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Tata in the airline business

The announcement of Tata taking over the heavily debt-ridden loss-making Air India may coincide with the 90th anniversary of JRD Tata flying airmail from Karachi to Juhu on 15th October 1932. That later became Air India. In 1953 it was nationalised.

The Tatas is one of India’s most respected industrial groups and the most globalised Indian conglomerate. Every Indian is proud of the brand, the true Indian in all senses of the term. It has a rich history of contributing to nation-building. When it is about to take over the government-owned commercial airline asset, Air India, now it is only a repeat of history. On 15th October 1932, JRD Tata flew a consignment of mail from Karachi to Juhu Airport, which later became Air India. Ninety years after the historical event, AIR India returned to the Tata fold.   

Since the 1990s, after the civil aviation sector opened up for private entry, the Tatas’ dream of re-entering the airline business remained in cold storage because, as the Tata group itself put it, three governments had stopped its entry for unknown reasons. In 1991, the Narasimha Rao government deregulated the civil aviation segment, subsequently allowing private air taxi service in 1994. Still, the Tatas couldn’t find a presence, despite its effort to revisit its legacy. Many private airlines appeared and disappeared after burning their fingers. The airline business hasn’t been a money-spinning business, though the passenger traffic has grown consistently. 

In 2011, after the government revised the foreign direct investment (FDI) guidelines allowing 49 per cent investment by a foreign company, Tata entered into this sector – per has with revenge. Tata Sons has two airline joint ventures, one with Singapore Airlines by the name of Vistara and another with AirAsia Berhad in the name of AirAsia India. In AirAsia, Tata Sons has a 30 per cent stake, and Telstra Tradeplace holds a 21 per cent stake. The combined market share of the Tatas in the airline segment is around 13 per cent. Now another one also has come into its hands.  

By making a bid with ₹3000 crores more than the reserve price of ₹15,000-20,000 crore, Tata Sons has emerged winner of the combined Air India, Air India Express and 50 per cent in the ground handling company AISATS. The huge debt-ridden Air India will have a sigh of relief as 85 per cent of the price that Tats Sons is paying will offset the debt burden, and 15 per cent will go to the government. Since 2008, Air India has been making losses without respite to reach an estimated loss of ₹70,820 crores now.

Air India, in which Indian Airlines also merged in 2007, fell steep into the debt burden after the unnecessary purchase of aircraft soon after the merger. Against the experts’ recommendation for buying 23 aircraft, Air India bought 111 aircraft at the cost of around ₹70,000 crores. More than 95 per cent of the sum was funded through a debt infusion. That made Air India sick with mounting losses.

The Centurion  Indian Aviation     

Do you know which country had the history of the world’s first airmail service? It’s India. On 18th February 1911, Henry Pequet, a French pilot then aged 23, carried 6500 pieces of airmail on a Humber biplane over nearly 10 km from Allahabad to Naini. Hundred years later, the Indian civil aviation industry, the fourth largest in the world in terms of passenger traffic, has 800 aircraft carrying nearly 200 million passengers. Roughly 70 percent of them are domestic travellers. The Vision 2040 set by the Union Civil Aviation Ministry projects air passenger traffic to increase nearly sixfold to 1.1 billion by 2040, including 821 million domestic and 303 million international passengers with an estimated 2,359 aircrafts.

Udaykumar K.V.


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