The Tata Group is planning to raise around $1.8 billion in working capital loans for Air India as a part of its airline modernisation plan. According to sources, the capital raised will be used for daily operations, aircraft rentals, and refurbishment, among other things.
The Group has ambitious plans for the newly privatized airline with fleet and network development, aircraft refurbishment, digitisation, etc. Air India has accumulated huge losses over the years with a loss of about $1.1bn in FY22 alone.
Tata’s plan is to re-brand Air India as a global airline at par with competitors like Qatar and Emirates and as per experts, the airline needs to invest in newer, technologically advanced aircraft, manpower, and customer experience.
Prior to the buy-out, the legal consultants had advised Tata that the approximate capital needed to revamp the airline would be over $1bn. However, sources have revealed that those expenses have gone up since then. Sources have revealed that Tata might secure a loan for three years at a rate of 7.5 to 8%.
The Tatas had established a new subsidiary to handle the Air India deal, known as Talace, the subsidiary took unsecured loans for over $3 billion from various banks for a period of one year which is approaching renewal at the end of January 2023.
Air India has already started witnessing sweeping operational changes like leasing new planes for international capacity expansion, hiring new talent for pilots and cabin crew posts along with recruiting skilled executives with impressive salaries. Several new international destinations have been opened with a brand-new menu for enhanced customer experience. Interestingly, Air India became the most punctual airline in September 2022 as per the Ministry of Civil Aviation records beating competitors like IndiGo and Go Air.
The airline has launched a five-year roadmap – Vihaan to focus on issues like hardware, finance, technology, etc. All-in-all the Tata’s are leaving no stone unturned to transform the debt-ridden airline into its former state of glory.