Tata May Have Gotten Air India For Cheap, But Running It Won't Be

Tata Sons Pvt., which emerged as the winning bidder for Air India at Rs 18,000 crore, will have to shell out a lot more to run the carrier.

“Right from day one, Tatas will have to bear Air India’s losses,” Tuhin Kanta Pandey, secretary at Department of Investment and Public Asset Management, told reporters on Friday after announcing the winning bidder for the airline.

Pandey said Tatas can’t resize the airline’s employees in the first year, voluntary retirement scheme for workers from second year must ensure business continuity and there will be costs of repair and refurbishment of aircraft, among others.

“They will have to do 100 things to stabilise the airline and will have to put in a lot of money,” Pandey said, adding that only then they’ll be able to turn the ailing carrier around.

“It's like 15 years of muck,” he said. “Practically we have saved the aviation industry with the divestment.”

There’s an attached liability of Rs 9,185 crore on the 42 leased aircraft, Pandey said, adding many among Air India’s 99 owned planes are grounded.

Tata Sons will get 100% shares of Air India along with its shareholding in low-cost carrier Air India Express and its shareholding in ground and cargo handling business AI-SATS. It will also have to bear a daily loss of Rs 20 crore, which would amount to around Rs 7,300 crore annually.

Tata Sons, according to the deal, will take over Rs 15,300 crore of the airline’s Rs 61,652-crore debt.

The department’s next focus, Pandey said, would be to clear the special vehicle purpose, Air India Asset Holding Ltd., which will hold the remaining liability of Rs 42,652 crore and Air India's non-core assets, such as land and buildings , worth Rs 14,718 crore.

“It’s a very big task of clearing up AIAHL liabilities and dispose of assets,” he said.