Air India Back Into The Tata Fold

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Air India, after a gap of sixty-eight years, returns to the Tata fold.

Brief History

JRD Tata started the airline as Tata Airlines in 1932. Regular commercial operations began in 1946 when a public limited company was registered with the name Air India. In 1953, the Indian government decided to nationalise the airline. Two airlines were carved out, Air India for international operations and Indian Airlines for domestic operations. The government allowed JRD Tata to continue as chairman of the company till 1977. According to reports, the government then paid a paltry sum of INR 2.8 crores (USD 375 Million) for getting a 100% stake in Air India.

By the ’90s, the national carrier came under pressure mainly due to the opening up of competition and relatively poor management from the government. Indian Airlines was re-merged back with Air India in an attempt to reduce the losses. As per reports, since 2009, the government of India has spent USD 14.7 billion (INR 1.1 Lakh Crores) to make up the airline’s losses or raise debts. At the time of sale, Air India’s total debt stood at USD 8.3 billion (INR 61,562 crores).

The Tata Group bid was USD 2.4 billion (INR 18,000 crores). They are taking up a debt of about USD 2.0 billion (INR 15,300 crores), and the remaining USD 400 million (INR 2,700 Crores) will be paid in cash to the government.

What Does Tata Get for This Amount?

Tata’s has bought the ailing airlines with a long-term perspective. They get the entire government stake in the following companies –

100% stake in Air India Limited 100% stake in Air India Express Limited 50% stake in Air India SATS, which is a joint venture with Singapore Airways. This constitutes the entire stake of the government. AISATS is an airports services company.

The airline company has a 10% market share on the domestic routes, and 30% on the international segments in terms of passenger traffic (2019). Indigo Airlines remains its closest competitor.

The airline has a fleet has 127 aircraft consisting of B747s, B777’s and A320’s. The company owns sixty-nine of these aircraft, and the rest are on lease. Tata’s also get the twenty-five B737-800 NG aircraft of Air India Express. Seventeen of these are owned by the company, while eight are on lease.

With the airline also comes the flying rights to the USA, Europe, Middle East, and several other countries. Air India has prime slots in airports such as JFK, Newark, Heathrow, Paris, Frankfurt, etc. Air India Express has flying rights to all major cities in the Gulf region, generating 50% of Air India’s revenues.

Tata already has full ownership of Vistara and a majority stake in Air Asia India. They are mandated to keep the Air India brand and restricted from re-sale for the next five years. It will be interesting to see how, in the long-term, Air India’s return to the Tata’s will fit in their aviation strategy.

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