As per reports being circulated in the media, Tata Sons may bid for Air India Sale by Government. Ironically, it was the Tata Group, which had founded the Air India in 1932.
In 88 years time, Tata Sons grew to become the holding company of the $113 billion salt-to-software conglomerate. On the other hand, Air India finds itself today laden in a mountain of debt. The oil companies refuse to refuel Air India planes pending outstanding payments. Air travelers generally do not take Air India as seen in its market share. A private player, IndiGo, has already beaten Air India in its own game. In just 10 years, IndiGo did what Air India could not do in 50 years. It is a different story, though, that IndiGo, ever since the time of its inception, mostly consists of ex-Air India employees!
The Indian government, on its part, is trying very hard to sell Air India since 2018 but could not find any capable buyer for Air India sale by government. In the meantime, a number of its employees have superannuated while others have grown three years more in seniority. The debt has mounted further.
In 2020, Air India sale by government program had to be deferred four times due to the deadly coronavirus pandemic. The Centre keeps modifying bidding parameters for Air India. It has now permitted the bidders to quote enterprise value instead of equity value. It has now extended the last date for submitting bids to December 14, 2020.
Moreover, the pandemic has resulted in a huge slump in the global civil aviation sector.
To pursue its passion for aeronautics, Tata sons also runs two airlines: a full service airline Vistara, with Singapore Airlines (SIA), and Air Asia India, with Air Asia Berhad. It is a different matter, though, that both these airlines are presently not running profitably.
The Tata Group is reportedly in talks with SIA to bid for Air India through Vistara.
Points which are seriously being considered in the acquisition of Air India by Vistara include :
– it will result in a significant outlay of money,
– assumption of risk by the shareholders of Vistara,
Technically, a bid by Vistara would necessitate approval from SIA and Temasek, which owns 55 per cent in SIA. They have already let known their concerns to Tata Sons about its move to take over Air India.
The SIA and Temasek would necessarily have to evaluate whether such a venture is really feasible or whether the bidders are really keen to make such a massive investment and take risk especially at times of corona when the business growth has been brutally hit.
The passion for aviation in Tatas can be gauged by their resolve to go ahead with the bidding with or without SIA. Tata Sons appears very keen to take over Air India. It may partly be because of an emotional connect and partly because of its ambition to consolidate its entire aviation activities under a single entity. It has reasons to believe that despite several liabilities, Air India has several assets too which are priceless. Air India only needs a professional leadership management that could bring back its lost glory.
Also Read: Centre open to 100% stake sale in Air India