Tata Sons Wins Air India Bidding Process: What Comes Next?

Time Stamp: October 8, 2021 6:31 PM
Source Node: 1124317

It’s official: Air India is returning to the hands of Tata Sons. Earlier today, the Indian government announced that Tata has successfully won the bid for Air India, pricing the debt-saddled carrier at ₹18,000 crores ($2.39 billion). The deal comes with several conditions on the next step ahead for Tata’s homecoming asset. Let’s find out more.

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Air India was nationalized by the government in 1953 and has struggled to survive in the last two decades. Photo: Getty Images

It’s official

While the rumors had begun to fly early in the week, the Indian government formerly crowned Tata Sons as the new owners of Air India on Tuesday. The decision closes the 21-month long divestment process that has been beset with delays due to the coronavirus, forcing extensions and price cuts for the airline.

Tata Sons valued Air India at ₹18,000 crores ($2.39bn), taking on ₹15,300 crores as debt for the airline and paying ₹2,700 crores ($358.5mn) in cash to the government. This narrowly beat out the bid from SpiceJet CEO Ajay Singh’s consortium, which put in a bid for ₹15,100 crores ($2bn). However, both bids were above the government’s reserve price of ₹12,906 crores ($1.71bn).

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The Tata’s paid nearly $700mn more than the government’s minimum price for Air India. Photo: Getty Images

With the process now wrapped up, the government can proudly say that it has turned a chapter in Indian aviation. Privatizing Air India and removing its debt from the books has long been a priority of the government, one that it has been pushing hard for since 2017. So what comes next for Tata?

Strings attached

As one might guess, privatizing a national asset like Air India is not easy in the slightest. Tata’s accession to the helm comes with strings attached, mainly in terms of ownership and employee rights. For starters, Tata cannot fire any employees for one full year and can only engage in voluntary retirements for removals from the second year. All benefits will be covered by the government, a key concern previously.

However, none of this was dampening the spirits over at Tata Sons. Chairman emeritus Ratan Tata put out a statement shortly after the announcement, including a note about the airline’s founding by JRD Tata in 1932.

Air India has now come full circle, having moved from private hands to public ones and back to Tata. For Indians, the day marks the first real chance at reviving the iconic Maharaja and bringing the carrier back to some of its formal glory.

Soon

The official transfer of ownership will occur in December 2021, giving Tata a two-month window to prepare. The next year will see the Tata’s rewire the company and plot its future, especially with regard to its other airline holdings. The group now has a stronghold on all of India’s long-haul routes and could potentially become a huge player if things go well.

For now, the entire aviation industry is closely watching the future of Air India and how it will disrupt the status quo. Could the airline truly return to its pinnacle of success? Will it struggle in a price-sensitive market? Only time will tell.

What do you think about Tata’s winning bid for Air India? How will things go from here? Let us know in the comments!

Source: https://simpleflying.com/tata-sons-wins-air-india/

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