Return flight

The USD2.4 billion divestment of national carrier Air India, which was nationalised in 1953, means the airline is returning to its original owners, the Tata Group. Freny Patel explores the background to this momentous deal

The divestment of India’s national carrier has had more than its fair share of turbulence since day one, when the government initiated the privatisation of Air India back in 2017, and witnessed two aborted missions.

The government’s latest drive to sell Air India succeeded possibly after it climbed down on a couple of key contentious issues: It granted the flexibility to bidders to decide on the quantum of Air India debt they were willing to absorb; and the income tax department permitted the successful bidder to carry forward Air India’s losses and set them off against future profits.

The government’s concessions brought immediate results as Tata Sons and SpiceJet founder Ajay Singh bid for the national carrier and, eventually, Tata was named the winning bidder, returning the airline to its original home.

“India will lose a national carrier but the divestment was imperative,” says Anuj Trivedi, a partner at Link Legal who, along with his team at the firm, advised Air India on the transaction. “It is a perfect match for the Tatas, especially since the corporate group knows the Air India structure well, having started the airline.”

Tata has acquired the beleaguered national carrier for INR180 billion (USD2.4 billion). It will take on board INR153 billion of debt, one-quarter of the airline’s total debt, and pay the government INR27 billion in cash.

Cyril Amarchand Mangaldas represented the government of India, while AZB & Partners advised Tata Sons in the Air India divestment.

The sale of Air India to the Tatas comprises the national carrier Air India, the budget airline Air India Express, and Air India SATS Airport Services (AISATS), a joint venture company between Air India and Singapore Airport Terminal Services that provides ground handling services across airports in the country.

An elated Ratan Tata, former chairman of Tata Group, tweeted: “Welcome back, Air India!”.

“The Tatas will have the opportunity of regaining the image and reputation enjoyed in earlier years,” he said in his tweet. “Under the leadership of JRD Tata, Air India was one of the most prestigious airlines in the world, and now the Maharaja will return to Tatas after seven decades.”

While the deal has been sealed, drawing the curtains on the vexed divestment, putting the sale together was a complicated affair.