Tata Sons — which got the go-ahead to buy Air India after offering $2.4 billion — faces an uphill task to revive a carrier that hasn’t made money since its 2007 merger with domestic operator Indian Airlines.
Sixty-nine years after it was nationalized, Air India returned to its founder, the Tata Group. The airline was formally handed over to the conglomerate today.
Tata– which got the go-ahead to buy Air India after offering $2.4 billion — faces an uphill task to revive a carrier that hasn’t made money since its 2007 merger with domestic operator Indian Airlines. The group already runs two unprofitable joint ventures with Singapore Airlines and AirAsia Group in the country and has faced criticism for not running that business efficiently, even though they contribute a tiny portion to the group’s overall revenue.
Air India’s market share more than halved to less than 10% last year. While Air India’s regional arm, Alliance Air, is not a part of the deal, the group is also gaining control of low-cost, short-haul international carrier Air India Express and an equal stake in a ground handling company with SATS Ltd.
A consortium of lenders led by the State Bank of India (SBI) has agreed to provide loans to the group for the smooth operations of the loss-making airline. The SBI-led consortium has agreed to grant both term loans and working capital loans depending on the airline’s requirements.