Tatas, Air India & The Story Of Buying An Airline During A Pandemic
As the debt-ridden airline finally leaves the hands of the Indian government, we take a look at what lies in the future for Air India.
Air India has been having a difficult time for the past couple of years. The airline has been struggling with debt, and the Indian government was trying its best to sell the company to raise funds. However, the government’s efforts have been in vain for over two decades. After three attempts, Air India has finally found itself a buyer.
On Friday, the Centre announced that Tata Sons’ subsidiary Talace Pvt. Ltd. has emerged as the winning bidder for the 100% stake in the airline, with a winning bid of 18,000 crore. Talace will be taking over ₹15,300 crore of Air India’s more than ₹60,000 crore of accumulated debt and offer an additional ₹2,700 crore in cash for the Centre’s equity stake.
Going Back To The Tatas
In 1932, Jehangir Ratanji Dadabhoy (JRD) Tata founded Tata Airlines, and in 1946, the aviation division of Tata Sons was listed as Air India. Then, in 1948, Air India International was launched with flights to Europe. The international service was among the first public-private partnerships in India, with the government owning 46%, the Tatas holding 25% and the public keeping the rest.
In 1953, Air India was nationalised, and for the next over four decades, the airline remained under the control of the Indian government. The airline controlled the majority of the domestic airspace. When the aviation sector was opened to the private players in 1994–95, Air India slowly began losing its market share. Ever since the NDA government came into power in 2014, they have been putting weight behind privatisation of CPSEs (Central Public Sector Enterprises). After trying to get a bidder for Air India since 2017, the airline has finally found a buyer in late-2021 and has returned to its original owner — The Tatas.
Duration & Brand: The Tata Group will be making payments to the government, and the Centre is aiming to hand over the airline in four months, but it could take until the end of this fiscal year for the transfer to be completed. Also, the brand Air India is here to stay, as it is well known across the globe. But, not for long though. They have to retain the brand name for five years, and after that, they can sell it, but not to a foreign entity.
For Employees: According to ET, free trips for Air India employees and family members will be limited. The health insurance of retired employees will be transferred either to the central government health scheme or to an insurance company. Also, employees might have to make some payment for insurance coverage.
Advisory Team: Sources told ET that the Tata Sons is establishing a short-term advisory team before its takeover of Air India. This team will consist of key Tata Group executives, including board members, global aviation specialists, and some top Air India officials. Sources added that the board will meet on Tuesday to discuss the strategy for Air India.
It is also expected that the board will discuss the funding plans for the group’s airline businesses, including Air India. Sources said that the Tata Group is eager to hit the ground running with Air India and the advisory team will guide its integration into the fold, which includes the takeover and handover formalities.
Might Be A Rough Road In The Future
Air India was clocking a loss of ₹20 crore a day. So, this disinvestment is a huge relief for the government, but for Tata Group, it might be a challenging journey to get the airline off the ground. The new owners of the airline should take many drastic measures so that Air India can become profitable again. The Tatas should implement measures to lower the company’s losses and boost revenues as quick as possible.
The group should identify avenues in which they can save cost, including managing employees efficiently. The other important thing is that Air India should find ways to get its customers back. These days, people are used to travelling in airlines such as Indigo, which offer better services at a much affordable price. So, Air India should have to focus on changing its interiors and upgrading its looks so that it can charge premium prices.
In The End
The airline industry is a capital-intensive industry, and the pandemic made it difficult for them to function properly. People around the world are avoiding travelling, and industry bodies like the International Air Transport Association (IATA), saying that international air travel will be just 22% in 2021 as compared to the 2019 levels. With the pandemic continuing to affect most of the sectors, getting into an airline business at this moment will be a challenge for the Tatas. We have to wait and see how they revamp the company and how they get everything back on track to make Air India the Maharaja of the skies again.