Tata unlikely to bid for AI as ‘terms too onerous’
NEW DELHI/MUMBAI — India’s steel-to-autos conglomerate Tata Group, widely seen as a potential suitor for Air India (AI), is unlikely to consider a bid for the state-run carrier as the government’s terms are just too onerous, two sources familiar with the matter said.
India, keen to sell the loss-making, debt-ridden airline, finalised plans in late March to divest a 76 per cent stake and offload about $5.1 billion of its debt.
But the government has stipulated the winning bidder cannot merge the airline with existing businesses as long as the government holds a stake. The winner may also be required to list Air India and would need to abide by conditions designed to safeguard employee interests, restricting its ability to cut staff.
Since the terms were disclosed, no company has come forward to say it is interested or to reaffirm previous interest, while Jet Airways and rival IndiGo, have already publicly opted out of the race.
A lack of interest from Tata is likely to put pressure on the government to rethink its terms or even the structure of the sale.
“The deal structure needs serious corrections,” said Amber Dubey, partner and India head of aerospace and defence at consultancy KPMG.
He said the main challenges are the debt, the government’s residual 24 per cent stake and the workforce, adding that the government should consult with potential bidders and simplify the terms. Tata Group, which already owns stakes in two airline jointventures in India, does not see “how a deal would be workable” under the current terms, said one of the sources, who asked not to be identified due to the sensitivity of the matter.
Tata Sons, the holding company for the conglomerate Tata Group, declined to comment.
In addition to the 76 per cent stake, the government is also selling all of Air India’s low-cost arm - Air India Express, and 50 per cent in the airline’s baggage handling and airport services unit.
The buyer would have management control and gain access to more than 2,500 international slots and over 3,700 domestic slots. But it would also need to take on Air India’s 27,000 employees, 40 per cent of which are permanent staff.