Tata Buys Air India for Rs. 18,000 Crore After 68 Years
Tata Sons regained control of Air India nearly 68 years after its nationalisatio
The latest news in the business world is that Tata has purchased Air India for Rs 18,000 crore. This is very big news because Air India was initially founded by J R D Tata who loved flying planes in 1932. He was responsible for designing the famous ‘Maharaja' mascot. However in 1953, PM Jawaharlal Nehru and his government paid J R D Tata Rs 2.8 crore and took 100% ownership of Air India. Thus Air India became a government owned company. In the beginning, Air India was the only flight company in India and was very successful. However soon many private flight companies started in India. Strong competition from private airlines and bad management led to Air India’s decline and thousands of crores in losses and loans. In 2001, when the BJP were in power, they tried to sell 40% stake to private companies but no one was interested. With each passing year, Air India’s losses kept increasing. In fact, since 2009-10, the government has spent over Rs 1.1 lakh crore to make up the losses or raise loans to do so. In 2018, the Narendra Modi government made another attempt to sell. This time they were ready to sell 76% stake but again not a single company was interested. The reason for this was that private companies felt that if the government had even 24% ownership, the private company would not have complete freedom. The losses were so huge and to make Air India successfully again companies wanted full freedom which they felt the government would not give.
On 7 August 2020, an Air India flight ran off the runway and crashed. Because of the incident not a single company in India was interested in buying the airlines. The government could not afford to give any more financial support. Moreover, every additional day that AI remains operational, the government suffers a loss of Rs 20 crore — or Rs 7,300 crore per year. As of August 2021, AI’s total debt was Rs 61,562 crore. Finally the government accepted to sell 100% of Air India and said that companies could choose to say how the loan they would cover. Tata bid and said that out of Rs 61,562 crore, Tata would pay off Rs 18,000 crore loan. Rs 15,300 crore will be paid through various assets like shares, land, etc and the remaining Rs 2,700 crore would be paid in cash. That leaves Rs 43,562 crore of debt. The assets left with the government, such as buildings, flights, etc., will likely generate Rs 14,718 crore. But that will still leave the government with a debt of Rs 28,844 crore which will come out of the government’s pocket. On the other hand, Tata will have to invest more money to make the Air Lines successful again. Despite the major amount of money, Ratan Tata is very happy that Air India is back with the Tatas and has big hopes for the airline
