Wednesday, January 19, 2022

AI may have to pay royalty to Tata Sons for brand name use

Air India, which will be housed under Tata Sons' subsidiary Talace following the handover by the government at the end of this month, may have to pay royalty to Tata Sons for using the Tata brand name. The final handover formalities of Air India from the government to the Tata group includes putting in place arrangements for the payment of brand royalty charges to Tata Sons as owners of the acquired airline entity.

"A newly formed board committee for Air India is currently discussing the possibilities of using the Tata brand name for Air India, and if they do, Air India will have to pay royalty." Employees of Air India have to sign the Tata Code of Conduct once it comes into the Tata fold. The usage of the Tata branding is therefore inevitable," according to an official familar with the matter.

"Vistara and Air Asia haven't paid royalty to Tata Sons because they do not use the Tata branding," the official added.

Under the Tata Brand Equity and Business Promotion (TBEBP) scheme, group companies using the Tata brand have to pay 0.25% of annual revenue or five per cent of the profit before tax. The brand Air India, which will be untouched for five years, may include a tagline of a Tata Enterprise or Tata Airline. "It does not matter if an entity using the Tata brand name is loss-making, the royalty payment is charged on the revenues generated, not on profits made", a Tata group official said.

The transfer of Air India to the Tata Group has been delayed to January 31 due to procedural delays in finalisation of the company's balance sheet and some approvals from international regulators.

An estimated eight brand logos would be transferable to the Tatas which they have to retain for a period of five years. Says Harish Bijoor business and brand strategy specialist, " This is a quirky and convoluted twist for sure. Out here there is a brand that belonged to the Tatas, went to the GoI. Returned to the Tatas this year. The brand identity remains Air India with a label of new ownership of the Tatas slapped back onto it. And then of course there is the issue of royalty the brand needs to pay!" 

19/01/22 Kala Vijayaraghavan/Economic Times

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