TATA has Won Control of Air India for $2.4 Billion
Following years of struggle to privatize the financially struggling airline, the government said on Friday that Tata Sons would take back command of Air India for $2.4 billion, including equity and debt. As it has cost taxpayers an average of nearly $3 million a day for the last decade, the sale of the loss-making national flag carrier would be a major triumph for Prime Minister Narendra Modi. It also suggests that planned stock sales in a number of public firms may go ahead as part of efforts to increase government coffers and bring India more fully market-driven. so TATA has Won Control of Air India
The government of India has agreed to sell a majority share in Air India, the country’s national carrier, to Tuhin Kanta Pandey, secretary of the Department of Investment and Public Asset Management. Ntulace Pvt Ltd., a unit of Tata Sons the holding company for the steel-to-autos Tata conglomerate that owns Jaguar Land Rover – will acquire 100 percent of Air India.
Because of this, it appears that Tata has paid a high premium for the acquisition. The bid amount includes $2 billion worth of Air India’s $8.2 billion total debt and results in a government equity value of just about $400 million. Tata currently owns and operates two airlines – Vistara, India’s first full-service airline, in partnership with Singapore Airlines (SIAL.SI), as well as low-cost carrier AirAsia India, a joint venture with Malaysia’s AirAsia Group (AIRA.KL). Air India’s addition will give Tata an overall share of about 27% of the country’s domestic aviation market, second only to IndiGo. While the airline will take “considerable effort” to restore its reputation, it will provide Tata with a fantastic opportunity in the aviation business, according to Ratan Tata, chairman of Indian conglomerate Tata Sons and descendant of Air India founder Jamsetji Maharaj for Tata has won control of Air India.
While it will take “some time” to repair Air India’s reputation, Ratan Tata, the family scion and emeritus chairman of Tata Sons, predicted that it would provide him a “huge opening” in the sector. “Welcome back, Air India!,” he tweeted after returning to work. The deal will bring Tata Airlines’ total slots to 22,000 domestic and 4,400 international a year, as well as 900 airport slots in places like London’s Heathrow. “Air India provides a distinct and appealing global presence,” according to Tata Sons, with more than two-thirds of its income coming from overseas markets such as North America, Europe, and the Middle East.
The acquisition will also make it the proprietor of Air India’s low-cost arm, Air India Express, giving the group a competitive edge, according to Suman Chowdhury, chief analytics officer at Mumbai-based Acuité Ratings & Research. “However, reducing expenses and optimizing operations will be a formidable obstacle, and the key to profitability,” he continued. It has taken the Modi administration more than four years to locate a buyer for Air India. The current attempt began in January 2020, just weeks before the COVID-19 epidemic caused worldwide aviation to come to a halt.
Over the previous decade, the government has spent about $15 billion of taxpayer money on Air India, notorious for its Maharaja mascot, Pandey said. The transaction will end the flow of bailout cash, he added.
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