Tata Sons had
acquired a 100 per cent stake in loss-making Air India on January 27, 2022,
through its fully owned subsidiary, Talace Private Limited. Tata group has
emerged as the successful bidder of the divestment process of the national
carrier Air India.
About the Tata group:
Founded by Jamsetji Tata in 1868, the Tata group is a global
enterprise, headquartered in India, comprising 30 companies across ten
verticals. The group operates in more than 100 countries across six continents,
with a mission 'To improve the quality of life of the communities we serve
globally, through long-term stakeholder value creation based on Leadership with
Trust’.
Tata Sons is the principal investment holding company and
promoter of Tata companies. Sixty-six percent of the equity share capital of
Tata Sons is held by philanthropic trusts, which support education, health,
livelihood generation, and art and culture.
About Air India & the story of acquisition:
Jehangir Ratanji Dadabhoy Tata started Tata Air Services,
which was eventually renamed as Tata Airlines in 1932 and became a public limited company.
The Air Corporations Act was passed in 1953 by the Indian government in order to purchase a majority stake in the airline carrier from Tata Sons. Later, when the aviation industry was opened up to
private competition in 1994. As on August 31, Air India had a total debt of ₹61,562 crore. Later, when the aviation industry was opened up to private competition in 1994
Frivolous attempts were made in 2000-01 to privatize Air India. Plus, these low-cost airlines started causing a dent into
Air India’s market share. When the aviation sector was opened up for private
participation in 1994, 6 major private airliners i.e. Jet Airways, Air Sahara,
Modiluft, Damania Airways, NEPC Airlines, and East-West Airlines, entered the
market, eating into Air India’s space.
The then government agreed to provide Air India about Rs
30,000 crore in equity funding, spread over a decade.
In order to combat
this competition, UPA government chose to
merge Air India and its domestic business, Indian Airlines, into a single entity which was accomplished in
2006.
The plan was to use the assets and capital pooled together to accelerate expansion. After merging with Indian Airlines in 2006, the company began to lose money. This is due to
the fact that, prior to the merger, the ministry had spent close to 67,000 crore on 111 new wide-body
planes. And, following the merger, the merged company employed about 30,000 people.
In 2006–07, Air India and Indian Airlines lost a total of $7.7 billion. Air India had a debt of 426 billion rupees and an operational deficit of 220 billion
rupees by March 2011. The government was being sued for
$429 billion. The Indian government has finally found a buyer for Air India, with Tata Group being chosen as
predicted to take over the flag carrier. The government sold Air India to the Tata group’s
holding company, Tata Sons through its wholly-owned subsidiary Talace Pvt Ltd.
Talace Pvt Ltd. submitted a winning bid of Rs 18,000 Crore as the Enterprise Value of Air
India. Consequent to the acquisition, the Tatas will own a 100% stake in Air
India as also 100% in its
subsidiary Air India Express and 50% in the joint
venture Air India SATS (airport services on ground and cargo handling). The total permanent and contractual employee strength of Air
India & AIXL is 13,500. The Tatas will get ownership of iconic brands like Air
India, Indian Airlines & the Maharajah. Air India has a fleet of 117
wide-body and narrow-body aircraft and AIXL has a fleet of 24 narrow-body
aircraft. A significant number of these aircraft are owned by Air India.
As Tata Sons had acquired a 100 per cent stake in loss-making Air India on January 27, 2022, through its fully owned subsidiary, Talace Private Limited. Later, it announced that Air India and Vistara will be
merged into one entity, which is estimated to be completed by March 2024.
Disclaimer: this blog was written for educational purpose, the resource of the data in this blog was online journals.
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