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The government sale puts the airline, which Tata originally founded in 1932, back into the hands of Indian conglomerate. The country's politicians will be relieved.

Tata Sons will take charge of Air India after a winning bid of $2.4 billion, including equity and debt, the government said on Friday, marking the end of years of struggle to privatise the financially troubled airline.

A successful sale of the loss-making national flag carrier will be a major victory for Prime Minister Narendra Modi as it cost tax payers an average of nearly $3 million a day for the past decade. It would also bode well for planned stake sales in a slew of state-run firms to bolster government coffers and make India a fully market-driven economy.

Talace Pvt Ltd, a unit of Tata Sons the holding company for the autos-to-steel Tata conglomerate which owns luxury carmaker Jaguar Land Rover will acquire 100 percent of Air India, Tuhin Kanta Pandey, secretary of the Department of Investment and Public Asset Management, said.

The deal, which is expected to be finalised by the end of the year, puts Air India back in the hands of the group which founded it as Tata Airlines in 1932 before it was nationalised in 1953.

The bid amount includes Tata taking on $2 billion of Air India’s $8.2 billion total debt, resulting in an equity value of only about $400 million which it will pay to the government.

Tata currently operates two airlines Vistara, India’s only other full-service carrier, in a venture with Singapore Airlines as well as budget airline AirAsia India, a venture with Malaysia’s AirAsia Group.

Family scion and emeritus chairman of Tata Sons, Ratan Tata said on Twitter that while it will take “considerable effort to rebuild Air India”, it would provide a strong market opportunity to Tata’s presence in the aviation industry.

“Welcome back, Air India!,” he said in a tweet.

The acquisition will give Tata an additional 4,400 domestic and 1,800 international slots at Indian airports annually, as well as 900 slots at airports overseas, the most lucrative of which are at London’s Heathrow.

Tata will also gain 8,000 full-time employees and some 120 planes, mostly older narrowbody Airbus aircraft but also some newer widebody Boeing planes.

“Air India provides a unique and attractive international footprint,” Tata Sons said in a statement, adding that more than two-third of the airline’s revenue comes from international markets like North America, Europe and Middle East.

(Reporting by Aftab Ahmed; Editing by Edwina Gibbs, Kirsten Donovan)

This article was written by Aftab Ahmed from Reuters and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.

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Tags: air india, india, tata, vistara

Photo credit: Two-thirds of Air India's revenue comes from international markets such as North America, Europe and the Middle East. Regis Duvignau / Reuters

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