Tata Sons, the holding company of India’s largest conglomerate Tata Group, will retake control of Air India, the government announced on Friday, with the debt-ridden state-run airline returning to the group it was founded by nearly seven decades ago.
Tata Sons submitted the winning bid of 180 billion rupees (US$2.4 billion) as the enterprise value of Air India, Tuhin Kanta Pandey, the secretary in the government’s Department of Investment and Public Asset Management, told a media briefing. The deal is expected to close by the end of December. Tata founded the airline in 1932 when India was still under British rule and named it Tata Airlines. In 1946, the airline was converted into a public company and renamed Air India.
“Welcome back, Air India,” Ratan Tata, chairman emeritus of Tata Group, said sharing his signed statement on Twitter. “The Tata Group winning the bid for Air India is great news!” he wrote. “While admittedly it will take considerable effort to rebuild Air India, it will hopefully provide a very strong market opportunity to the Tata Group’s presence in the aviation industry.”
At Friday’s media briefing, Pandey said that Air India had “a very excessive debt” arising from continuous losses the airline had incurred. Total debt as of 31 August stood at 615.62 billion rupees, he said. Tata’s bid comprises taking over the airline’s debt of 153 billion rupees and paying the remaining 27 billion rupees in cash to the government. A consortium led by Ajay Singh, founder of budget carrier SpiceJet, was the runner-up with a bid of 151 billion rupees.
For Tata Group, Air India adds a third airline to its current roster of a majority interest in AirAsia India and Vistara, a joint venture with Singapore Airlines. Air India, which hasn’t turned a profit since its 2007 merger with Indian Airlines, holds prized landing and parking slots at London’s Heathrow airport, which may help Vistara lure business travellers with direct flights to Europe.