AIR INDIA RETURNS HOME

The welcome of Air India is marked by old posters of the Maharajah, Air India’s loveable mascot that once symbolized “graciousness and high living.” The social media is filled with throwback photos of JRD and Ratan with much more in-depth trivia and history showing us happy signs of the airline returning to its home.

It all started when the Tata group’s chairman emeritus Ratan Tata tweeted “Welcome back, Air India" last week. The tweet had two emojis, a landing flight and a house. Twitterati were quick to label it “ghar wapsi". Tata Sons subsidiary Talace Pvt Ltd won the bidding battle for the debt-laden national carrier at the enterprise value of ₹18,000 crores. The government will take a hit of ₹28,844 crores.

The Tatas will own a 100% stake in Air India, as also 100% in its international low-cost arm Air India Express and 50% in the ground handling joint venture, Air India SATS. Apart from 141 planes and access to a network of 173 destinations including 55 international ones, Tatas will also have the ownership of iconic brands like Air India, Indian Airlines and the Maharajah.

History

The man who gave birth to his passion project and turned into a multi-global business, JRD(Jehangir Ratanji Dadabhoy) Tata spent his childhood in France in the neighbourhood of Louis Blériot, he was always fascinated by planes and their working. When the Flying Club was opened in Mumbai (then Bombay) in 1929, JRD Tata enrolled and logged long hours to master the art and science of flying aircraft. This was when JRD Tata’s fascination for flying took firm roots.

As the reins of the Tata Group was passed down to his hands one of his first acts included giving birth to Tata Aviation Service in 1932 with an investment of Rs 2 lakh and piloted the first flight of Air India, then called Tata Air Mail.

Air India started growing at a faster rate, it launched its first domestic flight from Bombay to Trivandrum with a six-seater Miles Merlin. In 1938, it was re-christened as Tata Air Services and later as Tata Airlines. Colombo in Ceylon (now Sri Lanka) and Delhi were added to the destinations in 1938. During the Second World War, the airline helped the Royal Air Force with troop movements, shipping of supplies, the rescue of refugees and maintenance of aircraft.

During World War

Tata changed the name from Tata Air Services to Tata Airlines in 1938. When World War II broke out, the British Indian government commandeered all the aircraft that Tata Airlines owned back then. Before that, Tata had started having issues with the government in running the airlines business.

After World War II ended and Tata got back control of the aircraft, JRD Tata renamed the airlines Air India in 1946 and went public as a joint-stock company.

Tata-Government collaboration

Independence changed Tata’s relation with the government. Tata Group, in October 1947, gave a proposal to the government to float Air-India International. Since the bearings of the company were getting heavy on the Tata Group.

The government had made its clear cut plan to hold a 49% stake in Air India venture with a provision of obtaining an additional two per cent stake in the company. Tatas were to have 25 per cent and the rest was to be owned by the public. The proposal got the Nehru government’s approval within weeks. In 1953, the government paid Rs 2.8 crore to purchase the rest of Air India’s stock. The government paid another Rs 3 crore to purchase other domestic airlines making the nationalisation of civil aviation complete.

Next year, Air India launched its maiden international route with a Bombay-London flight. It was on this flight that its iconic mascot Maharaja was used.

Can the Tatas turn it around or not?

Let's be honest, the carrier doesn’t command the same respect it used to have for obvious reasons. Air India has also found it challenging to compete with private sector airlines since 1991 and over the last few decades, the national carrier’s growth potential has also been chastened by its huge debt pile. Profits have been off the books since its merger with Indian Airlines in 2007. Adding to the list is the cost of maintenance checks, refurbishments and renovation which is in dire requirement. The Air India purchase is a very tough and complex move, Satyendra Pandey, managing partner at aviation advisory firm AT-TV, said. “Tata group will need access to capital to the tune of at least ₹10,000 crores to support the Air India acquisition," Panday did the maths and estimated that it would take 4-5 years minimum for the company to prove its way back under the new Captain for Tata Group. “The turnaround will hinge on the three pillars of costs, culture and communication. Attacking the cost base demands a hacksaw approach as opposed to a scalpel. That, in turn, has consequences," Pandey added.

By a hacksaw approach, Pandey implied a more aggressive stance towards cost rationalization (the scalpel approach being gentler). For now, there are limitations to a very aggressive approach. Tata group, for instance, will have to retain all 12,085 Air India employees for a minimum period of one year, and offer a voluntary retirement scheme after that.