if they have actually won the bid but the sources say that Tatas have bid more than Spicejet.
TATAs have reportedly bid Rs 5000 crore more than their main competitor, Spicejet. However, there are many media houses that are already confirming that the deal has been done. We are informing through this article that this is not true as of today. Secretary of Department of Investment and Public Asset Management took Twitter to discard this news.
"Media reports indicating approval of financial bids by Government of India in the AI disinvestment case are incorrect. Media will be informed of the Government decision as and when it is taken" Commerce and Industry Minister Piyush Goyal wrote.
The government formed a group called Air India Specific Alternate Mechanism (AISAM) for this purpose of disinvestment. The group is led by home minister Amit Shah and comprises Finance Minister Nirmala Sitaraman, Commerce Minister Piyush Goyal, and Civil Aviation Minister Jyotiraditya Scindia.
Note that this is the government's 3rd attempt to sell the loss-making national carrier. The first attempt was made in the year 2001 and the second in 2018 when not even a single bid was made for the debt-laden company. The government has revised a lot of terms and conditions and then brought the deal again to the table.
The key change between earlier offers and offers this time is that center has agreed to give away 100% of its stake in Air India. Earlier, they were willing to give away only 76% of their stake. If the deal is complete, TATA Group would acquire 100% shareholding in Air India Ltd. and 50% in the Air India SATS Airport Services Private Ltd.
The government said that once the deal is finalized, an agreement would be signed with the winning party within 15 days and the complete transfer of the asset would hopefully be completed by mid-February next year. The government also carried two meetings with both the bidder in which all the assets and liability of Air India were disclosed to them.
How much loss is Air India actually in?
Minister of state for civil aviation, V.K. Singh told the Rajya Sabha in the month of August this year that Air India has accumulated a total loss of ₹70,820 crores. Note that the company has never made a profit since its merger with Indian Airlines in 2007-2008.
The benefit which was expected from this merger was never achieved. The company made a total loss of about ₹9,500- ₹10,000 crores in the year ended March 2021. Last year this figure was about ₹8,000 crore. There were multiple factors for this loss as told by the minister. Some of them are:
- Very high interest on the already existing debt
- Plenty of low-cost airlines have emerged that have increased the competition
- High input cost
- The negative impact of exchange rate variation.
Figures are expected to shoot up more because the aviation industry was one of the worst-hit industries during the pandemic. The aviation consultancy firm CAPA India said in its India Aviation Outlook FY22 that the total loss of Air India can reach $20 Bn by the year 2024-2025.
History of TATA's love for Aviation
Looks like the TATAs are taking back what was once forcefully taken from them. "My own friend Nehru stabbed me in my back. I can only deplore that so vital a step was taken without giving us a proper hearing", said JRD Tata on the sudden nationalization of his beloved Airlines. 68 years later, sources are confirming that the TATA group is very close to sealing the Air India deal.
Today TATAs own salts to software; but did you know that aviation was one of the first industries in which the TATAs entered? It started when JRD Tata, the group chairman before Ratan Tata became India's first qualified pilots in 1929. JRD Tata got his pilot license in India in the shortest number of hours. JRD Tata founded the Tata Air services in the year 1932 by investing 2 lakh rupees.
In 1938, the company was rebranded as TATA Airlines with initial operations from Bombay to Trivandrum, Delhi, and Colombo. In 1946 after World War 2 the TATA airlines went public and became a joint-stock company. That's when it got its name, Air India. Soon after the independence, the government acquired a 49 percent stake in the airline and by 1953 took control of the airlines from TATA sons making it India's first state-run aviation company.
Even after this, the group did not cut themselves completely from Air India or the aviation industry itself. Ratan Tata, a trained pilot himself and also once the chairman of Air India, sought to buy the airline in the year 2000 in alliance with Singapore airlines but aborted the plan later.
But the group's trust in aviation did not end there. India liberalized its foreign direct investment in the aviation field in the year 2012. TATA returned to the industry the next year.
This time in joint ventures with international carriers. First, with Air Asia Berhad they started Airasia India headquartered in Bengaluru. And in 2015 Vistara, was a joint venture between Tata Sons and Singapore airlines. Six years after re-entering the market with a joint venture Tata sons was dominating the newsroom discussions once again for its likey interest in jet airways.
Cut to 2021, Tatas emerged as the frontrunner among the bidders attempting to get into the cockpit of the national carrier Air India once again. Merging Air India in its fleet would be a massive upgrade for the company. Air India will come with 1800 international landings and plenty of parking plus 900 slots at overseas airports combined with 4400 domestic slots.
A decent number of routes and slots at prime locations like the UK, the US with a large number of airplanes in its fleet would take the company's ambitions to the sky. With a whopping one lakh crore rupees of debt, and losses staring at its new owner, TATAs taking over Air India will put an end to the decade-long struggle of the various government to offload the stake in the bleeding national carrier.