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Tata gets back Air India usurped by Congress governments

Nearly a century after their brainchild was usurped by socialist regimes of Jawaharlal Nehru and Indira Gandhi, Tata Sons get their baby back

Tata gets back Air India usurped by Congress governments

Decades after their brainchild was usurped by two socialist regimes under Jawaharlal Nehru and his daughter Indira Gandhi, Tata Sons, the holding company of Indian multinational conglomerate Tata Group, has won the bid to take control of Air India, according to some media reports.

While the Ministry of Finance says that reports suggesting that Tata Sons has won the bid for Air India are not correct, sources said it was only because of protocol that the government could not divulge the result of the bidding process as of now. “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,” it said. 

Reports say that the Committee of Ministers on the national carrier disinvestment headed by Home Minister Amit Shah has approved the winning bid for the national airline.

The government had last week evaluated financial bids received from Tata Group and SpiceJet founder for the acquisition of Air India. The financial bids were evaluated against an undisclosed reserve price and the bid offering the highest price above that benchmark was be accepted.

This marks the return of Air India to Tata fold after 67 years. The Tata Group founded Air India as Tata Airlines in October 1932. The government nationalised the airline in 1953.

The government is selling 100% of its stake in the state-owned national airline, including Air India’s 100% shareholding in AI Express Ltd and 50 per cent in Air India SATS Airport Services Private Ltd.

The stake sale process, which begun in January 2020, faced delays due to the Covid-19 pandemic. In April 2021, the government asked potential bidders to put in financial bids. The last day for placing financial bids was September 15.

Tata Group was among the multiple entities that had put in an initial expression of interest (EoI) in December 2020 for buying the Maharaja.

With previous attempts since 2017 failing to get any significant interest and after receiving feedback from potential investors, the government in October last year sweetened the EoI clause relating to the transfer of Air India’s debt to the new investor, giving bidders flexibility to decide on the quantum of humongous debt they want to absorb.

As per the Air India EoI floated by the Department of Investment and Public Asset Management (DIPAM) in January 2020, of the airline’s total debt of Rs 60,074 crore as of March 31, 2019, the buyer would be required to absorb Rs 23,286. The rest would be transferred to Air India Assets Holding Ltd (AIAHL), a special purpose vehicle.

Air India has been in losses ever since its merger with domestic operator Indian Airlines in 2007. The airline, which was formed by the Tatas as a mail carrier in 1932, will give the successful bidder control of 4,400 domestic and 1,800 international landing and parking slots at domestic airports, as well as 900 slots at airports overseas. Besides, the bidder would get 100 per cent of the low-cost arm Air India Express and 50 per cent of AISATS, which provides cargo and ground handling services at major Indian airports.

Tata Airlines to Indian Airlines to Air India

Air India had its origin as Tata Air Services later renamed to Tata Airlines founded by JRD Tata of Tata Sons, an Indian aviator and business tycoon. In April 1932, Tata won a contract to carry mail for Imperial Airways and the aviation department of Tata Sons was formed with two single-engine de Havilland Puss Moths.

On 15 October 1932, Tata flew a Puss Moth carrying air mail from Karachi to Bombay (currently Mumbai) and the aircraft continued to Madras (currently Chennai) piloted by Nevill Vintcent, a former Royal Air Force pilot and friend of Tata. The airline fleet consisted of a Puss Moth aircraft and a de Havilland Leopard Moth. Initial service included weekly airmail service between Karachi and Madras via Ahmedabad and Bombay. In its first year of operation, the airline flew 160,000 miles (260,000 km), carrying 155 passengers and 9.72 tonnes (10.71 tons) of mail and made a profit of Rs 60,000 ($ 840).

As Tata Airlines

The airline launched its first domestic flight from Bombay to Trivandrum with a six-seater Miles Merlin. In 1938, it was re-christened as Tata Air Services and later as Tata Airlines. Colombo in Ceylon (now Sri Lanka) and Delhi were added to the destinations in 1938. During the Second World War, the airline helped the Royal Air Force with troop movements, shipping of supplies, rescue of refugees and maintenance of aircraft.

After World War II, regular commercial service was restored in India and Tata Airlines became a public limited company on 29 July 1946 under the name Air India. After Indian independence in 1947, 49% of the airline was acquired by the Government of India in 1948. On 8 June 1948, a Lockheed Constellation L-749A named Malabar Princess (registered VT-CQP) took off from Bombay bound for London Heathrow marking the airline’s first international flight.


In 1953, the Jawaharlal Nehru government passed the Air Corporations Act and purchased a majority stake in the carrier from Tata Sons though its founder JRD Tata would continue as Chairman till 1977. The company was renamed Air India International Limited and the domestic services were transferred to Indian Airlines as a part of a restructuring. From 1948 to 1950, the airline introduced services to Nairobi in Kenya and to major European destinations Rome, Paris and Düsseldorf. The airline took delivery of its first Lockheed Constellation L-1049 and inaugurated services to Bangkok, Hong Kong, Tokyo and Singapore.

On 21 February 1960, Air India International inducted its first Boeing 707-420, thereby becoming the first Asian airline to enter the Jet Age. The airline inaugurated services to New York on 14 May 1960. On 8 June 1962, the airline’s name was officially truncated to Air India and on 11 June 1962, Air India became the world’s first all-jet airline.

The airline had begun making losses by the time Indira Gandhi became the prime minister, but its purchases at the taxpayer’s expense continued with impunity.

