Tata Group likely to bid for Air India in partnership with Singapore Airlines; eyes merger of Air India Express, Air Asia India

FP Staff

As the government already set a fresh deadline for bidders to submit the expression of interest in Air India, Tata Group reportedly evinced interest to bid for the national carrier along with its partner Singapore Airlines, said a media report.

The Tatas in association with Singapore Airlines reportedly started the process to formulate the framework for buying Air India €" including a merger of AirAsia India, in which they hold 51 percent, and Air India Express, a 100 percent subsidiary of the national carrier, said a report in The Times of India.

Moreover, the Tatas reportedly approached Air Asia India's promoter Tony Fernandes for his approval to acquire Air India Express because as per shareholders' pact, Tata Group cannot invest more than 10 percent in another no-frills carrier without Fernandes being willing to waive the covenant, said the report.

Fernandes, a Malaysian entrepreneur, holds 49 percent in AirAsia India while Tata Sons has 51 percent share in the low-cost carrier. The budget carrier commenced operations in June 2014 with Bangalore as its primary hub.

Tata's full-service airline Vistara is a 51-49 percent joint venture with Singapore Airlines while Tata Sons owns 51 percent in AirAsia India.

While Air India's net loss in 2018-19 was around Rs 8,556 crore, its current total debt is around Rs 80,000 crore.

The government is looking to shift more debt from the balance sheet of the ailing Air India to asset holding company Air India Assets Holding Ltd (AIAHL) to further sweeten the deal for prospective buyers, according to a senior airline official.

In efforts to make the disinvestment more attractive, the carrier has already transferred Rs 29,474 crore of debt to AIAHL, a Special Purpose Vehicle (SPV).

As the government is set to invite preliminary bids from potential investors for selling 100 percent stake in Air India, all eyes are on the portion of airline debt to be taken off its books and qualification for suitors.

Prospective buyers would have to respond to the Expression of Interest (EoI) by 17 March 2020 and some of the potential bidders could be Tata Group, Hindujas, IndiGo, SpiceJet and a few private equity firms.

As per the bid document, Air India has an aircraft fleet of 121 aircraft (excluding 4 B747-400 aircraft) as on November 2019, mainly comprising Airbus and Boeing aircraft, out of which 65 are owned or on finance lease.

Air India's low-cost subsidiary Air India Express has a total of 25 Boeing 737-800 NG aircraft of which 10 are owned and 7 on finance lease. The remaining 8 are on dry lease.

In January this year, Civil aviation minister Hardeep Singh Puri had asked disinvestment-bound Air India to set up an internal mechanism committee comprising members from the management and its various trade unions to sort out privatisation-related issues of employees, a source said on 20 January.

Meanwhile, Fernandes, one of the aviation industry's best-known faces, on Monday stepped aside as chief executive of Asia's biggest budget airline for at least two months, according to Reuters. The authorities are investigating allegations that Airbus paid a bribe of $50 million through sponsorship of the Caterham F1 team to win orders from AirAsia.

€" With inputs from agencies

Also See: Air India to set up panel to address privatisation-related issues of employees; airline staff dues to be paid fully: Report

If I were not a minister today, I would be bidding for Air India; assets make airline a goldmine: Piyush Goyal

What an Air India buyer will get: Debt, old aircraft, little-used Star Alliance creds and lots of extra employees

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