- The government is currently debating whether to go for a partial divestment or a complete sale of Air India
- Sources said that Tata is not keen to acquire AI unless the government reduces the carrier’s debt.
- If the Tatas buy into Air India, the national carrier will return to the original owner.
MUMBAI/NEW DELHI: The Centre is said to have sent feelers to the Tata Group, the original promoter of Air India, to buy the beleaguered national carrier.
A few weeks ago, group chairman N Chandrasekaran is reported to have had an informal meeting with Union finance minister Arun Jaitley and civil aviation minister Ashok Gajapathi Raju in New Delhi, triggering speculation about India’s largest conglomerate renewing interest in a possible deal to buy Air India.
The government is currently debating whether to go for a partial divestment or a complete sale of Air India; a final decision is yet to be taken. Jaitley recently said that if more than 85% of the flying could be handled by private airlines, then they could handle even 100%, indicating the government’s willingness to exit Air India+ .
Sources in Bombay House, the Tata headquarters, said that the $104-billion group is not particularly keen to acquire AI unless the government significantly reduces the carrier’s Rs 50,000 crore-plus debt+ .
ET NOW (which is part of the Times of India Group) on Wednesday reported that the Tatas had held informal talks with the government signalling its interest to buy 51% stake in Air India. When contacted, a Tata Group spokesperson declined to comment on the matter. Senior officials in the civil aviation ministry also chose to be tight-lipped.
If the Tatas buy into Air India, the national carrier will return to the original owner. JRD Tata had pioneered aviation in the country with the establishment of Tata Airlines in 1932. Fourteen years later, the carrier was rebranded as Air India and subsequently nationalised in 1953. Air India is widely believed to have always remained close to group chairman emeritus Ratan Tata’s heart -in 2013, he was reported to have reiterated that he would be happy to look at the national carrier if it was put up for divestment.
Sixteen years ago, the conglomerate along with its current partner Singapore Airlines had shown interest in Air India when the government had decided to sell 40% in the carrier. Subsequently, the Vajpayee-led NDA government called off the divestment move.
The Tatas currently operate two airline joint ventures – AirAsia India and Vistara – in the country. Tata Sons holds 40% in AirAsia India, which is in partnership with Malaysian budget carrier AirAsia, while it owns 51% in the full-service Vistara which is in alliance with Singapore Airlines. AirAsia India clocked a loss of Rs 133 crore on revenues of Rs 159 crore in fiscal 2015 and Vistara reported a loss of Rs 401 crore on revenues of Rs 715 crore in fiscal 2016. The acquisition of AI could further swell the Tata Group’s debt, which stands at $26 billion, and stretch its resources thin.
Tata and Singapore Airlines plan to start international flights for Vistara next year, for which it requires wide-body planes. Vistara has so far not placed orders for big planes. If Air India were to come into the Tata fold, Vistara could fly international using the national carrier’s overseas network and fleet. Air India has a 17% market share in international traffic to and from India. In fact, it is the only Indian carrier that has the maximum non-stops to US.
“In terms of passengers’ perception, the problem with Air India is with the soft infrastructure -in-flight service, cabin cleanliness, amenities, in-flight entertainment -and not hardware, which is aircraft. The Tatas can improve overall passenger experience with Singapore Airlines’ assistance,” said an industry source.
Air India has prime slots in the busiest airports like JFK, Newark, Heathrow, CDG (Paris) and Tokyo worth millions of dollars. It has Boeing 777s and 787s which are used for flights to Australia, Far East, Europe and North America. The carrier’s non-stop Delhi-San Francisco over the Pacific is one of the longest flights on the planet in terms of distance flown.