Mumbai: Tata Sons will find it difficult to turn around Air India, even though there are synergies between group companies and the Indian airline.
“Whoever acquires Air India will need to put in tens of thousands of crores of capital to clean up the balance sheet; pay off liabilities that come with the airline; and to fix, grow, and bring the airline to a point where it can be a meaningful and an effective global competitor,” Sanjiv Kapoor, former chief strategy and commercial officer, Vistara and former COO, Spicejet told BusinessLine.
Shakti Lumba, former executive director, Alliance Air, Vice-President of ICPA and V-P, Operations, IndiGo said the Tata group will be under greater financial stress. “ I am no finance expert, but it is simple math. The Tata Group had a net debt of ₹1.39 lakh crore in 2019 and only TCS was making money, while the rest were all losing money. They will be taking on ₹1.25-lakh crore liability of Air India, ” Lumba said..
However, Koushik Jagathalaprathaban, Partner, AT-TV said that the Tatas are never in a hurry to generate profits; plus, the group has deep pockets. “The Tata group is a patient capitalist. It does not expect immediate profits. It gives the time for the companies to brew, make its space in the industry and generate profits.”
According to Lumba, there are other challenges including high flight time costs, high tail-to-employee ratio, and employee and equipment productivity is low. There could also be gaps in work culture between the current Air India staff and Tata group.
Air India has a huge employee base and unions, too. The company provides a lot of benefits to its employees even post retirement, including pension, discounts on tickets among others. In addition, being a government airline, it has been providing benefits to government employees as well, along with tickets on credit. Managing all that will be a challenge, said experts.
“But by far, their greatest challenge will be rewriting all policies which were drafted decades ago,” Lumba explained.
Many believe that the Tatas’ decision is based on the emotional connect with the airline that was started by JRD Tata.
17/12/20 Forum Gandhi/Business Line
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