The Tata group, India’s largest corporation, has purchased India’s loss-making national airline Air India.
The airline was sold to the firm, which was the top bidder at approximately $2.4 billion (£1.7 billion).
The airline was formed by the Tata company in 1932 before being taken over by the government in 1953.
The government has been attempting to sell the airline for years, despite its $9.5 billion in losses.
However, it just sweetened the transaction by lowering the financing conditions for the buyer. The amount of debt that the Tata group will take on under the new arrangements is yet unknown.
Prime Minister Narendra Modi, who wanted to sell the government’s full stake in the airline, will benefit from the sale.
Air India boasts a plethora of assets, including coveted Heathrow airport slots, a fleet of over 130 planes, and hundreds of highly qualified pilots and personnel.
In India, Tata Sons operates two airlines: Vistara, a full-service carrier in cooperation with Singapore Airlines, and AirAsia India, a low-cost carrier in association with Malaysia AirAsiaBhd.
Why Did This Sale Happen?
Since merging with the state-owned domestic airline Indian Airlines in 2007, the national carrier has been losing money and has had to rely on taxpayer-funded bailouts to stay afloat. The government said the airline was losing over 200 million rupees ($2.6 million) every day.
The airline has blamed its poor financial performance on rising aviation fuel prices, expensive airport usage charges, competition from low-cost carriers, the rupee’s depreciation, and a heavy loan load over the years.
According to Jitender Bhargava, a former executive director of Air India, the airline “suffered from uneven service standards, low aircraft utilization, poor on-time performance, outmoded productivity requirements, a lack of revenue generating capabilities, and an unfavorable public perception.”
A Historic Airline Acquisition
Aside from the airline’s fleet of over 130 planes, the new owner will have control of the airline’s 4,400 domestic and 1,800 foreign landing and parking spaces, as well as 900 slots at international airports.
Air India also has great real estate worth millions of dollars. According to the aviation ministry, its fixed assets – land, buildings, and planes – were valued more over 450 billion rupees ($6 billion) in March of last year.
The airline also possesses over 40,000 items of art and collectibles, including an ashtray created by Spanish surrealist artist Salvador Dali and donated to the airline. Dali was given a young elephant by the airline, which was taken to Spain.
Experts think Air India is a promising potential for Tata Group, given India’s passenger growth of approximately 20% per year and analysts’ claims that the Indian market is massively underserved.