1. Tata Group may buy Air India. Will India’s national carrier fly back to its home base?

Tata Group may buy Air India. Will India’s national carrier fly back to its home base?

Tata Group is considering buying a controlling stake in the state-run aviation behemoth Air India from the government in partnership with Singapore Airlines, provided the government brings down its debt substantially. This could be a homecoming for Air India, whose original owner was the Tata Group itself before the airline was nationalised.

By: | Updated: June 22, 2017 10:34 AM
Tata Group chairman N Chandrasekaran has held informal talks with the government, expressing preliminary interest in buying a controlling stake in Air India with a 51% equity holding. (Image: Reuters)

The Tata Group is considering buying the giant beleaguered state-run carrier Air India from the government in partnership with Singapore Airlines, ET Now reported on Wednesday citing unidentified sources. This could be a homecoming for Air India, whose original owner was the Tata Group itself before the airline was nationalised in 1953.

Tata Group chairman N Chandrasekaran has held informal talks with the government, expressing preliminary interest in buying a controlling stake in Air India with a 51% equity holding, ET Now reported, adding that the the group may bring in Singapore Airlines to buy the balance 49%, if the government goes for complete privatisation of the airline. The government, which is also reportedly keen on retaining Air India as a domestic carrier, is happy with the Tata Group’s interest in the heavily debt-laden carrier, the report said. Further, the government is likely to mandate that a controlling stake be bought by an Indian entity.

White elephant

Air India, under intense competition from leaner, more efficient and often-cheaper private airlines, is reeling under a debt of about Rs 50,000 crore, with about Rs 28,000 crore in working capital debt, and about Rs 4,000 crore in interest burden alone. It has not turned profit in 10 years, since at least the year 2007. Recently, top government representatives, including Finance Minister Arun Jaitley and Civil Aviation Minister Ashok Gajapathi Raju have spoken openly about their plans to sell Air India.

Air India’s market share in domestic market has fallen to 14% in 10 years from 35% a decade ago, placing it third in the national ranking, behind Indigo, which commands about 40% of Indian skies, and Jet Airways, which has about 16% of the share. Air India also flies overseas, and commands 17% of the international traffic from and into India. Air India has guzzled up taxpayer money over and over again but to no effect.

Value buying

The carrier has received bailout packages worth about Rs 24,000 crore out of a total Rs 30,000 crore approved, but has failed to revive its fortunes amid private airlines continuously gaining market share.

While the Tata Group is concerned with Air India’s huge debt pile and is reportedly seeking a huge reduction in the debt burden that it would take over before considering the acquisition, the conglomerate sees value in the 14% market share the airline commands, ET Now reported. Meanwhile, the government is also reported to have assured the Tata Group that it will bring the airline’s debt down substantially to make the deal lucrative for India’s largest private business conglomerate.

Tata Group, which is keen on an otherwise tough Indian aviation market, reportedly sees value in adding Air India to its existing business, which includes a low-cost carrier AirAsia India in partnership with Malaysia’s Air Asia, and a premium airline Vistara in joint venture with Singapore Airlines.

Back to the hangar

Notably, Air India was launched as Tata Airline back in the year 1932 by the erstwhile Tata Group Chairman JRD Tata, with a maiden flight between Mumbai and Karachi. Later in 1948, post independence, it was incorporated as Air India International — a joint venture corporation between the government and the private sector to start overseas services. Five years later, the government decided to nationalise all aviation business in the country, though this came as a personal setback to JRD Tata, as has been noted in various articles published over the years.

(Originally published on Wednesday, June 21, on www.financialexpress.com)

