The purchase of the loss-making national carrier is a triumph of Prime Minister Narendra Modi’s efforts to drive market-oriented transformation.
The sale boosts Prime Minister Narendra Modi’s efforts to push for market-oriented changes and revitalize the economy by selling stake in debt-ridden state-run companies.
“This is the first privatization in over fifteen years,” Arvind Panagariya, former top economist of the Modi government, tweeted on Friday. “Hopefully this paves the way for more.”
According to officials, the Indian government has tried for years to find a buyer for Air India, which is saddled with about $8.2 billion in debt and costs the government about $3 million a day to run.
In 2018, the government could not find any buyer when it tried to sell 76% stake. Then last year, New Delhi sweetened the deal by offering its entire stake in Air India and reducing the amount of debt the new owner had to pay.
According to Tuhin Kanta Pandey, top official in the Department of Investment and Public Asset Management, Tata has agreed to take on a debt of about $2 billion and pay back about $400 million in cash. The government will bear the rest of the loan.
Airline industry experts say the Indian market is poised to expand after the easing of Covid-19 travel restrictions. Rating company ICRA’s sector head and vice president Supriyo Banerjee said airlines have seen a 10 per cent annual growth in passenger traffic over the past decade..
Mr. Banerjee said rising incomes, better airport infrastructure and increased tourist demand have propelled the airline sector.
Tata operates two airlines in India: the full-service Vistara, in a venture with Singapore Airlines.handjob
and budget carrier AirAsia India in partnership with Malaysia’s AirAsia Group.
The deal would return the airline to the Tata Group, nearly 90 years after it was established as Tata Airlines in 1932. The government nationalized the airline in 1953, and it suffered heavy losses in 2007 after a bumpy merger with another state-run carrier, Indian Airlines.
Tata Sons emeritus chairman Ratan Tata on Friday nodded to the airline’s historic comeback by tweeting a picture of the company’s former chairman JRD Tata, standing on a tarmac in front of an Air India aircraft and a row of flight attendants. in colorful sarees
He said the Tata family had big plans to restore Air India as “one of the most prestigious airlines in the world”.
“Welcome back, Air India!” He tweeted.