In 1971, the airline took delivery of its first Boeing 747-200B named Emperor Ashoka (registered VT-EBD) and introduced a new Palace in the Sky livery and branding. In 1986, Air India took delivery of its first Airbus A310-300. In 1993, Air India took delivery of a Boeing 747-400 named Konark (registered VT-ESM) and operated the first non-stop flight between New York and Delhi.

In 2000, Air India introduced services to Shanghai, China.

Government makes mess of successful airline

In 2000–01, the Atal Bihari Vajpayee government made attempts to re-privatise Air India, which had made huge losses under successive Congress governments.

On 23 May 2001, the Ministry of Civil Aviation charged Michael Mascarenhas, the then-managing director, with corruption. According to the ministry reports, the airline lost approximately Rs 570 million ($ 8.0 million) because of extra commissions that Mascarenhas sanctioned and he was later suspended from the airline. In May 2004, Air India launched a wholly-owned low-cost subsidiary called Air-India Express connecting cities in India with the Middle East and Southeast Asia. Until 2007, Air India mainly operated on international long-haul routes while Indian Airlines operated on domestic and international short-haul routes.

In 2007, Air India and Indian Airlines were merged under Air India Limited and the airline took delivery of its first Boeing 777 aircraft. The airline was invited to be a part of the Star Alliance in 2007.

The combined losses for Air India and Indian Airlines in 2006–07 were Rs 7.7 billion ($ 110 million) and after the merger, it went up to Rs 72 billion ($ 1.0 billion) by March 2009. In July 2009, State Bank of India was appointed to prepare a road map for the recovery of the airline. The carrier sold three Airbus A300 and one Boeing 747-300M in March 2009 for $ 18.75 million to finance the debt. By March 2011, Air India had accumulated a debt of Rs 426 billion ($ 6.0 billion) and an operating loss of Rs 220 billion ($ 3.1 billion), and was seeking Rs 429 billion ($ 6.0 billion) from the government. A report by the Comptroller and Auditor General blamed the decision to buy 111 new aircraft and the ill-timed merger with Indian Airlines for the poor financial situation. In August 2011, the invitation to join Star Alliance was suspended as a result of its failure to meet the minimum standards for membership. The government pumped Rs 32 billion ($ 450 million) into Air India in March 2012.

On 1 March 2009, Air India made Frankfurt Airport its international hub for onward connections to the United States from India. However, the airline shut down the Frankfurt hub on 30 October 2010 because of high operating costs. In 2010, financially less lucrative routes were terminated and the airline planned to open a new hub for its international flights in Dubai. In 2012, a study commissioned by the Corporate Affairs Ministry recommended that Air India should be partly privatised. In May 2012, the carrier invited offers from banks to raise up $800 million via external commercial borrowing and bridge financing. In May 2012, the airline was fined $ 80,000 by the US Transportation Department for failing to post customer service and tarmac delay contingency plans on its website and adequately inform passengers about its optional fees.

In 2013, the then-Civil Aviation Minister Ajit Singh stated privatisation was the key to the airline’s survival. However, the opposition led by the BJP and the CPI(M) slammed the government. In 2013, the Indian government planned to delay equity infusion of Rs 300 billion ($ 4.2 billion) that was slated to be infused into the airline slowly over a period of eight years. In January 2013, Air India cleared a part of its pending dues through funds raised by selling and leasing back the newly acquired Boeing 787 Dreamliners. In March 2013, the airline posted its first positive EBITDA after almost six years and 20% growth in its operating revenue since the previous financial year. Air India Limited split its engineering and cargo businesses into two separate subsidiaries, Air India Engineering Services Limited (AIESL) and Air India Transport Services Limited (AITSL) in 2013. In December 2013, the airline appointed veteran pilot SPS Puri as its head of operations. The appointment was criticised by the Air India pilots union as Puri allegedly has multiple violations to his name.

Star Alliance membership

Air India became the 27th member of Star Alliance on 11 July 2014. In August 2015, it signed an agreement with Citibank and State Bank of India to raise $ 300 million in external commercial borrowing to meet working capital requirements. For FY 2014–15, its revenue, operating loss and net loss were Rs 198 billion ($ 2.8 billion), Rs 2.171 billion ($ 30 million) and Rs 5.41 billion ($ 76 million) compared FY 2011–12, which were Rs 147 billion ($ 2.1 billion), Rs 5.138 billion ($ 72 million) and Rs 7.55 billion ($ 110 million). As of May 2017, Air India is the third-largest carrier in India (after IndiGo and Jet Airways), with a market share of 13%.


On 28 June 2017, the Government of India approved the privatisation of Air India. A committee has been set up to start the process. In March 2018, the government issued an Expression of Interest (EOI) to sell 76% stake of Air India, along with low-cost airline Air India Express, and a 50% stake of AISATS, a ground handling joint venture with Singapore Airport Terminal Services (SATS). According to the EOI, the new owner would have to take on a debt of Rs 33,392 crore ($ 4.7 billion) and a bid would have to be submitted by mid-May as the Government wanted to complete the selling process by the end of 2018, but no private firms showed any interest in buying the debt-laden airline.

Having failed on previous occasions to sell the airline, the Government decided to sell a 100% share of the airline and started its preparation in late-2019. On 27 January 2020, the Modi government released the Expression of Interest (EOI) to invite bidders. This time, the government decided to sell 100% shares of both Air India and its budget carrier Air India Express as well as 50% shares of AISATS and to attract more bidders this time, the government has already decreased nearly Rs 30,000 crore ($ 4.2 billion) of debts and liabilities in a Special Purpose Vehicle (SPV).

Sirf News documented the efforts of the Narendra Modi government to privatise Air India extensively over the past years, culminating in the auction that went in Tata Sons’ favour this week.


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