Key Sentence:
- India’s national carrier Air India has been sold to the Tata Group, the country’s largest conglomerate.
- The government sold the airline to the company that had made the highest bid of nearly $2.4 billion (£1.7 billion).
The Tata Group originally founded the airline in 1932 before being taken over by the government in 1953. The government has been trying to sell the airline for years, which has amassed a $9.5 billion loss. But recently, it has sweetened the deal as the terms of the debt are not too difficult for the buyer. However, how much debt the Tata Group will take on under the new terms is unclear.
Minutes after the takeover, Tata Sons Honorary Chairman Ratan Tata tweeted a photo of former JRD Tata chairman on the tarmac with an Air India plane in the background:
The sale boosts Prime Minister Narendra Modi, who wants to sell all of the government’s stake in the airline. Air India has many advantages. Including valuable slots at London’s Heathrow Airport, a fleet of over 130 aircraft, and thousands of trained pilots and crew.
Tata Sons already operates two airlines in India – Vistara, a full-service airline partnered with Singapore Airlines. And AirAsia India, a low-cost airline partnered with Malaysia AirAsia Bhd.
Why is Air India banned?
The national carrier has suffered losses since it merged with the state domestic carrier Indian Airlines in 2007 and relies on taxpayer money to keep operations going. The government says it loses nearly 200 million rupees ($2.6 million) daily to run the airline. For years, the airline blamed high fuel prices, high airport fees, competition from budget carriers. A weak rupee, and high-interest rates for its poor financial performance.
Air India “suffered from inconsistent service standards, low aircraft usage, poor weather performance, outdated performance standards. Lack of revenue-generating skills, and poor public awareness,” said Jitender Bhargava, the airline’s former CEO.
Have there been attempts to sell Air India in the past?
In 2001 a former BJP-led government tried to sell a 40% stake. Several overseas airlines, including Lufthansa, British Airways, and Singapore Airlines. Showed interest but withdrew when the government required them to work with Indian companies to submit bids.
In 2018, Mr. Modi’s government attempted to sell a 76% stake and part of its debt, but potential buyers found the terms unattractive. The inscription, Air India advertises a flight to the United States in 1961
In January 2020, the government decided to sell its entire stake in Air India. “There is no choice but to privatize or close the airline,” said Civil Aviation Minister Hardip Singh Puri.
In late December last year, Air India received two offers – one from Tata Sons and the other from its employees and American investment firm Interrupt. In September, Ajay Singh, who operates private low-cost airline SpiceJet, also applied personally for the airline.
This time the government decided to acquire its entire stake in Air India, the low-cost division of Air India Express, and it’s subsidiary AISATS. Experts say restructuring Air India’s workforce of more than 14,000 employees could challenge new owners.