Synopsis: The Tata Group is actively considering taking over the state-run carrier Air India, which the Centre has placed on the block.
The Tata Group has initiated detailed research on besieged national airline, Air India, and may make a formal bid near the official deadline by the end of this month. There focus is currently on identifying industry synergies and viability.
Officials said that it’s too early for them to discuss financing or the business structure until the extensive research is completed. A spokesperson for Tata Sons, for the first time publicly announcing the development, said that they are currently evaluating the plan and will make a bid at the right time and after due thought. They, however, do not have any plan for attracting a financial partner.
Other airlines involved in the national carrier are allegedly trying to cut out Air India Express to allow them to bid for the low-cost airline.
The conglomerate has been employing top law firms and analysts for thorough research. It has been postulated that the company aims to combine AirAsia India and Air India into a single entity. But Tata Group officials said there were no formal talks on that yet. The Group has two joint Aviation sector holdings. The first is the full service airline Vistara, and AirAsia India is the second one, which is budget airline.
Vihang Virkar, aviation law expert and partner at PDS Legal, said that if the Tata Group wishes to pursue it, a deal will require immense effort since the group will have to deal with multiple factors such as malfeasance and potential non-competitive arrangements with Singapore Airlines and AirAsia; future spending requirements; and the operational implications of three separate airlines. He also said there are as many positive ones such , several profitable international routes and prime location real estate owned by Air India, whereas there negative implications i.e., large debt, and exceptionally high labor-related liabilities, which are attached to the airline.
According to provisional figures, Air India’s total debt as of 31st March, 2019 stood at Rs 58,351.93 crore. The government tried to make the ailing carrier attractive by reducing the debt and offering a stake of 100%. Airline bidders will need to bear Rs 23,286.50 of debt crore while the remaining crore will be transferred to Air India Assets Holding Ltd — a special purpose fund.
Legal experts said that the Indian regulations give Air India an advantage over other airlines in terms of flight route allocation and access to airport infrastructure because of its position as the national carrier.