Legacy issues may keep Tata group away from investing in Air India

The Tata group is not keen to bid for Air India due to legacy issues with the airline, which may create legal hurdles in the acquisition later, said sources close to the development.

Instead, the group will grow and invest in its two joint venture airlines, Vistara and AirAsia India, with its fleet size going up to 200 aircraft in the next few years.

The government wants to fast-track the divestment of the national carrier and may relax bidding norms after failing to attract any suitor last year. A revised expression of interest document is expected in July.

Last year, the Tata group had explored investing in Jet Airways but had shelved the plans with sources citing legacy issues and the need for a forensic audit. The grounding of Jet Airways in April has freed up slots at airports and the group is keen to capitalise on the opportunity.

Tata Sons, the group’s holding company, has cleared fund allocation for Vistara and AirAsia, which will allow them to increase their fleet size and grow market share.

“The capital allocation for Vistara is already cleared, and the idea is to gain market share steadily,” a source said, adding: “With both airlines doing well, the group doesn’t need a third.”

The high debt of AI, at about Rs 50,000 crore, was a major concern for the group while bidding in the first round.

Since then, the government has transferred around Rs 30,000 crore of debt to an asset-holding company, which will sell real estate and other assets to raise funds.

Currently, Vistara and AirAsia India have 29 and 21 planes, respectively, and the plan is for both airlines to have around 40 planes each by the end of this fiscal year. Both airlines have a cumulative market share of 11 per cent while market leader IndiGo controls almost 49 per cent of the Indian market. Air India’s market share is around 13.5 per cent.