Privatization of Air India- Third time's a charm

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 “History repeats itself”

In 2017, the airline continued making losses, and its debt ballooned to Rs 50,000 crores while it continued to lose significant domestic and international market share. Yet again, the government set out to privatize Air India despite failing in 2000. In March of 2018, they issued an expression of interest to sell a 76 percent stake of the perennially loss-making airline and also a 50 percent stake of Air India SATS Airport Services Pvt Ltd, a ground handling joint venture with Singapore Airport Terminal Services.

This attempt at privatization asked the bidders to take on Rs 33,392 crores worth of debt and submit a bid by the month of May 2018. It isn’t surprising that no private firms showed any interest in buying the debt-laden airline.

History had repeated itself. The government had classically failed to privatize Air India. Although the Airline was massively failing, it was undeniable that Air India had somehow become a symbol of ‘national pride’. This strange reason was making the sale of the airline far more challenging as the foundations of the ruling party’s political campaign fed off the idea of ‘nationalism’.

However, they were presented with no other option but to reattempt the privatization of their most expensive fleet of toys as they couldn’t afford to play with it anymore. In January 2020, the government released the expression of interest to invite bidders. This time they decided to sell 100 percent shares of both Air India and its budget carrier Air India Express as well as 50 percent shares of AISATS.

As of August 31, 2021, Air India had a total debt of ₹61,562 crores. Additionally, the onset of the COVID-19 pandemic hit the privatization process of Air India as the aviation sector worldwide took a hit. Perhaps, the third time's a charm. Air India’s fortune had turned around as the government had received two bids by September of 2021.  The Tata Group and the consortium led by SpiceJet's founder Ajay Singh submitted their bids to buy the flag carrier.

The Tata Group had won a bid. Talace Private Limited, a subsidiary of the Tata Group's holding company, paid Rs 18,000 crore, out of which about Rs 2,700 crore was paid to the government, and the loans worth Rs15,300 crore were taken up by the new entity. This marked the beginning of an arduous, long, and ongoing journey of reviving the airline.  The Tata Group now operates three airlines - Air India, Air India Express, and Vistara upon the merger of Air Asia India and AI Express.

Now, Tatas’ decisions ought to be strategic. With the entry of a new budget airline, Akasa Air, and other domestic competitors struggling for capital, the new owners of Air India realize that they need to restructure their approach to acquire customers and cater to the budget class as well as the more lucrative business class. The hope is directed at Tata’s reputed managerial expertise, which is expected to come into play.

 

Reference

Anonyumous. (2021, December). Privatisation of Air India deserves praise.... but Go I needs to learn from it. and do more. Vayu Aerospace and Defence Review. https://www.proquest.com/openview/90372a4b1389293121d4af8807a9899a/1?pq-origsite=gscholar&cbl=2028820

MISHRA, M. (2022, January 27). Air India returns to Tata: Everything you need to know about this handover. The Economic Times. https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/air-india-returns-to-tata-everything-you-need-to-know-about-this-handover/articleshow/89155741.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst


Acknowledgment: I thank Ms. Vaishnavi Krishna Mohan, Student of BA(Hons) Economics at Ahmedabad University for her support in content development

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