Tata to purchase Air India: The start of a revolution in Indian aviation

The deed has finally been done. What was in the making for a long time now, what people of India were hoping for, what India’s pride depended on – the Modi government has acted on it. Air India – the country’s ‘Maharaja’ as it is referred to, has been disinvested in. A money-guzzling, debt-ridden PSU mired with bureaucratic lethargy has been privatised, and this marks the beginning of what could be a revolution for Indian aviation. On September 15, Tata Sons and SpiceJet Chairman Ajay Singh officially submitted their final bids to buy India’s flag carrier Air India. Now, the wait is finally over. Tata Sons has won the bid for purchasing the national carrier – Air India.

Besides 100 per cent stake in the national airline, the buyer will get 100 per cent of AI Express – a low-cost airline – and 50 percent of Air India SATS Airport Services. Life has actually come to a full circle for Air India. It was the socialist megalomaniac Jawaharlal Nehru who snatched Air India, then known as Tata Airlines from Jehangir Ratanji Dadabhoy Tata. JRD Tata was not even informed about his airline being nationalised. Now, Tata Sons have finally got ownership over their father’s legacy, and they will make full use of the opportunity to turn the carrier’s fortunes around and make it a major global airline.

Air India – Saddled with Debt

According to a Reuters report, the government was losing ₹200 million every day to run Air India. Air India, so far, has accumulated a debt of ₹700 billion or $9.53 billion. PM Modi intended to sell the government’s entire interest in Air India since voted to power. The loss-making airline has been kept afloat by a bailout since 2012. The debt-ridden carrier employs more than 10,000 employees. The cumulative loss of the company is 70,000 crore rupees and the loss for the fiscal year 2019 was 7,600 crore rupees.

Air India had a bloated head count of 214 employees per plane, while Singapore airlines has 160 and British Airways has 178. Air India, with time, had imbibed socialism as the way forward. It offered up to 24 free tickets each year to each of their estimated 24000 employees and even their extended families could use it.

Also read: “Air India will have to close if not privatized”, finally the government takes a bold call on loss making Airline

In 2007, the government of India merged Indian Airlines – the domestic carrier – and Air India. The scale-based economics behind the merger failed miserably. Ever since the two entities merged in 2007, Air India suffered heavy losses every year. In April 2012, the UPA-II government announced a bailout package of over ₹ 30,000 crore for a 10-year period to keep the national carrier afloat.

Air India’s Potential to Flourish

Air India is India’s major airliner which connects almost all parts of the world to our country. It has a vast fleet of jets. As of August 2021, Air India operates no less than 127 aircrafts, which include fleets of Boeing 777-300ER, Boeing 777-200LR, Boeing 747-400 and Airbus A320neo among others. Air India has a vast network whose potential, sadly, remains untapped. However, now that Tata Sons are back in control of the airline, things are about to take a much more positive turn for Air India.

Read more: The disinvestment of Air India is an idea whose time had come almost a decade back

A fundamental problem which plagued Air India for decades was its non-profit oriented business approach. Being a “national carrier”, which received bailouts from the Indian government time and again, Air India never really took things seriously, which is why its debt situation only turned from bad to worse. With the Modi government in place, a consensus was reached upon that bailout packages for Air India are simply unfeasible, not to mention, ineffectual. The airline would not change its outlook to business, and things would ultimately remain the same. However, now that the airline has been privatised, Air India does not have the government to bank on. It must perform, or perish.

Difficulties like out-of-date aircraft, inability to pay its employees and lack of adequate service to passengers added to its Air India’s deterioration. Furthermore, the rise of private airlines like SpiceJet, Air Asia and IndiGo have only added to its woes, since these private players started offering competitive airfares and better services than Air India.

Tatas – The Rightful Heirs of Air India

If there is one corporate group which can turn around the fortunes of Air India, it is the Tata Sons. Air India was snatched away from JRD Tata, and now, Ratan Tata is bringing the airline back to the empire. There is a sense of emotional value which the Tatas attach with Air India. And then, the Tatas have the potential of making Air India the country’s global airline offering, which not just Indians fly on, but people from across countries use for air travel as well.

Tata Sons is also keen to bring low-fare airline AirAsia India under the Air India umbrella after its bid for the state-owned carrier gets processed. According to the Economic Times, at a later stage, full-service carrier Vistara is also likely to be part of a combined entity if Singapore Airlines (SIA), its 49% shareholder, comes on board. So, the Tatas are effectively planning to construct an Indian airline behemoth out of Air India. Needless to say, the group has a plan, and once it gets effectuated, there is a high chance of Air India becoming a shining success story for the country which would go on to propel the rise of aviation in India.

India’s aviation sector is all set for a revolution. The Tatas must implement their plan for Air India with utmost care, as the future of Indian aviation has now come to depend on them in a big way.