Even as the date for receiving queries from bidders is moving closer, the Tata Group appears to be inching forward to bid for Air India by actively exploring a structure for “Air India” acquisition with “Singapore Airlines|, its joint venture partner in “Vistara”.
The queries on the sale process will be received till 11 February, the government will answer the queries by 25 February, while the respective expressions of interest will have to be submitted by 17 March. The qualified bidders will be informed by 31 March 2020.
The minimum net worth criterion to bid for Air India, reeling under a debt of Rs 80,000 crore, has been set at Rs.3,500 crore, but the government has allowed domestic carriers with negative net worth to put in bids on the strength of their consortium partners if the local airline’s share in the consortium is limited to 51%.
Tatas have started working on the structure for such an acquisition, including a merger of “AirAsia India (headquartered in Kochi, with 49 per cent stake of Malaysian entrepreneur Tony Fernandes and 51 per cent of Tatas) and “Air India Express( a 100% subsidiary of AI).
The Tata Group, has reportedly approached Fernandes for his approval to acquire “Air India Express”, since the shareholders’ agreement stipulates that Tatas can’t invest more than 10% in another budget airline without unless he is willing to waive the covenant.
While “Air India Express” flies to over 33 destinations with over 649 services a week to the Gulf countries, “AirAsia India” has been waiting to get government nod to fly overseas.
On the other hand, the combination of “Air India” and “Vistara”, is expected to help the Tatas to monopolise the full-service space in India. With the two-pronged strategy to acquire “Air India”, the Tatas aims to up its ante in the aviation business that it had pioneered in the country. In “Vistara”, Tata Sons holds 51% stakes while Singapore Airlines owns 49% stake and the company is registered as TATA SIA Airlines Limited.
As per the bid document, Air India has an aircraft fleet of 121 aircraft (excluding 4 B747-400 aircraft) as on November 2019, mainly comprising Airbus and Boeing aircraft, out of which 65 are owned or on finance lease. “ Air India Express” has a total of 25 Boeing 737-800 NG aircraft of which 10 are owned and 7 on finance lease. The remaining 8 are on dry lease.
However Fernandes, former director of “AirAsia R. Venkataramanan, Deputy CEO of AirAsia Tharumalingam Kanagalingam and other top executives are being investigated by the Enforcement Directorate about allegations of money laundering. While Fernandes was summoned last month and again on Wednesday, Venkataramanan has been asked to appear before ED on February 10. Venkataraman had stepped down as managing trustee of the Tata Trusts in March last year and later exited “AirAsia India”.
In addition, the CBI, is also investigating Fernandes and others on charges of criminal conspiracy under the Prevention of Corruption Act, under the allegation that a conspiracy was hatched to get the erstwhile 5/20 rule amended during 2009-14, to get the requirement to operate for minimum 5 years to become eligible to fly overseas, scrapped.
Besides Malaysia’s Anti-Corruption Commission, working alongside Britain’s Serious Fraud Office (SFO), has been probing the case of bribery in the airline. The SFO had found that individuals associated with the plane making, had paid to secure deals with “AirAsia” and its long-haul unit “AirAsia X”. Two other agencies in Malaysia, including the aviation agency and the Security Commission, are investigating the matter.
