Tata Sons Ltd, the holding company of the Tata group, plans to raise as much as USD 4 billion to infuse fresh capital into Air India and refinance costly debt. Tata plans to raise funds through a mix of equity and hybrid debt to refinance a part of Air India’s debt and revamp the airline, which it acquired in October last year at an enterprise value of USD 2.3 billion from the government, a source stated.
“The debt refinancing portion will be relatively easier as lenders within Tata’s existing banking relationships will step in,” the second person said. “The equity component of the transaction may take a bit longer given that globally, the number of private equity funds that invest in airline business are relatively few”.
“The fund infusion is crucial for Air India’s operational efficiency to regain market share,” said the first source. “The fund will be used to bring in new aircraft and offer differentiated customer service initiatives, which will attract passengers,” said the source.
Tata is undertaking an overhaul and expansion of Air India and its unit Air India Express, according to sources, and is about to close orders for around 200 narrow-body A320 Neo jets and widebody aircraft. These are likely to be delivered by the beginning of next fiscal. In July, IndiGo, India’s largest carrier, had a domestic market share of 58.8% as against 56.9% in June. Vistara flew 1.01 million passengers, and Air India flew 810,000 passengers in July.
According to the latest figures, Air India’s domestic market share shrank to 10.2% in January 2021, just after Tata Sons completed the acquisition, from 11.6% in January 2020. In July, Air India’s market share further shrank to 8.4%, while market shares of Vistara and AirAsia India, the Tata group’s other two airlines, stood at 10.4% and 4.6%, respectively, according to data compiled by the Directorate General of Civil Aviation (DGCA). Rivals Go First and SpiceJet’s market share stood at 8.2% and 8%, respectively.
Source: Mint
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