Air India Finds Buyer, Will Be Privatized

Tata Group wins bid for Air India

Air India has been struggling financially for years, and has perpetually been on the brink of collapse. The airline is owned by the government of India, which has given the airline just enough money to stay in business, but nothing beyond that. The airline is currently costing taxpayers over $1 billion per year.

The government has been looking to privatize Air India, and it looks like a buyer has now been found. Tata Group has won a bid to purchase Air India, and the deal should close by the end of the year. With this deal, Tata Group is paying a total of $2.4 billion. That includes taking over $2 billion of Air India’s $8.2 billion in debt, plus paying about $400 million to the government.

Tata Group will acquire 4,440 domestic and 1,800 international slots at Indian airports, plus 900 slots at international airports. Air India has 8,000 full time employees and 120 planes.

Per a statement from Tata Group:

“At the Tata group, we are delighted to be declared as the winner of the bid for Air India. This is a historic moment, and it will be a rare privilege for our Group to own and operate the country’s flag bearer airline. It will be our endeavour to build a world-class airline which makes every Indian proud.”

For those not familiar, Tata Group is a major investment firm that has stakes in all kinds of companies. In the aviation sector, Tata Group already owns 51% of Vistara, and 84% of AirAsia India, so the company already has interests in aviation, and this will likely lead to some consolidation. To take it a step further, Tata Group actually founded Air India in 1932, before it was taken over by the government in 1953. So I guess in reality Tata Group is regaining control of Air India after nearly 70 years.

It’s also interesting to note that SpiceJet was allegedly also bidding for Air India, though the airline didn’t bid quite as much as Tata Group, so lost out.

What does this mean for the future of Air India?

Is this really going to happen?!?

I’m so caught off guard that I don’t know what to make of this. There are an endless number of struggling government-owned airlines out there that haven’t turned a profit in a long time, and that are looking to be privatized. It almost never works out.

Suffice to say that I wasn’t expecting that Air India would be able to find a buyer. A few initial thoughts:

  • I’m curious to see if this actually happens, or if there end up being issues (like with employees) that prevent this deal from closing

  • With Tata Group also owning stakes in Vistara and AirAsia India, what exactly is the plan here? Will we see one mega-airline created in India, or will the airlines operate independently? Will Vistara be merged into Air India, or vice versa, or what?

  • What will Tata Group do to make Air India succeed, which the airline has struggled to do for well over a decade? Will Air India become more premium (like Vistara), more low cost (like AirAsia India), or what?

What does this mean for the future of Vistara?

Bottom line

Tata Group has won a bid to purchase Air India for $2.4 billion, in a deal that’s expected to close before the end of the year. The company also owns stakes in Vistara and AirAsia India, so this is a pretty major development.

I can’t wait to see how this plays out — will this deal actually close, and if so, what will it mean for Indian aviation going forward?

What do you make of Tata Group winning the bid for Air India?

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