Tata Group and Air India - The Complete Story

With the homecoming of "Maharaja" after 68 years, the divestment of India's national carrier was concluded on 27th January, 2022 with the government completing the handover of Air India Ltd, and its subsidiaries, Air India Express & AISATS (a 50% stake), to the Tata Group.

Let's look at the hitory of Tata Group & Air India and the turn of events that led Air India to return to its original founders after an almost seven-decade hiatus.

Table of Content

History of Air India

Air India was founded by Jehangir Ratanji Dadabhoy Tata as Tata Air Services, later named as Tata Airlines in 1932. While the name of the airlines was Tata Airlines, Tata Airlines expanded from a division of Tata Sons into a company, and Air India came into picture in the year 1946.

Air India came into picture after an opinion poll was announced among its employees. The employees were presented with the options for the poll; Indian Airlines, Pan-Indian Airlines, Trans-Indian Airlines & Air India.With the maximum votes on Air India by the employees, AIR INDIA's name came into existence.

Competition

Post World-War II, Air India became a public limited company as the thn Government of India passed Air Corporations Act and majority stake in the airline carrierfrom Tata Sons in 1953. JRD Tata remained chairman till 1977.

But with the low-cost airlines started entering the market, it caused a dent on Air India's market share along with futile attempts to privatise Air India.

The competition led to a mergerbetween Air India and Indian Airlines by the then UPA Government and the process was completed in the year of 2006.

The dark phase of debt accumulation

After Air India and Indian Airlines merger, Air India started suffering losses because the Ministry had purchased 111 new wide-bodied aircrafts costing them Rs. 67,000 crores.

Air India lost approximately Rs. 570 million because of the extra commissions that Michael Mascarenhas, the then Managing Director had sanctioned.

In 2006-07, combined losses beared by Air India were Rs. 7.7 billion and it went up to Rs. 72 billion by March 2009.

Altogether, Air India accumulated a debt of Rs. 26 billion and an operating loss of Rs. 220 billion while seeking Rs. 429 billion form the Government. To get Air India out of the debt mess, the then Government provided Air India an equity funding of Rs. 30,000 crore spread over a decade. By August 31, 2021, Air India had a total debt of Rs. 61,652 crores.

Merger with Indian Airlines

After Air India and Indian Airlines merger, Air India started suffering losses because the Ministry had purchased 111 new wide-bodied aircrafts costing them Rs. 67,000 crores.

Air India lost approximately Rs. 570 million because of the extra commissions that Michael Mascarenhas, the then Managing Director had sanctioned.

In 2006-07, combined losses beared by Air India were Rs. 7.7 billion and it went up to Rs. 72 billion by March 2009.

Tata Group to the rescue

The Tata Group won the financial bid for acquiring debt-laden national carrier Air India on October 8, 2021 resulting in 100% stake in Air India at Rs. 18,300 crores of which 15,300 crores was the debt component and 2,700 crores was the cash component to be paid to the Government. After 3 major attempts for over 2 decades, Air India went back to its original owner, Tata Group.On 27th January, 2022, the handover began along with disinvestment process.

Maharaja returns after 68 years

The Tata Group blueprinted a 100-day plan for Air India of improving the operational and service standards of the airline and in order to achieve the same,Tata Group will have to retain all 12,085 employees for at least a year.

Conclusion

The Tata Group-Air India merger wil pave for course correction for the loss-making airline. The confirmation of Air India's sale to Tata was termed as a historic momentby many politicians experts.