Earlier this month, the government had accepted an offer by Talace Pvt Ltd, a unit of the holding company of the conglomerate Tata group, to pay Rs 2,700 crore cash and takeover Rs 15,300 crore of the airline’s debt. And the Maharaja returned home!
In 1978 the illustrious Indian industrialist JRD Tata opened the newspaper to discover that the government had fired him as chairman of Air India, the airline he founded in 1932 and managed even after its nationalisation in 1953. Tata Trusts chairman Ratan Tata has credited the decision to bid for Air India to group chairman N Chandrasekaran.
Indian taxpayers will no longer have to pay Rs 20 crore per day to keep the loss-making Air India flying. As on August 31, Air India had a total debt of Rs 61,562 crore. About 75 per cent of this debt or Rs 46,262 crore will be transferred to a special purpose vehicle AIAHL before handing over the loss-making airline to the Tata Group.
Tatas would not get to retain non-core assets such as the Vasant Vihar Housing colony of Air India, Air India Building at Nariman Point in Mumbai, and Air India Building in New Delhi. Within two years, the government has to work out a monetisation plan for it to be sold so that the money can be used to set off AIAHL liabilities,.
Of the 141 Air India aircraft that Tatas would get, 42 are leased planes while the remaining 99 are owned. Tata will also take over the capitalised lease liability on account of operating leases of Rs 9,185 crore. Besides, some of these 141 planes are grounded due to lack of engine, fuel efficiency and other maintenance.
The government is divesting its 100 per cent ownership of Air India and Air India Express along with its 50 per cent stake in ground-handling company AISATS.
The government will, however, transfer about Rs 16,000 crore of unpaid current liabilities, in excess of current and non current assets, such as fuel bills and other pending dues that Air India owes to suppliers, to Air India Assets Holding Ltd (AIAHL).
A Letter of Intent (LoI) has been issued to Tatas on October 11 confirming the government’s willingness to sell its 100 per cent stake in the airline. Tatas have now to accept the LoI, post which the Share Purchase Agreement (SPA) will be signed. Conditions precedent to the transactions would need to be satisfied by Tatas before they actually can take over the operations. Normally within 14 days of acceptance of LOI, the SPA is signed.
While this will be the first privatisation since 2003-04, Air India will be the third airline brand in the Tatas’ stable – it holds a majority interest in AirAsia India and Vistara, a joint venture with Singapore Airlines Ltd.
Air India will give it access to a fleet of 117 wide-body and narrow-body aircraft and Air India Express Ltd another 24 narrow-body aircraft besides control of 4,400 domestic and 1,800 international landing and parking slots at domestic airports, as well as 900 slots at airports overseas such as London’s Heathrow.
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.
Prime Minister Narendra Modi on Wednesday said the divestment of Air India would re-energise domestic civil aviation. “The country has taken a big decision with regards to Air India for ensuring that the civil aviation sector functions professionally while providing safety and passenger amenities,” PM Narendra Modi said, addressing a ceremony after inaugurating the Kushinagar International Airport in Kushinagar district of Eastern Uttar Pradesh.
The International Monetary Fund on Monday said the sale of national carrier Air India will constitute an “important milestone” in India’s privatisation efforts.