Tuesday 2 March 2021
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Tata wishes to re-own Air India, suggests EoI

After usurping Tata Airlines, the Indian state through a law of 1953 had given it a monopoly to on domestic routes, banning private operators

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Economy Business Tata wishes to re-own Air India, suggests EoI

Tata Group, India’s salt-to-software conglomerate, has reportedly submitted an expression of interest (EoI) for the debt-laden national airline Air India over the weekend. Earlier, several news reports mentioned that the Tata Group had started due diligence and likely to make its bid close to the 14 December official deadline.

The promise in 1953 was to make better provisions for the operations of air transport services in the country. The delivery was a constant decline in the standards of the service and Tata Airlines-turned-Indian Airlines’ deterioration as a company.

Air Corporation Act, 1953, had established two corporations by the names Indian Airlines and Air India International. Jawaharlal Nehru’s daughter Indira Gandhi, who became the country’s prime minister about five years after her father’s death, took her family’s socialist conviction further by usurping private enterprising in several sectors, most importantly, banking and insurance while continuing to not allow private participating in these domains.

Air Corporation Act, 1953, gave Indian Airlines the monopoly to operate on domestic scheduled services, ruling out other operators. Air India International became the single Indian carrier to operate on international routes, except flights to some neighbouring countries which were given to Indian Airlines.

While Air India International did not see any major problems of organisation, personnel or morale, the route was not smooth for Indian Airlines as it was a difficult task to fit in eight varieties of separate managerial and supervisory staff into its unified cadres of management.

Also, these airlines had different scales of pay and conditions of services, so it was also a challenge to mould all these units into one single integrated organisation with uniform standards of operation, administration and of course uniform scale pay.

In 2007, the union government announced that Indian Airlines would be merged into Air India. By March 2011, Air India had accumulated a debt of Rs 426 billion ($ 6.0 billion) and an operating loss of Rs 220 billion ($ 3.1 billion), and was seeking Rs 429 billion ($ 6.0 billion) from taxpayers’ hard-earned money.

Air India posted an operating loss of around Rs 4,600 crore in the last financial year mainly due to higher oil prices and foreign exchange losses.

The Narendra Modi government had in January sought bids for selling its entire 100% equity in the cash-strapped carrier airline, including Air India’s 100% stake in no-frill subsidiary Air India Express Ltd and 50% stake in Air India SATS Airport Services Pvt Ltd. The Tata Group is believed to have used its budget airline joint venture in India with Malaysia’s AirAsia Group, Air Asia India, to submit the EoI, according to a report. Several news reports said that Tata Sons was considering to slowly raise its stake in AirAsia India to more than 76% by the end of 2020-21.

Further, a group of 200 Air India staff is likely to file EoI, and the group claims to have a financial investor on board, the publication mentioned. Budget airline SpiceJet’s Chairman and Managing Director Ajay Singh is eyeing the embattled national carrier but the domestic carrier was reticent to comment.

Back in 2018, there were no bidders for Air India when the Centre had first offered to sell a 76% stake, this time around there are multiple interests. The ailing airline has outstanding debt of Rs 23,286 crore after the government brought it down from Rs 62,000 crore earlier this year to make the carrier more attractive to potential buyers.

Civil Aviation Minister Hardeep Singh Puri on 13 December said: “It (AI divestment) is a confidential procedure. The department concerned (DIPAM) will comment at the appropriate time.” Last year, the minister had mentioned the carrier would have to shut down if not privatised.

Tata Sons, the holding company of the $ 113 billion (about Rs 8.34 lakh crore) Mumbai-based conglomerate, is said to have shown its interest through AirAsia India, where it has a significant majority stake. Though Tata Sons operates a full-service carrier, Vistara, in partnership with Singapore Airlines, it has decided to submit EoI through AirAsia India. Singapore Airlines was reluctant in participating in the privatisation process of the beleaguered Air India, the daily mentioned.

What’s more significant, Singapore Airlines is in the midst of raising fund after it posted its biggest quarterly loss due to a huge drop travel demand because of the Covid-19 crisis.

The newspaper citing sources said since AirAsia India was created before Vistara, the former’s agreement allows it to enter the full-service business. According to industry watchers, the Tata Group — which founded AI as Tata Airlines in 1932 — is being seen as the most likely winner.

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