The government signed the share purchase agreement (SPA) with Tata Group for Air India’s divestment, sticking to the timelines that aim at transferring the airline to its new owner by the end of this fiscal. The £1.8 billion deal, which will require Tatas paying £270 million upfront and taking over a debt of £1.53 billion, will now enter its most crucial phase of meeting vital “conditions precedent” (CP). The government will retain £4.47 billion of AI’s debt in an SPV which will be paid off gradually by monetising its non-aviation assets like land and buildings.
In the CP phase, clearances will be sought from regulatory agencies, including Competition Commission of India (CCI), Directorate General of Civil Aviation (DGCA), lessors, lenders and other third party vendors. “The tricky part usually is CCI but with Tata Group’s four airlines’ combined domestic or international share being nowhere near 50%, that will not be an issue in this case. Similarly, there are doubts that the substantial ownership and effect control of AI-Tata is with Indians,” say people in the know.
Once CP requirements are met, the closing balance sheet on date of CP completion will be prepared. A transition management will be put in place with representatives from Bombay House. Unless there is difference of views between the outgoing and incoming owners, the Tatas will then pay £270 million consideration and take over control. The new owner currently has Vistara with Boeing 787s, B737s and A320s in its fleet and AirAsia India with A320s. AI and AI Express will soon join the group.