Editorial: Maharaja goes home
It’s a sort of ‘Ghar Wapsi’ for Air India to return to the Tata Group nearly seven decades after it was nationalised, capping years of struggle by the government to sell the struggling airline that became a burden on taxpayers. Successive governments had pumped in $15 billion to keep the ailing airline flying. The handover […]
It’s a sort of ‘Ghar Wapsi’ for Air India to return to the Tata Group nearly seven decades after it was nationalised, capping years of struggle by the government to sell the struggling airline that became a burden on taxpayers. Successive governments had pumped in $15 billion to keep the ailing airline flying. The handover to the Tata group, the successful bidder, marked the end of a long process to unload the debt-laden airline. The private conglomerate now faces the daunting task of turning around the national carrier, losing Rs 20 crore a day, with a bloated workforce and dwindling market share. Integrating Air India’s fragmented operating network, executing its global bilateral agreements, augmenting the network, changing the lethargic and bureaucratic work culture and bringing down the high operating costs are also among the key challenges. Also, much of Air India’s fleet of 117 planes is ageing and new aircraft will have to be acquired. Over decades, the AI staff has become used to a culture of low expectations and will find it difficult to grapple with more exacting demands from the new owners. After several twists and turns, scepticism and prolonged delays, the conclusion of the Air India deal marks the first step in the Centre’s mega privatisation push. In October last year, the Tata Group had emerged as the winning bidder for 100% of Air India, including the airline’s 100% stake in budget airline Air India Express and 50% stake in ground handling firm AI-SATS, having placed a bid of Rs 18,000 crore.
Of this amount, Tatas were to take over Rs 15,300 crore worth of debt and Rs 2,700 crore was to be paid to the government in cash. The timing of the takeover is certainly not ideal as it comes in the midst of a raging pandemic and high fuel costs. India’s airline industry is expected to face its biggest-ever loss of more than Rs 20,000 crore in this financial year, nearly 44% more than Rs 13,853 crore the airlines haemorrhaged in the last financial year. This would push back the industry’s recovery beyond fiscal 2023, according to a Crisil Ratings analysis. The airline will have to fight a huge battle with Gulf-based airlines like Emirates, Etihad and Qatar Airways, which have grabbed a large chunk of the Indian market and have flights to a huge number of Indian cities. On the positive side, the new owner of Air India does control prized slots at international and domestic airports. The acquisition will give the Tata Group access to 4,400 domestic and 1,800 international airport slots at Indian airports and 900 slots at foreign airports. Air India’s biggest strength is probably its international routes and it can offer direct flights from North American cities like New York and San Francisco.
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