Air India privatisation: Government retains iconic Air India buildings, land bank

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Life has come full circle to Air India, with the government selling the national airline to the Tatas. The privatisation of the debt-ridden airline has been on the anvil some time now. Tatas will pay Rs 18,000 crore to the government stake in Air India, and the airline’s stake in  Air India Express Ltd (AIXL) and Air India SATS Airport Services Pvt Ltd (AISATS). The deal, however, excludes Air India’s iconic buildings and land bank.

Of the Rs 18,000 crore,  Rs 2,700 crore will be paid in cash and the buyer will absorb Rs 15,300 crore debt of Air India. The remaining Rs 46,262 crore will be taken over by the government’s Air India Asset Holding Ltd (AIAHL).

The airline’s India’s non-core assets comprising land and building, valued at Rs 14,718 crore, will be transferred to AIAHL.

Employees of Air India to be retained for a year

The Hindu Business Line reported that the government will give three buildings of Air India to the Tatas for two years and the apartments for six months. These buildings are likely to include the iconic Nariman Point (Mumbai) building and headquarters building and the building at Safdarjung (Delhi).

What Tatas get in the deal is the full ownership of Air India and Air India Express. It will also own 50% in Air India SATS, the ground-handling arm. Iconic brands Air India, Indian Airlines, the Maharajah will also go the Tatas. Also, 141 aircraft and over 7,000 domestic and international slots are part of the deal.

Tata group will have to retain all Air India employees for one year at least. The group is free to offer voluntary retirement schemes after one year of the acquisition.

Quoting Secretary of Department of Investment and Public Asset Management (Dipam), Tuhin Kanta Pandey, the Mint reported the government will have to provide for provident fund, gratuity dues, and the post-retirement medical benefit for staff.

Air India has an employee strength of 12,085 employees, including 8,084 permanent and 4,001 contractual staff. Air India Express has 1,434 employees.

According to the Mint report, Air India’s fleet comprises 121 aircraft, mainly Airbus and Boeing aircraft including A319, A320, A321, B777 and B787.  Air India Express has 25 Boeing 737-800 NG planes.

As many as 65 aircraft are either owned by the airline or on financial lease or bridge loans.

The Business Standard reported that Tata group will also have to pay around Rs 9,185 crore on account of capitalised lease obligations of 42 leased aircraft, primarily the Boeing 787 Dreamliner aircraft.