A homecoming: On Air India and the Tatas

Air India, the airline started by J.R.D. Tata in the 1930s, is all set to return to the Tata fold after a 68-year-long journey as India’s state-owned flag carrier. The Centre’s announcement on Friday that Tata Sons’ subsidiary Talace Pvt. Ltd. was the winning bidder for the 100% stake in the debt-laden airline rings the curtain on the government’s multi-year effort to privatise the loss-making carrier. Talace emerged winner in the two-horse race by bidding to take over ₹15,300 crore of Air India’s more than ₹60,000 crore of accumulated debt and offering an additional ₹2,700 crore in cash for the Government’s equity stake. For the Tatas, who have retained an abiding interest in the country’s airline industry and currently majority own both a budget carrier, AirAsia India, and a full-service airline, Vistara, the Air India acquisition brings opportunities to gain scale and synergies at a significant level. With Air India and its low-cost unit, Air India Express, together serving 55 overseas destinations, holding over 3,000 landing and parking slots, operating a 141-aircraft fleet of wide-body long-haul jets and narrow body planes for shorter flights, and the parent holding membership of the 26-airline Star Alliance, the Tatas in one stroke add unparalleled global reach among Indian carriers. Air India’s 13.2% consolidated market share of domestic traffic as of August also gives the group a more competitive combined share of almost 27%, albeit still a substantial 30 percentage points adrift of market leader IndiGo.

The Centre, for its part, can finally heave a sigh of relief at having successfully exited the commercial aviation space, a high-cost industry that most governments around the world have left in the hands of private carriers so as to ensure taxpayers’ money is deployed more meaningfully in social and strategic sectors. After having ploughed in more than ₹1-lakh crore of capital in the past decade alone and seeing Air India suffer a daily loss of over ₹20 crore, the Government’s desperation to cut its losses and close out a fire sale is understandable. The pandemic’s impact on public finances and the carrier’s operations, especially given the devastating impact on air travel both domestic and international, is sure to have helped spur the Government’s decision to agree to not only absorb 75% of the carrier’s debt, but to also pick up the tab on medical benefits for former employees. And in a bid to protect the interests of the more than 13,000 permanent and contractual staff at the airline and its unit, the government has bound Talace to ensuring there should be no job cuts for at least one year. Still, integrating the state-run carrier’s sizeable workforce is going to be one among the many serious challenges, awaiting the Tatas. To turn around Air India at a time of soaring fuel costs and COVID-hit air travel, is sure to test the conglomerate’s managerial mettle.

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Printable version | Dec 3, 2021 7:56:39 AM | https://www.thehindu.com/opinion/editorial/a-homecoming-the-hindu-editorial-on-air-india-and-the-tatas/article36933282.ece

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