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Tuesday, 28 January, 2020, 11 : 30 AM [IST]

Vistara may bid for Air India with 100% on offer

According to a report in The Economic Times, Vistara, the airline majority-owned by the Tata Group, may explore opportunities to bid for Air India, executives close to the matter said, even as industry insiders said they expect the national carrier to finally find a buyer with the government offering to sell 100% stake.   The government too looked confident of getting a buyer this time, after its offer in 2018 to sell a 76% stake got no takers. 

“We are certain … We are very clear we are going to get it done with,” said Hardeep Singh Puri, Aviation Minister.  On the face of it, the 100% divestment offer “does not seem worth rejecting” and therefore makes it as attractive to the Tatas as to other industry players, said an executive.  “There is the emotional goodwill part too, considering that it was part of the Tatas initially (before the government nationalised Air India). It is too early though to make any blanket statement,” said the executive. “We have just received the documents and a lot of matters need detailed consideration in terms of their financial status.”  Vistara, jointly owned by Tata Sons and Singapore Airlines, may consider the opportunity through an alliance with an investor or another airline as it would be a tough task for a single player to handle the acquisition.  Tata Sons declined to comment.  

Acquiring Air India would give Vistara a significant foothold into the national carrier’s network, something it needs for scale. Vistara, which started with a capital of $100 crore, has been slow to expand and accounts for just 6.1% of the domestic market. It started international flights only last year.  Until November last year, Air India and its regional subsidiary, Air India Express, ferried the highest number of international passengers among Indian carriers. In FY19, it carried around 22.1 million passengers. As of end-November 2019, it had a fleet of 121 planes.  
But the government seemed determined to sell the carrier, as it sweetened the offer this time after the failed attempt in 2018. It is offering 100% stake and has reduced the carrier’s debt to about INR 23,286 crore from INR 62,000 crore.  

Pradeep Singh Kharola, Secretary, Aviation, said, “We are pretty hopeful of the divestment process this time.”  The Tata Group had earlier held preliminary discussions to consider investment in the now-grounded Jet Airways. But further talks were scuttled over concerns that Jet’s promoters, the Goyals, would insist on a board seat.  

Mark D Martin, the founder of Martin Consulting and an aviation expert, said that Air India should rightfully go back to the Tatas which is a better aerospace company with aviation in its DNA. “But this is not the right economic climate to sell Air India since it will be a garage sale. None of the investment companies are willing to make any major commitment into India currently in a market where domestic consumption has dropped significantly,” he said.
 
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