  1. S
    shankar
    Jun 22, 2017 at 6:03 pm
    3 reasons why Tata or any other business should not touch Air India with a bargepole. 1. The GoI is like a used car sman. Do not trust it one bit. 2. The IT and ED departments will file cases that the move to buy out a company with huge losses is "money laundering". Plain and simple. Jail time for all executives. For more on this pay heed to Mr. Arvind Datar, a tax and legal expert from Chennai who has exposed these draconian provisions in the IT Act. 3. The rivalry between AI and IA staff and the various unions will f k the new owners with the GoI applauding from the side lines. 4. The politicians in power will give out the routes to those who feed them well. Since Tatas are Singapore Airlines are well regarded, keep your shirt clean. Mr. Lohani is doing a good job currently but he has no hope in of pulling AI out of the muck.
    Reply
    1. J
      Jay
      Jun 21, 2017 at 11:20 pm
      Selling AI back to Tatas will add one more nail to the coffin of the CORRUPT CONgress Dynasty Regime
      Reply
      1. A
        Aviraj Mehta
        Jun 21, 2017 at 9:34 pm
        But how will Tata buy it's rival previous attempts were still ok it wanted to enter the market but now it has why would it acquire air India when it has Vistara
        Reply
        1. F
          FE.com Business
          Jun 22, 2017 at 12:21 pm
          Aviraj. Thanks for your interest. You may find the answer in today's follow-up story: The air pockets in Tata’s plans to pilot Air India / : financialexpress /industry/tata-may-buy-air-india-hurdle-debt-compe ion-benefits-assets-fleet-slots-routes/730318/
          Reply
        2. V
          Varun
          Jun 21, 2017 at 7:29 pm
          Thats a good thing to happen. Whatever Congress touches it becomes dust.
          Reply
          1. H
            Hari
            Jun 21, 2017 at 5:58 pm
            This is the glaring example of massive political corruption prevailing in this country which brought reputed AIR INDIA to worst causing huge financial loss to the company. This is one of biggest GIGANTIC SCAM taken place during last UPA regime. THIS should be dealt seriously BY BJP GOVT WHO MUST RECOVER TOTAL FINANCIAL LOSSES TO AIRLINES FROM PERSONS CONCERNED RESPONSIBLE FOR WRONG PURCHASES OF AIRCRAFT WHICH WAS NOT REQUIRED BY AIR INDIA. THE GOVT MUST FIRST ENSURE RECOVERY OF LOSSES CAUSED TO AIR INDIA BY NCP AND CONGRESS LEADERS DURING UPA RULE. BJP GOVT MUST FIX RESPONSIBILITY FOR SUCH GIGANTIC SCAM WORTH MORE THAN ONE LAC CRORE BY NCP AND CONGRESS LEADERS IN PURCHASING OF HUNDREDS OF AIRCRAFT WHICH WAS NOT NEEDED BY AIR INDIA. THIS IS CASE OF RECKLESS LOOTING OF PUBLIC MONEY. THE PUBLIC IS FULLY AWARE WITH BUNGLING DONE BY UPA GOVT WITH CONNIVANCE OF NCP LEADERS. BJP GOVT MUST RECOVER LOSSES CAUSED TO AIRLINE FROM NCP AND CONGRESS LEADERS BY SEIZING ALL THEIR ASSETS.
            Reply
            1. H
              Hari
              Jun 21, 2017 at 5:47 pm
              This is glaring example of massive political corruption prevailing in this country which brought reputed AIR INDIA to worst causing huge financial loss to the company. This is one of biggest GIGANTIC SCAM taken place during last UPA regime. THIS IS taken seriously BY BJP GOVT WHO MUST RECOVER TOTAL LOSS FROM PERSONS CONCERNED RESPONSIBLE FOR WRONG PURCHASE OF AIRCRAFT NOT REQUIRED BY AIR INDIA. THE GOVT MUST FIRST ENSURE RECOVERY OF LOSSES CAUSED TO AIR INDIA BY NCP AND CONGRESS LEADERS DURING UPA RULE. BJP GOVT MUST FIX RESPONSIBILITY FOR SUCH BIG SCAM WORTH MORE THAN ONE LAC CRORE BY NCP AND CONGRESS LEADERS IN PURCHASING OF HUNDREDS OF AIRCRAFT NOT NEEDED BY AIR INDIA. THIS IS CASE OF RECKLESS LOOTING OF PUBLIC MONEY. THE PUBLIC IS FULLY AWARE WITH BUNGLING DONE BY UPA GOVT WITH CONNIVANCE OF NCP LEADERS. BJP GOVT MUST RECOVER LOSSES CAUSED TO AIRLINE FROM ASSETS OF NCP AND CONGRESS LEADERS BY SEIZING ALL THEIR ASSETS. THEREAFTER, THESE CULPRITS MUST BE TRIED IN FAST TRACK COURT.
              Reply
              1. S
                Sadasivan
                Jun 21, 2017 at 4:16 pm
                The Tata Group, is reputed for its HRD,with empathy,as its main feature..Hence ,it may keep,the employees.
                Reply
                1. S
                  Sadasivan
                  Jun 21, 2017 at 4:14 pm
                  The Tata Group,buying stakes in Air India,would be most appropriate and fair.
                  Reply
                  1. G
                    Gaurav Srivastava
                    Jun 21, 2017 at 3:48 pm
                    TATA group is a real business Tycoon of India the World.
                    Reply
                    1. P
                      PN Venugopalan
                      Jun 21, 2017 at 3:27 pm
                      Good development. It is nostalgic for Tata Group. Great JRD must be smiling. Tough task ahead for the Tata to turn it around but they can and will. Only Air India employees of all cadres must see reality and co-operate and support the new Management as and when it happens. Good wishes.
                      Reply
                      1. R
                        Ram
                        Jun 21, 2017 at 3:10 pm
                        Great News. But sack all Maharaja like employees first!
                        Reply
                        1. M
                          Manish Chheda
                          Jun 21, 2017 at 2:09 pm
                          To gain market share with debt is not vital slow and steady Vitara could win the market share in 10 years but the debt burden would. not cease in 10 yrs if Tata plans to take over..... Kingfisher empire is gone..... we cannot. have Tata empire vanish...
                          Reply
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