Ready to take-of

The Tata Group finally regained control of debt-ridden Air India, seven decades after the Government had nationalized the carrier, heralding a pivotal moment for the country’s aviation sector and the Government’s role in running businesses.

The handover marked the Narendra Modi Government’s first successful privatization effort, eight years into its stint in power. The Government has struck privatization gold for the first time with Air India and it must use this as a point of take-off.

JRD Tata had originally launched the airline in 1932 as the nation’s first carrier, flying mail between Karachi in the then-undivided, British-ruled India and Bombay. It was nationalized in 1953. The Tatas had attempted to buy a 40 percent stake in the airline at the turn of the century in partnership with Singapore Airlines, but the Southeast Asian firm backed out, and the Tatas lost the opportunity. This time, with the whole of Air India up for sale, the Tatas decided to go on their own; and it worked, for a price tag of Rs 18,000 crore.

The Competition Commission of India cleared the takeover of Air India by the Tatas on December 20. The Tatas beat a consortium led by rival SpiceJet promoter to win the bid for the national carrier The Finance Ministry in a statement said the Air India strategic disinvestment transaction has been completed with the Government receiving the consideration of Rs 2,700 crore from Talace Pvt. Ltd., a wholly-owned subsidiary of Tata Sons. The Government retained debt of Rs 15,300 crore in Air India and Air India Express Ltd (AIXL) while 100% shares of Air India, AIXL, and the national carrier’s 50% shareholding in ground handling company AISATS were transferred to Talace.

For the airline, the homecoming promises to be filled with emotion and challenges. The Tatas already run a full-service airline, Vistara, with Singapore Airlines, and a low-cost carrier, AirAsia India. They now have a second full-service carrier in Air India and another low-cost service in Air India Express. Will the Tatas merge some or all of these airlines? Will their overseas partners agree? These are the key questions waiting for answers.

The Tatas must deal with a series of air pockets in this deal — from a pandemic that refuses to go away to an aging fleet of planes of the freshly acquired Air India. This apart, Air India has not made money since 2007, the year it was merged with the domestic carrier Indian Airlines. The airline’s workforce is highly unionized and had always been opposed to privatization. Add to that, the data from the Directorate General of Civil Aviation suggests that Air India was third highest in terms of passenger complaints in October 2021. Among the Indian carriers, it operated the lowest number of flights on time.

Despite all the visible challenges, Civil Aviation Minister Jyotiraditya Scindia, however, sounded optimistic. He stated that Air India will bloom under the wings of the new owners and the airline will pave the way for a thriving and robust civil aviation sector in India.

Soon after the takeover, the Tata Group drew up a 100-day plan to revive Air India by improving the operational and service standards. The main focus will be on customer satisfaction, on-time performance, passenger complaints, call centers, and so on. When the Tata Group won the bid to acquire Air India in October 2021, chairman emeritus of Tata Sons, Ratan Tata, tweeted an old photograph of the company’s former chairman JRD Tata getting down from an Air India aircraft, stating, “Welcome Back, Air India”. The Tatas will have the opportunity of regaining the image and reputation Air India enjoyed in earlier years, he said.

It’s now time to see how the 153-year-old conglomerate maps the future of its airlines business, considering the fact that the aviation industry, crippled by the pandemic, is yet to recover from the deadly blows. Fasten your seat belt!

What’s in it for the Tata’s

The acquisition of Air India has led to a massive build-up of Tata’s aviation assets. They have acquired a ready product to serve the domestic and the lucrative international market. With three airlines under their belt, the Tatas can hope to dominate the Indian skies in the next decade. Even on the international front, the Group, known for its turnaround capabilities can hope to create a mark in quality of service and efficiency. The acquisition is not an emotional decision alone for the Tatas. It comes with some invaluable tangible and intangible advantages.

Firstly, Air India controls some prized slots at international and domestic airports which include 900 slots at foreign airports that include those at the prestigious London’s Heathrow and New York’s John F. Kennedy International Airport. This apart, the Tata’s now have the benefit of flying to Air India’s 60 international destinations. Secondly, on the domestic front, at the Indian airports, the Tata Group has access to 4,400 domestic and 1,800 international airport slots while flying to more than 100 domestic destinations.

Thirdly, Tata’s got a fleet of 117 wide-bodied and narrow-body aircraft of Air India and 24 those of Air India Express. That’s an enormous fleet acquiring the size of which for any airline would require a long period, sometimes stretching to even a decade or more.

Fourthly, the airline came with trained pilots and cabin crew having rich experience and proven dedication to the airline.

Fifthly, Tata’s gained from the support and expertise of highly experienced engineers and technical staff of the Air India Engineering Services Limited (which was not part of the acquisition deal). Sixthly, the airline has time-tested operational standards which hold it in good stead in its international operations.

Lastly, Air India came with enormous public goodwill and a glorious past of being the national carrier, something the Tata’s will surely capitalize upon.

As the Tata’s go ahead in rebuilding the operations of the airline, they are bound to reap gains from Air India’s inherent advantages over the medium-term and gain dominant market share over the long term.

The airline flourished under the leadership of the legendary JRD Tata because he had found an identity and a role for it in the international skies. JRD along with Bobby Kooka, a marketing genius, transformed the image of Air India, an Asian carrier in a world dominated by Western airlines, by offering superior in-flight service. Both invented the concept of Asian hospitality that made the airline stand out internationally. The ‘Maharaja’, a marketing trump card, was among the world’s most recognized corporate mascots in the glory-filled days of Air India, even when it was under government control. Air India in fact showed the way of delighting fliers to other East Asian airlines. Many followed Air India’s model while others, including the now-famous Singapore Airlines, sought its help to improve their service standards. The latter now stands for operational excellence with gracious Eastern hospitality.

Today, once again, the Tatas can take a leaf out of JRD’s book and make Air India stand out from the rest of the world’s airlines by creating a unique model of hospitality and flying experience. JRD would tell people that Air India’s success was one of his greatest achievements. We all must hope it’d be that of N. Chandrashekhran’s team as well.