Mumbai: After a five-year wait, the government has finally managed to divest its hugely loss-making enterprise Air India, with the diversified conglomerate Tata Group making the winning bid. The Tatas made the bid at an enterprise value of Rs 18,000 crore. Of that, Rs 15,300 crore is the debt that’s being acquired while the remaining Rs 2,700 crore will be cash paid to the government. The bid was nearly 40 per cent higher than the reserve price that the government had pegged for the airline and nearly 20 per cent higher than what was bid by Spicejet promoter Ajay Singh.
With the arrival of Air India into their fold, the formalities for which are expected to be completed by December, the Tata Group, which has interests ranging from IT, consumer goods, steel to agri products, would be operating three different airlines--Vistara, which it operates through a tie-up with Singapore Airlines, AirAsia India, a budget airline in which it holds a stake along with the Malaysian carrier, and now Air India. Originally founded in 1930 by J.R.D. Tata, who later became chairman of Tata Sons from 1938 to 1988, the Tatas lost control of the airline after it was nationalised in June 1953. JRD’s business acumen in making the airline a favourite among fliers was matched only by his love for flying. He was the first Indian to pilot a plane from India to England in 1930 and that too devoid of any equipment modern flying machines come with. He was also the first to launch a cargo flight between Karachi and Bombay under Tata Aviation Service in 1932, and the commercial airline Tata Airlines the very next year. He had the audacious dream to place India on the international aviation map, a dream that fructified with the formation of Air India International on March 8, 1948, with its Bombay-London service inaugurated on June 8 that year.
The winning bid for Air India comes at a time when most economies have opened up after a debilitating pandemic, raising hopes for a revival of the airline business across the world. In India, the airline business has gone through one of its toughest phases ever. According to official data, Indian airlines and airports registered losses worth Rs 22,400 crore in 2020-21 as planes were grounded following curtailment of traffic during the lockdown. The pandemic, coupled with high aviation turbine fuel costs, bled most Indian carriers. The accumulated losses of Air India, which had been flying into losses ever since its merger with Indian Airlines in 2007-08, stood at Rs 70,820 crore as on March 31, 2020. Its debt stood at Rs 61,562 crore on August 31. Airlines under the Tata fold have not been faring well either. AirAsia India’s losses nearly doubled to Rs 1,533 crore on a year-on-year basis in 2020-21, while those of Vistara narrowed down to Rs 1,612 crore in the same period, as per media reports.
The currently highly competitive Indian aviation market is vastly different from the one in the 1950s, but the opportunities are big too, as the country emerges from the pandemic. According to credit ratings agency Icra, domestic air passenger traffic continued on the growth trajectory in August with volumes growing up to 31 per cent to 6.6 million over the previous month, helped by higher capacity deployment and a downward trend in the pandemic. How Tata re-moulds Air India, which had lost substantial market share to private players like IndiGo Airlines and the erstwhile Jet Airways in the past decade, will be keenly watched. Regaining customer trust will be a mammoth task, but not impossible. Air India founder JRD is widely acknowledged to have managed the airline with abundant humanism, perfectionism and an eye for detail. Those who worked closely with JRD say he had the vision to realise two things: First, that air travel would become economical only if it could be made into a mass market, large-scale industry; and second, that Air India would participate effectively in air travel only if it could offer something unique to the air traveller.
10/10/21 MG Arun/India Today
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