Air India could fly high with Tatas

Air India could fly high with Tatas


It is welcome that the Tata Group is reportedly considering bidding for takeover of ailing national carrier Air India. Much is at stake. J R D Tata, of course, pioneered civil aviation in India, and he did make Air India world class in its halcyon days in the 1950s. The beleaguered airline now needs urgent turnaround to soar high again. It is significant that the government is seeking 100% divestment of Air India, including its real estate assets. Of its high debt overhang of over ₹58,352 crore, as much as 60% is to be transferred to a special purpose vehicle, Air India Assets Holding Ltd, retained by the government, and only about ₹23,286 crore has to be absorbed by the winning bidder.

Air India has valuable bilateral rights and landing slots, plus attendant time slots and code shares. Besides, it owns as much as 56% of its large fleet size, including long-haul aircraft, which suggests options like sale and leaseback for the new owners, to proactively bring down debt levels. Further, there would be much scope for brand synergy of the Tata Group, with its presence in high-end hospitality, and Air India. There would be opportunity to leverage the appeal of Air India’s maharajah mascot, as the ailing carrier has a low revenue per-kilometre travelled and low, paid-for business-class occupancy. The way ahead for Air India is to shore up timeliness in operations and boost service quality with finesse, akin to the old days. Air India does have talented and experienced pilots and engineers, never mind the recent accident in Kozhikode. Focused attention on improving the flying experience would pay rich dividends quickly.

Note that Air India’s domestic market share has dipped of late. A thorough corporate revamp is clearly warranted. It can well be said that amidst the coronavirus pandemic, leading business groups need to be stepping up fresh investments rather than mulling big-ticket takeovers. But as economic recovery gathers momentum, as it must when the pandemic abates, aviation is slated to resume its high-growth flight path, and it could definitely be worth the while for Tata to be in the cockpit of Air India once again.

This piece appeared as an editorial opinion in the print edition of The Economic Times.

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