Air India: India agrees deal to sell national airline back to business giant Tata

Tata Group placed a winning bid of £1.7billion

Air India was founded in 1932 as Tata Airlines by JRD Tata, and was nationalised in 1950s (Reuters)

India’s debt-ridden national carrier Air India will be taken over by its founder Tata Sons, nearly 70 years after it was nationalised.

Indian conglomerate Tata Group placed a winning bid of Rs 180bn (£1.7bn) to re-claim the airline, outbidding a consortium led by SpiceJet’s Ajay Singh, who had participated in his individual capacity.

Besides the 100 per cent stake in Air India and its low-cost arm, Air India Express, the Tata Group’s winning bid also includes a 50 per cent stake in Air India’s ground-handling company, the government said in a statement. The transaction does not include non-core assets such as land and buildings, and these will be transferred to the federal government.

Air India owns more than 4,400 domestic and 1,800 international landing and parking slots at domestic airports, besides 900 slots at airports overseas. By reclaiming Air India, Tata Group has added a third airline to its band as it already holds a majority of stakes in AirAsia and Vistara airlines.

Ratan Tata, Tata Group’s chairman, shared a picture of his father and founder of Air India, JRD Tata, with the caption “welcome back Air India” soon after the government announced the deal. Air India was founded in 1932 as Tata Airlines by JRD Tata, and was nationalised in the 1950s.

This was the Indian government’s second attempt to offload the carrier, which has not made a profit since 2007, after an unsuccessful attempt in 2018. After the first unsuccessful bidding attempt when the federal government failed to receive any bidders for 76 per cent stakes three years ago, the government changed the terms to invite bids for full stakes. It also made changes to the bidding conditions.

Tuhin Kanta Pandey, secretary in the Department of Investment and Public Asset Management, said the transaction is expected to be completed by December this year.

According to the deal, Tata Group will retain all current employees of the carrier for the first year. But in the second year, “they will see who to retain and can also give VRS [voluntary retirement from service]”, said Rajiv Bansal, civil aviation secretary.

The Indian government has sustained losses of around Rs 610bn (£5.9 bn) to run the airlines, out of which Rs 153bn (£1.4bn) will pass on to the bidder. According to reports, the carrier was accumulating losses of around Rs 200m (£1,957,222) every day.