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Tata Group Likely to Win Bid for Air India
The long and overly drawn-out saga of Air India’s privatization might come to a close soon. The Indian government has been trying since 2017 to privatize the airline but has had trouble finding a buyer of the dumpster fire of an airline.
In late 2019, the Indian government moved a significant portion of Air India’s debt into a special purpose vehicle to make the airline more attractive to potential buyers and also expressed interest in selling up to 100 percent of the airline. Both high levels of debt and the fear of government meddling after privatization scared off buyers in earlier attempts at privatization.
When 2020 rolled around it brought along COVID-19 which delayed things but things picked back up at the end of 2020 when the Indian government started requesting bids for the airline.
Earlier this month the Central Board of Direct Taxes in India said the buyer of Air India could carry forward the losses of the airline and claim up to a 30 percent tax rebate annually. This is in addition to the buyer only needing to acquire aircraft-related debt.
All of this has sweetened the deal enough that there were two bidders for Air India. The first was the Tata Group, a large Indian conglomerate. Second, was Ajay Singh, chairman and managing director of Indian airline SpiceJet. Singh while affiliated with SpiceJet is said to have expressed interest in Air India in his private capacity.
The Tata Group
The government committee overseeing the privatization is set to meet this week and they will formally recommend the winning bidder to the cabinet for approval. It’s expected that the Tata Group will emerge as the top bidder.
The interesting thing here is that the Tata Group already owns stakes in two airlines in India, Vistara and AirAsia India. The acquisition of Air India would bring the third airline into the fold, however, that probably won’t last for long. It’s very probable that the Tata Group will work to unify these airlines into a single entity if the acquisition goes through.
AirAsia India can be folded into the new single airline a little easier than Vistara can. Vistara is a joint venture between the Tata Group and Singapore Airlines, holding 51 percent and 49 percent of the company respectively. The joint venture also includes language that Vistara has exclusive rights to undertake “full-service carrier” services within the Tata Group. It’s expected however that Singapore Airlines will play along and allow Vistara to be combined.
Full Circle for the Tata Group
If the likely acquisition by the Tata Group it will almost like everything coming back full circle. Air India didn’t start as a national airline but a private airline started in 1932 going by the name Tata Air Services, the airline didn’t go by the name of Air India until 1946. The airline was started by none other than J.R.D. Tata, the Howard Hughes of the Indian aviation industry and the chairman of the Tata Group from 1938.
For decades his meticulous attention to detail made Air India a world-class airline. It set the standard for other Asian airlines. The Singaporean government in the 1970s actually looked to Air India to develop the now world-class service standards of Singapore Airlines.
Air India was nationalized in 1953 and things went smoothly for the next two decades until Tata was fired by Indian Prime Minister Morarji Desai over a petty dispute. This ultimately is what started the decline of Air India.
The airline coming back to the Tatas may just be what Air India needs to return to the glory days of the airline. The Indian government hopes to have the bidding process wrapped up by December and begin the transition of the airline to the winner. The transition will take time but there is enough there to remain cautiously optimistic.
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