Tatas to create a new vertical on-board Air India after SPA

Tata Group will create a new vertical business to take all of its holdings in the airline sector, including Air India, after the share purchase agreement. The Group will retain its interest in Air India Express, AISATS and other verticals.

The Tatas currently hold a majority of the shares in AirAsia India, a low-cost carrier, and Vistara, a full-service airline.

There are several verticals within the Group. One of these verticals – tourism, travel – is where the group has an interest in Indian Hotels Company and Vistara. According to sources, this particular vertical will be split into hotels and airlines.

The Tata Group did not respond to a query regarding the bifurcation. This development is significant because Tata Sons’ Talace was the highest-bidder for the national carrier in the divestment process.

Talace had given an enterprise value estimate of Rs 18,000 crore to the Centre in Air India for its 100 per cent equity shareholding, which also includes Air India Express’ and AISATS’s respective shares.

Talace will keep Air India’s total debt of Rs 15,300 crore at Rs 18,000 crore. As the cash component, the rest will be paid to Centre. The reserve price for the Centre was Rs 12,906 crore.

Based on the results of the bids, the Centre will sign a share purchase agreement with Talace by December-end.

Talace will also be able to acquire more than 140 aircraft and eight logos, in addition to other human resources.

Tata Sons will now have two full-service carriers, Vistara, and Air India, as well as two low-cost airlines, Air India Express, and Air Asia India. There will also be a ground and cargo handling business, AISATS.

Tatas will acquire Air India’s 117 widebody and narrowbody aircraft, as well as 24 Air India Express. Air India owns a significant number of these aircraft. These aircraft will be operated on more than 4,000 domestic routes and over 1,800 international routes.

It will also be able to access Air India’s frequent flyer program, which has over three million members.