In a deal of epic proportions, Tata Group is set to take control of Air India after winning historic bid to own what it once started 89 years ago. Reportedly the salt-to-software conglomerate placed a bid of Rs. 18,000 crores. With this, the Tata Group will take on a debt of Rs. 15,300 crores while the remaining amount will be paid to the government in cash.
The news comes after Air India was open for new takers after it accrued losses upon losses due to competition and negative word-of-mouth from fliers. For the unversed, Air India stopped making profit in 2007 and has since accrued losses worth Rs. 9,500- Rs. 10,000 crores by 2021.
Details
Once known for the Flying Maharaja on its airplane wing – an obvious reference to the royalty and the magnificence it carried – Air India has turned into a tarnished shadow of itself.
Thanks to the stiff competition by other privatized airlines such as IndiGo and Jet Airways, the Centre operated Air India was pushed to the edge. Soon it was clear, privatization would be the only redemption for the airlines.
After years of tussle, Tata Sons – the original owners of Air India – have once again outbid competitors. They are now the new owners of Air India.
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The Facts of the Matter
Salt-to-software conglomerate Tata Sons are finally reported to have taken over the Centre-operated Air India. The company has reportedly outbid its competitors to end government’s control over an airline that it started in July 1930.
On Friday, October 8, Tuhin Kant Pandey, Department of Investment and Public Asset Management said, “Talace Pvt Ltd of Tata Sons is the winning bidder at Rs 18,000 crores. The transaction is expected to close by the end of December 2021.
It was also further revealed that the company will need to retain all the Air India employees for the next one year. After one year’s completion, they can offer VRS (voluntary retirement service).
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What Tata Group’s Control over Air India Signifies?
The return of Air India to Tata Group can be considered a major relief for the current government that was accruing losses after losses due to the failing carrier. The last time Air India reported a profit was in 2007. For over a decade, the airline has reported losses. So far, the airline has accrued loss worth Rs. 9,500-Rs. 10,000 crores.
Further, the buyout can be considered a crucial feather in the cap for the PM Narendra Modi government. It’s during his government that the stars aligned and the airline was bought back. For years there were attempts made to privatize the airline.
However, due to naysayers and lack of potential buyers, the deal was never struck.
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The Larger-than-Life Story of Air India
Often when larger-than-life stories are mentioned, we think of men and women. However, there are business entities too that have had a history, filled with ups and downs.
Air India was established in 1932 by J.R.D. Tata, India’s first ever licensed pilot. The airline was first in the business of delivering mail. Soon, the airlines grew and passengers flew with mails. By the end of 1932, it flew just over a hundred passengers and over 10 tons of mail.
Air India Once Ran with 100% Punctuality
In its first year, JRD Tata showed that he was an exemplary leader. His airline ran at a 100% punctuality rate. Further, Imperial Airlines, a British carrier, sent over some of its personnel to see how the airlines ran with such efficiency.
Govt. Takes Over, Liberalization Looms, Competition Hits
Come 1947, the airlines, then known as Tata Airways, was rebranded as Air India after the government took 49% stake in the company. Post liberalization, a slew of low-cost, high-efficiency airlines started giving a tough competition to Air India.
Soon, the Maharaja bled left and right and it was decided that privatization would be the only key of survival for the government.
If reports are to be believed, Tata Group own three major airlines – Air India, AirAsia and Vistara. It’s also being reported that Tata Group will be merging all three airlines under one entity.
