Tata regains Air India control in privatisation victory for Modi

By Aditi Shah

NEW DELHI, Jan 27 (Reuters) - India's Tata Group took control of state-run carrier Air India on Thursday, regaining ownership of the airline after nearly 70 years and marking a victory for Prime Minister Narendra Modi's privatisation push.

The auto-to-steel conglomerate in October won the bid Link to take over Air India in a $2.4 billion equity and debt deal, ending years of struggle to privatise the financially troubled airline that was kept afloat using taxpayer funds.

The Air India strategic disinvestment transaction has been completed today with the government receiving about $360 million in equity and Tata taking over more than $2 billion of Air India's debt, the finance ministry said in a statement.

"We are excited to have Air India back in the Tata Group and are committed to making this a world-class airline," Tata Sons chairman N Chandrasekaran said in a statement.

The deal includes three entities - full-service carrier Air India, its low-cost arm Air India Express and AI SATS, which provides ground-handling and cargo services.

Tata Group already operates two other airlines - Vistara, in a joint venture with Singapore Airlines SIAL.SI , and AirAsia India, which it operates in partnership with AirAsia Group AIRA.KL . But both have yet to make money.

The purchase of debt-ridden Air India will give Tata immediate access to valuable flying rights and landing slots, but industry executives say it will be an uphill battle Link to turnaround the carrier's financials and service levels.

The airline, with its maharajah mascot, was once renowned for its lavishly decorated planes and stellar service championed by founder JRD Tata. Air India was founded in 1932 and nationalised in 1953.

Since the mid-2000s, however, Air India's reputation has declined as financial troubles mounted. It flew widebody planes with business class seats in poor repair and grounded some of its new Boeing BA.N 787 Dreamliners to use for spare parts. Customers faced many delays and staff and suppliers were not always paid on time.

Air India's biggest competitive advantage is its ability to fly non-stop to destinations such as the United States and Europe, where it enjoys lucrative landing rights and where foreign carriers such as Emirates can only compete with stopover options.
Reporting by Aditi Shah Editing by Sanjeev Miglani and David Goodman

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