Air India up for grabs

Will Air India be run by Tatas again?

Privatization of Air India has been an issue in the public consciousness for some time now. Bids have been submitted for take over and the two front runners are Tata Sons and Spicejet Ltd.

Air India reserve price is being tipped around Rs 15,000-20,000 crore. The price is based on the future cash flow projection of Air India, its brand value and intangible assets like bilateral rights and slots in foreign airports to set the reserve price for the airline.

Tata Sons are believed to have submitted a higher bid than SpiceJet. Some observers say the Tata bid is about Rs 3,000 crore higher than the reserve price set by the government and about approximately Rs 5,000 crore more than the bid by Spicejet.

On October 1, a Bloomberg report claimed that a panel of ministers accepted a proposal from officials recommending salt-to-software conglomerate Tata Sons ahead of an offer from Ajay Singh, promoter of India’s airline operator Spicejet Ltd.

“Tata Sons Pvt. is set to take over ailing Air India Ltd. again, more than half a century after the country’s biggest conglomerate ceded control to the state, ending the government’s hold over an airline that for decades defined the lofty ambitions of a newly-independent nation the report said.

The finance ministry has termed reports suggesting the government has picked a winning bid for the debt-laden state-run airline Air India as incorrect.

“Media reports indicating approval of financial bids by Government of India in the AI disinvestment case are incorrect,” the ministry said in a tweet.

Media will be informed of the Government decision as and when it is taken.”

Air India and Tata Sons declined to comment.

The winning bidder would win control of Air India’s 4,400 domestic and 1,800 international landing and parking slots at domestic airports, as well as 900 slots at airports overseas, including London’s Heathrow Airport.

It would also get 100% of the low-cost arm Air India Express and 50% of AISATS, which provides cargo and ground handling services at major Indian airports.

For Tata Sons, the holding company for the salt-to-software empire and owner of British luxury carmaker Jaguar Land Rover, a win means it’s 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 went public in the 1940s, 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.

The selloff will put an end to a decades-long struggle to offload the money-losing flag carrier and a huge win Prime Minister Narendra Modi, who has embarked on a bold privatization plan to plug a widening budget deficit.

Air India began as Tata Airlines in 1932.

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