Months of speculation in the aviation industry have ended on a celebratory note with Tata Sons emerging as the successful bidder for “Air India,” the government-owned national airline which was put on sale by the government for a complete sell-off.
The other contender SpiceJet lost out in the race. There was widespread jubilation at the Tata House as this news trickled in. Ratan Tata expressed his happiness by tweeting, “welcome back Air India.” Ratan Tata further added, “Air India will provide a very strong market opportunity to Tata presence in aviation industry. Tatas will have opportunity of regaining Air India image and reputation it enjoyed under J. R. D. Tata.”
Life came full circle for Air India’s Maharaja as it finally came back home, enduring a torturous and turbulent journey. The tearful farewell in 1953 has ended in congratulatory homecoming 68 years later. Apart from Air India, Tata currently runs Vistara with Singapore Airlines and Air Asia with Malaysian airlines.
In 1932, J. R. D. Tata took off from Karachi with a load of mail to Bombay, present-day Mumbai, and thus began the inaugural service of Tata airlines and one of the most exciting journeys in aviation history. The rest as they say is history. Impressed by the stupendous success of this venture, RAF officer Nevill Vincent proposed to start an airline with J. R. D. Tata. J. R. D. Tata, the aviation aficionado, launched the airline with an initial investment of just Rs. 2 lakh as capital and named it Tata airlines.
The first domestic flight connecting Bombay to Delhi commenced in 1937. In the year 1946, Tata Airlines went public and became a joint stock company. It was renamed as Air India the same year.
In 1947, the Tatas proposed to the government that they take 49% of the capital, 25% would stay with the Tatas and the rest would be publicly subscribed. Government also had the offer of buying a further 2% from the Tatas thus giving them full control by increasing their share to 51%. This was the first instance of public-private partnership in any field. A new company Air India International was formed to give shape to this partnership. In June 1948, Air India International took its first flight to London from Bombay.
The government decided to nationalize the airline in 1953. The airlines were merged into a single state corporation with JRD Tata as the chairman. J.R.D. Tata remained the chairman of Air India and director on the board of Indian Airlines until 1977 and continued to serve on the boards till 1986.
The same year Ratan Tata was appointed as chairman of Air India. It was the first airline to induct a jet aircraft in its inventory in 1960. In the year 2007, Air India was merged with Indian Airlines causing financial hemorrhage for the entity. Air India was bleeding Rs. 20 crores a day. In 2017, government approved the privatization of Air India. Government will divest 100% of its ownership of Air India.
The government confirmed the news in a press conference that Tata Sons Private Limited have indeed won the bid for the airline. Their SPV Tallis Private Limited emerged as the winning bidder for the sale of equity shareholding of GoI in Air India, AI Express and Air India Sats at 18,000 crore. The transaction is expected to close by end of December 2021. Air India has a total debt of Rs. 61,562/= crores as of August 2021. The debt that will be taken over by Tata Sons would be Rs. 15,300/= crore.
One major bone of contention between the Tatas and the government was the huge pension and medical reimbursement obligations for retired Air India employee. One condition for takeover was that they want zero pending employee dues which the government has reportedly agreed. Air India as of today has 9426 permanent employees out of which 1600 are pilots and 4200 contractual employees as well as 1600 ground staff members.
A question in everybody’s mind is what would happen to the employees of Air India. The Tatas have agreed that no employee would be laid off for one year. After that the Tatas may introduce what is called in business parlance a golden handshake—a euphemism for voluntary retirement scheme.
Air India along with all its subsidiaries has a fleet strength of 172 aircraft, 87 of them owned and the rest on lease. It also has landing and parking slots in some of the busiest international airports like London, New York, Singapore, Hong Kong and Dubai. It has a total of 900 international landing slots. Maharaja ferried around 63 million passengers in 2020 before the pandemic brought the aviation industry to a grinding halt. There are 100 domestic routes that Air India served along with more than 70 international routes.
This momentous decision will have far-reaching consequences for the civil aviation industry of the country, but it has also raised many pertinent questions. What happens to the domestic route and how will India look without a national carrier? How is this going to affect brand Air India?
A glamorous credible brand in its heyday, could this bring back the glory days of flying if Air India returns to where it all started. Air India is celebrated for its national service at times of crisis but other times derided for its tardy service and lack of punctuality. Will all this change? Let us hope for the best. As they say all is well that ends well.