In an epochal event, India’s flag carrier Air India on Thursday returned to the hands of Tata Group, which founded it close to 90 years ago. The diversified conglomerate had won the race for full ownership of the state-owned airline in October last year, by offering Rs 18,000 crore as enterprise value (EV) consideration. The debt-laden, loss-making airline has long guzzled taxpayers’ money, but still holds considerable brand strength and repute, with its iconic Maharaja tag. Air India will be the third airline brand in the Tatas’ stable; it already owns 84% in AirAsia India and 51% in Vistara. The deal will add as many 141 wide-body and narrow-body planes to Tata Group’s fleet, a significant number of which owned by AI.

Besides, the Tatas would also get thousands of trained pilots and crew, lucrative landing and parking slots — 1,800 at domestic airports and half that number at airports overseas — and privileged bilateral rights across Europe, North America and West Asia.

The AI sale will be the first incidence of outright privatisation of a state-owned firm in the country after a gap of 17 years. The Centre ‘nationalised’ AI in 1953.

“The Air India strategic disinvestment transaction has been completed today with the government receiving a consideration of Rs 2,700 crore from the strategic partner (Talace, a wholly-owned arm of Tata Sons), retaining debt of Rs 15,300 crore in Air India and AIXL and transferring shares of Air India (100% shares of Air India and its subsidiary AIXL and 50% shares of AISATS) to the strategic partner,” the finance ministry said in a statement.

Earlier in the day, Tata Sons chairman N Chandrasekaran met Prime Minister Narendra Modi. “We are excited to have Air India back in the Tata Group and are committed to making this a world-class airline. I warmly welcome all the employees of Air India, to our Group, and look forward to working together,” Chandrasekaran said in a statement.

After the government announced the approval of the highest price bid of Talace on October 8, 2021, it issued the Letter of Intent to the winning bidder on October 11. The share purchase agreement (SPA) was signed on October 25, 2021. Thereafter, Talace, Air India and the government worked towards satisfying a set of conditions precedent defined in the SPA, including approvals from anti-trust bodies, regulators, lenders, third parties, etc.

The total debt and assorted liabilities of AI absorbed by the government were around Rs 67,000 crore. Given the total debt and liabilities of the airline is estimated at nearly Rs 1 lakh crore, the deal allows the government to recover around Rs 33,000 crore (Rs 18,000 crore from Tatas’ offer and around Rs 15,000 crore from non-core assets kept by it).

Tatas will have to retain all employees of Air India for one year from the close of the transaction and could offer VRS in the second year. The new owner of the airline cannot transfer Air India brand or logo for five years and even thereafter, can transfer these only to an Indian entity. Air India has over 12,000 employees — two-thirds of which are permanent and the balance, hired on a contractual basis; Air India Express (AIXL) has a staff strength of over 1,400. In the next five years, about 5,000 permanent employees will be retiring.

AI plunged into losses following its amalgamation with Indian Airlines in 2007. In recent years, the government has been making all-round efforts to privatise the airline. The process for disinvestment of AI and its arms started in June 2017 with the ‘in-principle’ approval of the Cabinet Committee on Economic Affairs. The first round did not elicit any expression of interest. The process resumed in January 2020.