Air India: The right reform

The sale of AI is good for the government, the consumer, and possibly for the Tatas because, free of much of its debt, AI, even in its present shape, may well turn in an operational profit
AI has a challenging flight ahead, but it will help that it is being piloted by a group that has repeatedly demonstrated that it has both the heart and the head for business (Hindustan Times) PREMIUM
AI has a challenging flight ahead, but it will help that it is being piloted by a group that has repeatedly demonstrated that it has both the heart and the head for business (Hindustan Times)
Updated on Oct 10, 2021 07:23 PM IST
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By HT Editorial

Friday’s announcement of the sale of Air India (AI) to the Tata group is a win for the government, a possible win for the buyer, and a definite win for consumers and India’s aviation business in general. It is a good deal for the government because, simply put, it no longer has to throw good money after bad. Sure, it has to deal with a pile of debt, but it also has AI’s land and non-aviation assets, and monetising them should help. It is also something the government should do right now — and strike while the iron is hot. And it has protected the jobs of all employees for a year, and also safeguarded their retirement benefits.

It is possibly a good deal for the Tata group because, free of much of its debt, AI, even in its present shape, may well turn in an operational profit. But it is overloaded with employees and its fleet is aging. The Tata group will also have to figure out how it restructures its two other aviation businesses, Air Asia India (a venture with Malaysia’s Air Asia) and Vistara (with Singapore Airlines). This will likely involve integrating some operations — IT, maintenance, ground handling, catering, cargo are all low-hanging fruit — while keeping some others distinct. It could even, at some point, require a complete merger of some businesses. Singapore Airlines will want to remain in the mix in some way, and the Tata group will likely want it to. The economic and operational possibilities of an airline consortium with one hub in Singapore and another in Mumbai are significant — and Tata may already be thinking along those lines. It helps that the Tata group is no stranger to large global acquisitions and partnerships that involve complex integration challenges.

There has been a rush of sentimental and nostalgic coverage of AI, and its association with the Tata group (it started life as Tata Airlines before being nationalised), but in business, there are no fairytale endings. There is no happily ever after. The end of the pandemic (which is in sight and expected sometime in 2022) could well result in a global aviation boom, but few businesses are as cyclical, investment- and service-intensive, and vulnerable to global economic and geopolitical developments as aviation. AI has a challenging flight ahead, but it will help that it is being piloted by a group that has repeatedly demonstrated that it has both the heart and the head for business.

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Wednesday, October 20, 2021