Saturday, October 09, 2021

Air India's glory days offer an insight into how it can be turned around

The Tata Group’s takeover of Air India signifies life coming full circle for India’s national carrier. It’s almost 89 years since the precursor to the carrier, Tata Airlines, was set up and about two decades after the September 11 attacks put paid to the first attempt at offloading what had become a national company.

For chairman emeritus Ratan Tata, it marks the return of a family heirloom that was established by the illustrious JRD Tata and nationalised in 1953. It will also give the conglomerate’s airline business a chunk of the market, thousands of trained professional employees, prized slots and aircraft for international expansion.

But the road ahead is fraught with challenges. The Tata Group is taking over a company with total losses of Rs 83,916 crore as of end FY21. Air India’s latest annual loss is a record Rs 10,000 crore while its debt is at Rs 61,562 crore. The Tatas are taking on Rs 15,300 crore of debt.

Having started life as a Tata venture, Air India’s history, at least the first half, is that of Indian civil aviation.

JRD Tata was born in 1904, seven months after Wilbur and Orville Wright, two bicycle mechanics who tested the first flying machine. In 1929, Tata became the first qualified pilot from India.

JRD and his friend Nevill Vintcent, a heavyweight boxer and fighter pilot in the British Royal Air Force, joined hands to form Tata Airlines with an initial capital of Rs 2 lakh, according to RM Lala’s biography of Tata, Beyond The Last Blue Mountain.

It took months of convincing then chairman Dorabji Tata. On October 15, 1932, Tata Airlines operated its first flight, ferrying mail from Karachi to Mumbai. The first aircraft, a De Havilland Puss Moth, cost Rs 20,000. The plane had one passenger seat. Rich businessmen chartered it for Rs 50. In its first year of operations, Tata Airlines flew 14 passengers and mail, making a profit of Rs 10,000.

After independence Tata planned to fly overseas — Air India International was formed with the government holding 49%. On June 8, 1948, the airline operated its first international flight from Mumbai to London. The aircraft was a 40-seater Lockheed Constellation called the Malabar Princess. Two years later, the Malabar Princess crashed in the Mont Blanc area in France.

Despite that, the airline’s repute grew over the next few years. “It was for years and years, one of the best airlines in the world,” said Michael Mascarenhas, Air India’s marketing frontman for close to four decades and its managing director in 2001. “Only 10 or 12 aircraft, superb inflight services, very good onground service and reservation service. At the same time, sparkling advertising different from everybody else.”

The man responsible for that was Bobby Kooka, who joined the airline in 1938. He and Jal Cawasji created the Air India Maharaja.

Under JRD, the airline acquired art to adorn its offices — the paintings totalled 8,000 at last count, according to Uttara Parikh, the last word on brand Air India for over three decades. Air India was nationalised by Jawaharlal Nehru government in 1953, despite resistance from JRD Tata. Two airlines were formed — Indian Airlines and Air India, with JRD as chairman of the latter. “And now the time has come to say goodbye,” he wrote to staff at the time. “As we turn the last page and put awaythe book, regret or bitterness has no place in our hearts.

Instead, we may find content in the thought that what we did was worth doing, that we set our standards high and would not lower them, that we never need part with our memories.”

The government then valued the airline at Rs 2.8 crore, using asset-minus-depreciation math. In 1960, Air India got its first jet, the Boeing 707 and, in 1971, its first 747. Tata was removed as chairman in 1978 by then PM Morarji Desai.

Both national carriers continued to soar, with Air India clocking a record profit of Rs 333 crore in 1991-92 under chairman Yogi Deveshwar, on loan from ITC, its former director finance S Venkat told ET.

Cash reserves were at Rs 2,000 crore and there was no working capital debt, he added. “Banks used to make a beeline outside the Nariman Point office with interest rates, as high as 20%,” he said.

Trouble started in the mid-90s, with leasing contracts that were costly and controversial, such as the one with Netherlands-based CaribJet that was probed by the CBI. The Atal Bihari Vajpayee government made the first attempt to privatise Air India. It turned into a two-horse race, with bids submitted by Tata Group in conjunction with Singapore Airlines and the Hinduja Group. But there was dissent within the government, primarily from the aviation ministry headed by Sharad Yadav, said senior executives from the time. The September 11 attacks ended that sale effort.

Thereafter, profits started plunging. Competition stiffened. Fuel prices rose and the rupee depreciated. An order of 111 planes at $11 billion in 2005 and 2006 was too late and too expensive, as alleged by the CAG later. The merger of the two state-run carriers in 2007 was the most unwieldy corporate action in their shared history. Mascarenhas called it the “death knell” of the two airlines. Former CMD Ashwani Lohani called it an attempt to mix oil and water.

In 2018, the government tried to sell 76% of Air India, unsuccessfully. In 2020 it tried again, absolving the bidder of Air India’s dues to airports and vendors, costly real estate and working capital debt raised to fund losses. Those seeking to acquire it were allowed to bid on enterprise value — 85% of amount would go to retire debt and the rest to the government.

09/10/21 Anirban Chowdhury/Economic Times

To Read the News in full at Source, Click the Headline

0 comments:

Post a Comment