It's back to square one with Air India -- almost after 67 years. It seems that Tata Group will be in the cockpit of Air India once again as the government has reportedly chosen it as the winning bidder. While the deal is yet to be announced, some reports suggest Air India has been valued at Rs 10,000-15,000 crore in addition to the Rs 23,000 crore of debt that will be taken over by Tata Group as part of the sale.
The deal would make Tata Group the second-largest airline operator in the domestic market with 26.7 per cent market share, and behind the market leader IndiGo (57 per cent market share). In the international segment though, Tata Group would emerge as the leader with the lion's market share.
The deal has many upsides for both the Tata Group and Air India. From the Air India point of view, it will finally get into the hands of a large conglomerate (with Rs 7.5 lakh crore of annual revenues) which can efficiently run the airlines -- once the legacy issues get sorted.
The biggest challenge with Air India is that its quality of service has not been up to the mark for several years. "The service standards have deteriorated over the last few decades. There is a lack of consistency of service too, which has disappointed many loyalists. On the passenger front, the Tatas will have to, inter alia, change the perception of Air India in order to turn around the airline," says Vinamra Longani, Head of Operations at Sarin & Co, a law firm. The bigger question is how the existing airlines of the Tata Group - AirAsia India and Vistara - would co-exist with Air India. "It's likely that Air India and Air India Express would not compete with the existing airlines. That part Tatas would have already figured out. Also, if all the airlines merge into a single entity a few years down the line, it's clear that the Air India's brand name would be retained," says an aviation analyst.
The domestic aviation market is highly skewed towards LCC (low-cost carriers). Even though Vistara is a full-service carrier, its back-end is operated like an LCC. With the acquisition of Air India, it remains to be seen if Tatas continue to straddle across LCC and FSC segments in the future.
01/09/21 Manu Kaushik/BusinessToday.in
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