Tata Sons wins bid to take over troubled state-run Air India

Tata Sons will pay $3.25 billion for a 100 per cent stake in Air India. PHOTO: AFP

NEW DELHI (REUTERS, BLOOMBERG) - Tata Sons has been selected as the winning bidder to take over state-run carrier Air India, the government said on Friday (Oct 8), marking the end of years of struggle to privatise the financially troubled airline.

Tata Sons, the holding company for the autos-to-steel Tata conglomerate, will pay 180 billion rupees (S$3.25 billion) for a 100 per cent stake in Air India, said Mr Tuhin Kanta Pandey, secretary of the Department of Investment and Public Asset Management.

The bid amount includes Tata's taking on of about US$2 billion (S$2.7 billion) of the national flag carrier's US$8.2 billion total debt.

A successful privatisation of Air India, which was founded as Tata Airlines in 1932 before being nationalised in 1953, would be a major victory for Prime Minister Narendra Modi as the loss-making carrier has cost taxpayers an average of nearly $3 million a day for the past decade.

The sale also bodes well for Mr Modi's plans to sell stakes in a slew of state-run firms to bolster government coffers and make India a fully market-driven economy.

Tata currently operates Vistara, India's only other full-service carrier, in a venture with Singapore Airlines as well as budget airline AirAsia India, a venture with Malaysia's AirAsia Group.

Tata Sons, the holding company for the salt-to-software empire and owner of British luxury carmaker Jaguar Land Rover, is coming back to an asset it started almost 90 years ago.

Established by legendary industrialist and philanthropist J.R.D. Tata, who was India's first licensed pilot, the airline originally flew mail in the 1930s between Karachi in then-undivided, British-ruled India and Bombay, now known as Mumbai.

Once it turned commercial and was government-owned in the 1950s, Air India quickly became popular with those who could afford to take to the skies.

Its advertisements featured Bollywood actresses and passengers were treated to champagne and porcelain ashtrays designed by surrealist painter Salvador Dali.

"Welcome back, Air India," Mr Ratan Tata, Mr J.R.D. Tata's successor and chairman emeritus of Tata Sons, said in a tweet.

"While admittedly it will take considerable effort to rebuild Air India, it will hopefully provide a very strong market opportunity to the Tata Group's presence in the aviation industry."

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