Why does Tata Group want Air India back?

NS.RD TATA I remembered it as his saddest day. In 1978, a prominent Indian industrialist opened a newspaper and discovered that the government had fired him as chairman of Air India, which was founded in 1932 and remained in control after nationalization in 1953. It was true. She replied that his successor, Marshal, was already comfortable in his chair.

Tata, who died in 1993, frequently said that his job at Air India was to protect airlines from the central government of Delhi. Undoubtedly, that sentiment contributed to his dismissal and was justified. After his exit, the flag carrier went into a spiral. In recent years it has lost nearly $ 3 million a day. Operating costs are well above the industry average. So are customer complaints. Perhaps noticing this, the government began attempting to unload Air India in 2001, but transactions were repeatedly set up over financial terms, with the state holding residual shares and, in some cases, maintaining control of the residuals. I am requesting that.

On October 8th, the process that was finally pulled out was completed. The airline will return to the Tata Group, one of India’s largest conglomerates today. The $ 2.4 billion bid (including $ 2 billion in debt) outperformed the only other from the owner of SpiceJet, a low-cost carrier with heavy debt. Some of Air India’s non-core assets and the remaining $ 6 billion in debt will be transferred to another government-owned holding company.

Given what has happened in India’s aviation industry since JRD’s disgraceful dismissal, it is not entirely unfair to conclude that the government has favored the Tata Group by letting go of Air India. Private airlines have emerged just to go bankrupt. The Covid-19 travel ban has cost the industry. Indigo, the most successful carrier with a 57% market share, was involved in a proceedings between its founders and expelled several top executives.

On the surface, the Tata Group’s desire to bring Air India back into the fold seems ridiculous. The group already manages two small airlines through an 84% stake in AirAsia India (an affiliate of a Malaysian airline) and a 51% stake in Vistara (co-owned by Singapore Airlines). Both are consistently losing money. Adding Air India to the mix seems to deepen Tata’s aerial pain. Carriers burn cash as fast as an old, frayed fleet burns kerosene. The workforce is united, difficult to manage, and resistant to change. The terms of the contract prohibit redundancy only by voluntary reduction in the first year and thereafter.

Still, Tata’s movement is not without reason. Today’s management sees the existing aviation business as an irreparable subscale. The deal doubles Tata’s domestic market share to 27% and provides a platform for Air India to grow overseas, especially through its network of landing slots in London and New York. Air India owns a low-cost carrier based in Kerala, has a fast-growing business transporting Indian workers to and from the Persian Gulf, and may partner with AirAsia India. there is.

Tata may now be capitalizing on Air India and even more urgently needed good management. The pandemic recession in global aviation means that aircraft are available. Boeing and Airbus are definitely already hitting Tata’s door. Tata Consulting Services, India’s largest information technology consultancy, could help connect different entities and enable savings in areas such as booking and loyalty programs. Indian Hotels, Tata’s hospitality division, may benefit from marketing links.

Managing this process is not easy. Singapore Airlines is believed to have opposed the deal and wanted Vistara to develop its own global network. Managing a plain and full-service sector makes sense in theory, but large airlines aren’t doing it well. Important support for Air India comes from the country’s strict restrictions on foreign airlines, negotiated as a bilateral treaty with its own country. Now that airlines are in the hands of individuals, they can be mitigated and their benefits diminished. After regaining the JRD chair, Tata may find it completely uncomfortable. ■■

For a more professional analysis of the biggest stories of economics, business and markets, Sign up for MoneyTalks, Weekly newsletter.

This article was published in the printed Business section under the heading “Longest Transit”.

Why does Tata Group want Air India back? Source link Why does Tata Group want Air India back?

Related Articles

Back to top button