The government has announced the signing of an asset transfer agreement between Air India and AIAHL, paving the way for the handover of Air India to the Tata Group.
The agreement between Air India and special purpose company AIAHL for the transfer of non-core assets has been notified by the government, ahead of the Tata Group's purchase of the national carrier.
In October of last year, the government signed a share purchase deal with the Tata Group for the sale of national carrier Air India for Rs 18,000 crore.
On Thursday, the Tata Group is poised to assume full control of the airline it founded in 1932. The cash portion of the transaction would be paid once the handover process is completed.
The Tata Group would pay Rs 2,700 crore in cash and assume Rs 15,300 crore in debt on behalf of the airline. The transaction also involves the sale of Air India Express and its ground handling subsidiary, AISATS.
The deal was supposed to be completed by December 2021, but the date was later pushed back to January 2022 due to longer-than-expected delays in completing procedural tasks.
After 67 years, Air India will be welcomed back into the Tata family. In October 1932, the Tata Group established Air India as Tata Airlines. In 1953, the government nationalised the airline.
The Department of Investment and Public Asset Management (DIPAM) notified the framework agreement entered into by and between Air India Ltd and AI Assets Holding Ltd (AIAHL) for the transfer of assets of the national carrier after it ceases to be a public sector company on January 24, as a precursor to the handover process.
The government established AIAHL in 2019 to hold debt and non-core assets of the Air India company.
Air India subsidiaries Air India Air Transport Services Ltd (AIATSL), Airline Allied Services Ltd (AASL), Air India Engineering Services Ltd (AIESL), and Hotel Corporation of India Ltd (HCI) were transferred to the SPV, along with non-core assets, paintings and artefacts, and other non-operational assets.
In October of last year, Tatas outbid a consortium led by SpiceJet promoter Ajay Singh and the government's reserve price of Rs 12,906 crore for the sale of its whole interest in the loss-making carrier.
Air India had a total debt of Rs 61,562 crore as of August 31, 2021. Before handing over the loss-making airline to the Tata Group, around 75% of this debt, or Rs 46,262 crore, will be transferred to the special purpose vehicle, AIAHL.
Aside from that, non-core assets of Air India, including land and buildings worth Rs 14,718 crore, are being transferred to AIAHL.
Tatas would not be able to keep non-core assets such as Air India's Vasant Vihar Housing colony, the Air India Building at Nariman Point in Mumbai, and the Air India Building in New Delhi.
Tatas would receive 141 Air India planes, 42 of which are leased planes and the remaining 99 are owned planes.
While this will be the first privatisation since 2003-04, Air India will be the Tatas' third airline brand – it already owns a majority stake in AirAsia India and Vistara, a joint venture with Singapore Airlines Ltd.
Air India will provide it with access to a fleet of 117 wide-body and narrow-body aircraft, and Air India Express Ltd will provide it with another 24 narrow-body aircraft, in addition to control of 4,400 domestic and 1,800 international landing and parking slots at domestic airports, as well as 900 slots at international airports such as London's Heathrow.
Since its merger with Indian Airlines in 2007-08, Air India has been losing money every year. Air India received approval for a Turnaround Action Plan (TAP) as well as a Financial Restructuring Plan (FRP).
Over the previous decade, more than Rs 1.10 lakh crore has been invested in the loss-making airline in the form of monetary assistance and credit guarantees to keep it afloat. The airline is currently losing Rs 20 crore every day.