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.
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.
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)