After 69 years Air India finally left government control to fly back to the Tata Group's nest on Thursday. The formal handover that was expected to be completed by December was delayed due to regulatory approvals.
With the completion of the transaction, the Mumbai-based chemicals-to-information technology-enabled services of the ITES Tata Group acquired management control of the airline. The full-service carrier Air India, its low-cost unit Air India ExpressIndia Express and a 50 per cent stake in the airline's ground and cargo handling subsidiary, Air India SATS Airport Services AISATS Chairman Tata Sons, N. Chandrasekaran, said in an official statement: We are excited to have Air India back in the Tata group, and are committed to making this a world-class airline. I warmly welcome all the employees of Air India, Air India ExpressIndia Express and AI SATS to our group, and look forward to working together. Chandrasekaran had a special thank you to Prime Minister Narendra Modi.
The Tata Group would like to acknowledge Prime Minister Shri Narendra Modi's commitment to reforms and faith in India's entrepreneurship spirit, which made this historic transition possible. Our prime minister has shown in action what his commitment to'minimum government, maximum governance' means. In October, the Tata Group had placed the winning bid of 18,000 crore for the beleaguered national carrier.
The process for Air India's privatisation was set in motion in the year 2000, although the idea for selling it was first proposed in 1988, following the successful sell-off of British Airways and other national assets by the Margaret Thatcher government in the UK. However, stiff political opposition to the sale of government-owned entities - euphemistically described as 'family silver' and intensified lobbying by vested interests in the private sector managed to derail the exercise several times in the past.
A jubilant former executive director of Air India, Jitendra Bhargava, and author of the 2013 book, The Descent of Air India, told Business Today: After years of descent, it is time for Air India's handover to the Tata Group. The new owners need to make sure the airline is in the northbound trajectory. These include software and hardware issues. Hardware issues include the refurbishment of the airline's fleet and demand serious investments, while software issues include improving ground service, inflight meal service, the turnout of staff and employee productivity.
Air India's return to the Tata Group will encourage a lot of people to start using the airline. As filing up seats will be a challenge, it will be necessary to get a lot more seats. The Tatas will have to pay special attention to marketing, according to Bhargava.
After World War II, it was renamed Air India after being founded as Tata Airlines by Jehangir Ratanji Dadabhoy JRD Tata in 1932. The Government of India acquired a majority stake in the airline in 1953 with the passage of the Air Corporations Act.
The new owners would need to pay attention to areas like boosting employee morale and reengineering existing work practices to improve the service element to meet customer expectations. Under the new management, the airline is capable of doing a turnaround despite these challenges.
Air India's negatives have been highlighted for a long time. It must be acknowledged that while making the deal, the Tatas focused on the positives like route network, manpower, etc. That's what should matter now, said Bhargava.
Others believed that the deal would be a game-changer for the country's civil aviation environment.
Both Air India and Tata's JV with Singapore Airlines, Vistara, will continue to operate separately. In the medium term, a lot of synergies will be discovered and aligned between the two carriers, given the construction of the deal. Jagannarayan Padmanabhan, practice leader and director of transport and logistics at CRISIL Infrastructure Advisory said that integration is likely to be done with the Tata-SIA JV post that phase.
Jagannathan said that as both Air India and Singapore Airlines are full-service carriers, it didn't make sense for them to compete in the same market.
Air India's international presence is better leveraged when both of them operate as a single entity. It's a better way to tap into their operational synergies. He said that this will be more relevant as India is a cost-sensitive market and all airlines strive to keep costs in check.
The deal would have long-term ramifications for the country's plans to privatise other public sector enterprises. PSEs Air India was the Holy Grail of public sector privatisation. The sentiment in the government was : If we can successfully privatise Air India, we can sell anything.'' A leading merchant banker said it was up to them to leverage it now that it's done.