Dhaka Tribune | Tata, Indian govt close to seal Air India deal

Apr 05,2021

Talks between the Indian government and Tata Group over signing a deal to buy state-run Air India are at its final stages, according to media reports.

Livemint reported on Monday that the two parties are close to sealing the terms of purchase after ironing out their differences over pension liabilities, real estate assets and debt.

The final talks are underway and Tata Group is expected to submit a financial bid by this month, it reported quoting two people familiar with the matter.

A large number of Air India’s workers are set to retire in the coming years and many of them want the government to take care of pension-related matters, according to one of the people who spoke to Mint.

Apart from a large fleet of carriers, the Indian government and Tata Group are also in talks over the ownership of Air India’s real assets, which includes staff quarters and residential colonies, the second person said.

Most of Air India’s real estate assets have been transferred to a special purpose vehicle (SPV) called Air India Assets Holding Ltd in 2019 as part of the government’s disinvestment process.

“While Tata Sons is keen to have such assets under its own control, post the acquisition of Air India, many employees may not be keen to see residential premises and other real estate assets of the airline going under the control of a private entity," the Mint report quoted the person saying.

An Air India aircraft takes off Twitter

The business group will submit a financial bid by this month

Talks between the Indian government and Tata Group over signing a deal to buy state-run Air India are at its final stages, according to media reports.

Livemint reported on Monday that the two parties are close to sealing the terms of purchase after ironing out their differences over pension liabilities, real estate assets and debt.

The final talks are underway and Tata Group is expected to submit a financial bid by this month, it reported quoting two people familiar with the matter.

A large number of Air India’s workers are set to retire in the coming years and many of them want the government to take care of pension-related matters, according to one of the people who spoke to Mint.

Apart from a large fleet of carriers, the Indian government and Tata Group are also in talks over the ownership of Air India’s real assets, which includes staff quarters and residential colonies, the second person said.

Most of Air India’s real estate assets have been transferred to a special purpose vehicle (SPV) called Air India Assets Holding Ltd in 2019 as part of the government’s disinvestment process.

“While Tata Sons is keen to have such assets under its own control, post the acquisition of Air India, many employees may not be keen to see residential premises and other real estate assets of the airline going under the control of a private entity," the Mint report quoted the person saying.

2021/12/dt-pg-1640501790753.jpg

The Indian government has been trying to sell Air India, surviving on a government bailout, for quite some time now. The national carrier has failed to make profits since 2007, when it was merged with state-run Indian Airlines.

The deal may get Tata, which already owns AirAsia India and Vistara, access to lucrative slots at airports in India and abroad as well as a large fleet of aircraft. But the airline comes with huge debts, a unionized workforce and large pension liabilities.

Air India carries debts of about 58,255 crore rupees as of 31 March 2019. However, 29,464 crore rupees of this amount was transferred to the SPV to make the carrier look attractive.

“The Tata group already has debt worth around $27 billion and is not keen on absorbing a significant amount of debt. We understand that as per the current talks, the government may absorb around $5 billion worth of debt while the rest could be transferred to the Tata group so that the burden is equally shared," the report quoted one of the two persons, who spoke on condition of anonymity.

“This way, the airline can be revived and turned profitable under a private entity, something which the government has been struggling to do so far," the person added.

In 2020-21, Air India is set to report a loss of close to 10,000 crore rupees, higher than that of 8,000 crore rupees the company reported last fiscal.

The Indian government is keen to close the sale as early as possible. Shortlisted bidders will have to submit financial bids in the next two months, Civil Aviation Minister Hardeep Singh Puri said last week, adding that the choice is between disinvestment and closing down the airline.