Tata Sons Pvt. has been chosen as the winning bidder to take over Air India. The government aims to complete the transaction by the end of 2021. Tata’s bid will see it take on ₹ 18,000 crore of the carrier’s ₹ 61,560 crore debt.
Tata Sons will acquire Air India, 50 percent of Air India-Sats, and Air India Express. The government will get ₹ 2,700 crore in cash from the Air India sale. The rest is the government’s debt, which Air India will take over. The transaction excludes non-core assets – land and building, valuing at ₹ 14,718 crore, which the government’s holding company AIAHL will receive. Air India’s total debt stands at over ₹ 60,000 crore and the government loses nearly ₹ 20 crore every day.
Air India employees will be getting a voluntary retirement scheme or VRS in the second year and there will be no retrenchment in the first year. Gratuity and Provident Funds benefits will be provided to all employees.
After five years, Tata Sons can transfer the brand but only to an Indian person so that the brand – Air India – remains Indian in perpetuity. The share purchase agreements allow Tata Sons to merge with Vistara and the other airlines.
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Earlier this month both Tata Sons and SpiceJet chairman Ajay Singh (in his private capacity) had placed bids to acquire Air India. The consortium led by Ajay Singh had quoted ₹ 15,100 crore. This was the second attempt by the Narendra Modi government to sell Air India. The centre had made an attempt in March 2018 but its expression of interest – to sell a 76 percent stake – had no takers over concerns regarding the airline’s burgeoning debt.
At present, the Tata Group operates Vistara in partnership with Singapore Airlines and AirAsia India in partnership with Malaysia’s AirAsia. The deal completes a full circle as Air India was founded in 1932 under the name Tata Airlines by family scion and aviation enthusiast Jehangir Ratanji Dadabhoy Tata.
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