India’s Tata Sons has acquired the deficit state airline Air India in a $ 2.4 billion deal to return its business to its original founder 68 years after being nationalized by the post-independence government.
NS 152 years old Conglomerate Long-term privatization The process has agreed to provide $ 368 million in cash for 100% stake and take on $ 2 billion of the airline’s total $ 8.2 billion in debt. The remaining debt remains in the state.
The sale is expected to be completed by the end of December and will fulfill the government’s promise of Prime Minister Narendra Modi after attempting privatization in 2018. We’re screwed To attract a single bidder for a carrier who loses about $ 1 billion a year.
The government that was trying to maintain 26% stake The first attempt to sell the business, then loosened the terms Attract buyers..
“Air India loses Rs 200 million a day. These losses after delivery will not be inflicted on taxpayers,” said Tuhin Kanta Panday, secretary of the Treasury’s investment department. Said when it was done.
The acquisition is Tata GroupHas long been ambitious in the aviation sector and already owns shares in two small domestic airlines, Vistara and AirAsia India, a joint venture with Singapore Airlines. Together, they account for about 11% of the domestic market.
After the announcement, Ratan Tata, the former chairman of the group, tweeted, “Welcome back, Air India.” “We certainly need a lot of effort to rebuild Air India, but we hope to provide a very strong market opportunity for Tata Group’s presence in the aviation sector.”
Air India was founded in 1932 by businessman JRD Tata. Originally known as Tata Airlines, a trained pilot, Tata, piloted the first single-engine plane and began as a small domestic passenger and postal service. International flights began after World War II.
In 1953, the aircraft carrier, then called Air India, was nationalized by then-Prime Minister Jawaharlal Nehru, who believed in the state’s leading role in the economy. Tata chaired until 1977, despite being disappointed with the fate of the airline.
For decades it had a domestic monopoly and limited international competition. However, India’s economic liberalization since 1991 has created fierce competition in this sector and has led to a rapid decline in Air India’s market share.
According to government statistics, Air India today carries less than 12% of India’s domestic passenger transport, despite New Delhi providing more than $ 14 billion in financial support since early 2009.
With a stable pipeline of taxpayer money to support it, Air India was also accused of a devastating price war that destabilized and even bankrupted some of its private rivals. Jet Airways And Kingfisher Airlines.
Tata Currently facing the big challenge of trying to modernize a group with about 13,500 employees, if Tata wants to reduce staff afterwards, everyone is promised at least one year of employment security and rewards. increase.
However, if successful, the overhaul will put Tata in pole position and benefit from the strong long-term growth expected in India’s early aviation market.
Air India has 141 planes and has the best international route network of all airlines in the country. About two-thirds of the revenue comes from international business.
“This is a historic decision and will have a positive impact on the aviation sector in the long run,” Kapil Khaur, director of the South Asia Pacific Aviation Center, told the Financial Times. “For Tatus after Covid, taking such a large amount of debt is a bold decision, which demonstrates their confidence that they have a viable business case.”
Cowl said overhauling airlines would probably require three to five years and a large investment.
“Air India’s turnaround requirements are patience, long-term capital and world-class expertise,” he said. “Tatas has the ability to bring both. They can invest the kind of money they need to make this airline work.”
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