People walk past an Air India logo outside its building in Mumbai in January 2020. Photo: AFP / Himanshu Bhatt / NurPhoto

State-owned airline Air India is likely to be handed over to salt-to-software conglomerate Tata Group by the end of this week, according to multiple media reports.

Some publications have reported that the tentative date for this historic transfer will be January 27. According to the share purchase agreement signed in October last year, the long-stop date was January 23. It was a timeframe during which the buyer and seller agree to fulfill all conditions required to complete a transaction.

The government had aimed to finish the transfer by December, but there were delays in finalizing the balance sheet of the airline and procuring the necessary approvals from global regulators.

An internal message sent to AI employees said the closing balance sheet needs to be submitted by January 24, which will be sent to the Tata Sons for review. Air India officials involved in finalizing the deal have been told to work even on Republic Day (January 26), a national holiday in India, the Hindustan Times reported.

After a competitive bidding process, on October 8 last year the government sold Air India to Talace Private Limited – a subsidiary of the Tata Group’s holding company – for 180 billion rupees (US$2.41 billion).

The government had set a reserve price for the loss-making airline at 129 billion rupees, and Talace beat the other offer of 151 billion rupees by a consortium led by Ajay Singh, the promoter of budget airline SpiceJet.

According to the agreement, of the 180 billion rupees, 153 billion rupees will be used to service Air India’s long-standing debts and the remaining 27 billion rupees will be paid to Air India Assets Holding Limited, a special purpose vehicle formed by the government.

The ailing airline has a total debt of 615 billion rupees.

Talace will get 100% equity shares in Air India and its budget carrier subsidiary AI Express, along with the government’s 50% stake in ground-handling company AISATS. The other 50% is held by Singapore-based SATS, the chief ground-handling and in-flight catering service provider at Singapore’s Changi Airport.

Following that, on October 11, a Letter of Intent was issued to the Tata group confirming the Indian government’s willingness to sell its stake in the airline and on October 25, the federal government signed the share purchase agreement for this deal.

In December last year, the competition watchdog – the Competition Commission of India – gave its approval of the deal. The other major approvals required were from airlines watchdog the Directorate General of Civil Aviation, lessor lenders and vendors.

The 90-year-old airline was initially set up by the Tata Group, when India was under British rule. India attained its freedom in 1947 and in 1953, the Indian government led by Jawaharlal Nehru nationalized the airline. And now the airline will once again return to the Tata Group.

The Tata Group has not finalized its management strategy for Air India. The conglomerate is a joint venture player in two other airlines – budget carrier AirAsia India and full-service airline Vistara.

According to the terms of the sale, Tata Group will have to retain all Air India employees for at least one year, after which it can offer a voluntary retirement service. The government has also assured that gratuity, pension funds and post-retirement medical benefits of existing and past employees would be honored by the new owner.

For the Narendra Modi government, it is a major success in the disinvestment of ailing state-owned enterprises. It had begun the process to sell Air India in 2018 and had to sweeten the deal many times over to be acceptable to buyers.