Air India and Tata: Meant to be?
Air India is on the verge of being privatised. Will Tata win over its long-lost lover?
The romance between Air India and Tata Group is a timeless classic.
Ignited by JRD Tata’s love for the aviation sector, the airline took birth in the Tata stable in pre-independent India. Only to be taken away by the government, a few decades later.
JRD was obviously bitter about this takeover. But if there is a heaven and JRD is looking down, he would be smiling at the turn of fate.
The government is now pulling all strings to sell the airlines. And, oh! Guess who is the front-runner in the race?
Of course. The Tata Group. Life comes full circle, no?
The Beginning
Tata Airlines had turned profitable in the very first year of operations. Its efficiency, punctuality, and services were lauded all over the world. The post-independence era promised a world full of opportunities for Tata.
But, all dreams came crashing down when the government nationalised the aviation industry and took over control of Tata Airlines. It was merged with other carriers. What’s more shocking is that this decision was taken before giving the Airlines any chance for negotiation!
JRD’s concerns did not stem from any monetary greed, rather all that he cared about was the success of the airline.
Did the Government of India have any experience in running an airline company? How then was it going to pull off something so technical? Nationalism won’t guarantee the quality of service and profitability, right?
Perhaps it was for those very reasons that JRD agreed to be the chairman for Air India and Indian Airlines, without any remuneration.
He dedicated 50% of his time to the Airlines instead of the 50+ companies of the Tata Group. He breathed the obsession with excellence in the entire organisation. He even cleaned toilets and dirty counters, if the situation demanded. Such was his dedication for almost 25 years in his time as the chairman. He wanted to show the world that even a public-sector company could be profitable.
Good things must come to an end. And so did JRD’s time as a chairman, with a plane crash in 1978. He wasn’t even directly informed about his removal. His feelings in his own words:
“I feel as you would feel if your favourite child was taken away”.
A few years later, he was reinstated as a Board Member. But, the damage was done.
The Beginning of the End
After Air India’s disassociation with Tata’s, the airline continued to run smoothly for some time... Until things started going south.
The aviation industry was liberalised in the 1990s, and paved the way for private players. And Air India started witnessing the rise of competition. In 2001, the first-ever attempt was made to sell 40% equity of the company. Guess who was the front-runner in the bidding process, then?
The Tata Group, in partnership with Singapore Airlines. Given that it’s 2021 and the government is still struggling, you can guess that the deal tanked.
Why, though?
At the very last moment, a bombing at Colombo Airport had led to massive losses for Singapore Airlines. It was also facing losses in other international carriers. Without Singapore Airlines, Tata did not want to bid alone.
Debts started mounting up. The government in 2007, merged Air India with Indian Airlines. In 2009, they even approached Ratan Tata to head the advisory board (Really!)
Aren’t you wondering why the Tata Group did not start its own airline even after liberalisation?
That’s because its application was not acted upon by the government. (No wonders Ratan Tata did not join the advisory board)
However, Tata’s dream to fly in the skies soon came to life in 2014: with AirAsia and Vistara.
But this time around, the Indian skies and the competitor landscape had changed significantly. This is what Ratan Tata said in an interview in 2019:
“…we are not going to see those companies generating profits or cash at least until 2025.”
Tata had to do something drastic to turn its fate around. With its rival, Jet Airways going down, it looked like aviation could indeed be profitable again.
All this while Air India continued draining the taxpayers money as debts rose higher and higher, exceeding Rs.60,000 crores. In 2018, the government tried selling 76% of the equity in the airlines along with a portion of the debt. But it did not receive any bids. Possibly the players sensed the desperation and the deal was not as lucrative.
The only way the government could now get rid of the airlines was by bowing down and making the deal more lucrative for the bidders. In 2020, the government again made the offer to sell it completely and promised not to intervene.
This time Tata Group was interested.
Imagine the scale it could achieve with Air India. Given the scale of the operations, a massive due-diligence process was required. As per the assessment, just for plumbing the holes in Air India, Tata Group will have to shell out $3.5 billion!
The deal could be made more lucrative. This came in the form of tax reliefs, reduced debts and a lot more. And now the final phase of the bidding process has been entered into. Today, 15th September 2021, the final bids will be placed for the company.
Will Air India’s privatisation be a success story? What do you think?
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