Acquisition of Air India
-“Welcome back Maharajah!”
On 8 October 2021, After facing huge loses and being debt-laden for about two
decades governments flagship National Carrier “Air India” finally came back to its
founding owners Tata & Sons. It is one of the biggest reforms in aviation sector.
Homecoming of Air India after 68 years of long journey marks a historical day for
Tata. In 1932, JRD Tata had a dream of starting his own Airline Company, “Tata
Airlines” & reach skies. Being an aviator himself this airline’s first commercial
flight from Mumbai to Karachi was piloted by none other than JRD himself!
Tata Airlines was the brain child of JRD Tata, which was so close to his heart. But
in 1946, Tata Airlines was renamed as Air India and after two years in 1948, Air
India International was launched and started its operations to overseas.
Jawaharlal Nehru, VijayLakshmi Pandit travelled in Air India if they ever had to go
out of India to maintain Foreign Relations. It was first of its kind of Public-Private
Partnership held in India where government had 49% of its shares, Tata had 25%
shares and rest was public owned.
Historical Background
In 1953, Government declared nationalization of Aviation Industry, Tata and 8
other airlines was nationalized overnight, JRD Tata tried to convince the
government departments that Running an airline is not like running a govt
department, Airlines is a capital incentive business, it needs 35 times more capital
and if it isn’t managed well, the company will bear huge losses, but to no avail,
everything went in vain. In the name of development and socialism, government
took away his fondly loved and raised company.
In the coming years, Air India showed downfall because of poor mismanagement
and mishandling by government officials and bureaucrats and many of the private
players in aviation industry during 1990s offered cheap tickets at lower price than
Air India, which caused it to loose many of its market shares. After encountering
continuous downfall in the sector the then Atal Bihari Vajpayee government
decided for the privatization of Air India.
Several Attempts of Governments Disinvestment Plans:-
Due to heavy losses In 2000s, NDA government under Atal Bihari Vajpayee, tried
to sell 40% shares of Air India to Tata group and Singapore Airlines, but it was
unsuccessful. Later in 2004-2014, Congress led UPA govt didn’t initiated any
privatization plans; instead they structured two plans for Air India in 2012, Turn
Around Plan (TAP) and Financial Restructuring Plan (FRP). Air India, after its
merger with Indian Airlines in 2007, suffered huge losses and debts.
In 2017, Air India Specific Alternative Mechanism (AISAM) was constituted by
Cabinet Committee on Economic Affairs (CCEA) for the disinvestment plans of Air
India. Govt tried to sell 76% stakes of it, but no bids received, owing to its present
debt condition.
The winning Bid for Tatas
In Jan 2020, govt exited and decided to go for 100% privatization of Air India,
which also mentioned 100% stakes in Air India Express & 50% in ground handling
Arms in AISATS. Government initiated this decision because of the total debts of
Rs. 60,074 crore suffered by the airlines. When DIPAM Secretary Tuhin Kanta
Pandey confirmed of Air India receiving multiple bids, govt initiated the financial
bidding process. Officially, Tata group and Spice Jet promoter Ajay Singh
participated in the financial bid, and finally on 8 October 2021, Tata group makes
winning bid of Rs. 18,000 crore for Air India. Government confirms Tata Son’s
subsidiary Talace Pvt. Ltd. as a winning bidder. Now Tata’s will own 100% shares
in Air India and also control over 141 planes, 173 destination networks, which
includes 55 international destination networks too, By their winning bid, Tata’s
will also claim ownership of iconic brands like Air India, Indian Airlines and the
Maharajah.
Tata’s will pay Rs. 18,000 crore to government where by 15% will go to
government & rest will be spent for clearing debt. Tata’s already own Air Asia
India & full service Airline Vistara.
Conclusion
By the acquisition of Air India, we are celebrating the homecoming of Maharajah-
The symbol of graciousness and high living. From Nationalization to suffering
heavy losses and again coming back to the Tata Group Air India indeed had a long
journey. Finally JRD Tata’s favorite company is back to the Tata group, a moment
to celebrate the win. But the question stays that How Tata’s will manage its debt
and turn it into a profitable company again, with rising fuel costs and travel
restraints by the pandemic? This also shows a different picture of incapability and
mismanagement of the government as a result Air India suffered heavy losses. It
still has a long way to go, but this reform gives surety that the way Tata’s gives its
contribution to boost the economic conditions of India; it will surely boost the
aviation industry and Air India with its consistent efforts. The legacy of Air India
as the best airline of the world will surely suffice in coming days.
