Why is Tata so keen to buy national carrier Air India?
If the Tata Group manages to take over Air India, it would be a reunion of sorts, given that Air India was started as Tata Airlines in the pre-independence era
Air India witnessed bids on Monday (December 14) with the government determined to privatise the loss-making and debt-ridden national carrier.
The government had offered to offload management control of the carrier and its entire stake in the airline, plus its 100% shareholding in the budget carrier Air India Express and its 50% stake in the ground-handling arm Air India SATS Airport Services. This came after a failed attempt in 2018 when the government wanted to offload 76% equity share capital in Air India and give up management control, but the offer found no takers.
The Tata bid
What is significant in Monday's bid is that it is widely believed that India's biggest conglomerate Tata Group, which owns a $113 billion business empire, had submitted its formal expression of interest (EoI) for the troubled carrier. According to a Times of India report, the bid was made through AirAsia India, in which Tata is a significant majority stakeholder.
Also read: Air India employees believe 'nobody can run airline better', prepare takeover bid
In August itself, the Tata Group had said that it was mulling a bid to take over the national carrier, according to ET Now. It was reported by The Economic Times last month that Tata Sons was in talks with Singapore Airlines (SIA) -- its joint venture partner in full-service carrier Vistara -- to bid for Air India together.
Air India witnessed bids on Monday as the govt seeks to disinvest the national carrier. Image courtesy: Facebook/Air India
The Tata Group reportedly was trying to get SIA to abandon a non-compete clause and join it in the bid but was ready to even go it alone if the SIA did not accede. That would breach the terms of pact with SIA, as according to them, only Vistara can be a full-service carrier within the overall aviation business of the Tata Group. So even Tata's solo bid would require a waiver from SIA, not to forget Temasek, which owns 55% stake in SIA.
Air India is a Tata offspring
Whatever happens, one can easily understand the Tatas' love for Air India. After all, Air India is the progeny of the Tatas. It was founded in 1932 by the legendary industrialist and philanthropist JRD Tata. His father Ratanji Dadabhoy Tata was the first cousin of Jamsetji Tata, who founded the Tata Group in 1868.
The plane in which JRD Tata took airmail from Karachi to Bombay. Image courtesy: Youtube/Vistara
JRD Tata was enamoured by flying from the very beginning and his first flight was in 1919, at the tender age of 15 years. He was fascinated with flying as a young boy holidaying in northern France with the family of Louis Bleriot, who was the first to fly across the English Channel. JRD Tata was awe-struck by the skills of Adolph Pegoud, a pilot hired by Bleriot.
In 1929, JRD Tata became the first licensed pilot in India. He got his pilot's A-licence in the shortest number of hours. According to Tata archives, he flew solo after just three-and-a-half hours in the air with an instructor.
Story of Tata Airlines
Tata Airlines started as Tata Air Services with an investment of Rs 2 lakh from Tata Sons and two second-hand de Havilland Puss Moth aircraft. The de Havilland DH80A Puss Moth was a British three-seater high-wing monoplane built between 1929 and 1933 and flew at a speed of just around 200 kmph. The first prototype was designed to cater to the flourishing private flying movement in the UK.
In April 1932, Tata was given a contract to carry mail for Imperial Airways of Britain. On October 15, 1932, JRD Tata himself flew a tiny single-engine de Havilland Puss Moth from Karachi's (currently in Pakistan) Drigh Road aerodrome to Bombay's (currently Mumbai) Juhu aerodrome via Ahmedabad, carrying 25kg of airmail. This was the first flight of Tata Airlines, and indeed of the country.
JRD Tata carried airmail from Karachi to Bombay in 1932. Image courtesy: Youtube/Vistara
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JRD Tata described the flight thus: "On an exciting October dawn in 1932, a Puss Moth and I soared joyfully from Karachi with our first precious load of mail, on an inaugural flight to Bombay. As we hummed towards our destination at a 'dazzling' hundred miles an hour, I breathed a silent prayer for the success of our venture and for the safety of those who worked for it. We were a small team in those days. We shared successes and failures, the joys and headaches, as together we built up the enterprise which later was to blossom into Air-India and Air-India International."
At Bombay, Tata's close friend and former Royal Air Force (RAF) pilot Neville Vintcent took over and flew the plane to Madras (currently Chennai) through Bellary. Karachi was chosen as the starting point for this historic flight because Imperial Airways terminated there with airmail from England, in those pre-independence days.
In those initial days, the airline got hardly any help from the British government. What it had to be satisfied with was an extra four annas (there were 16 annas in a rupee) as air surcharge per letter, for which postage stamp had to be fixed.
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An interesting story related to the early days of Tata Airlines is that the planes were so small that the occasional passenger had to travel sitting on top of mail bags, often ending up head over heels! Another challenge that the airline faced was that a mudflat at Juhu used to serve as the airfield, which would get flooded in the monsoon. As a result, the two de Havilland Puss Moths, along with three pilots and three mechanics had to be shifted to Poona.
Spreading its wings
The first full year of operations of the Tata Airlines was 1933. That year, the airline flew 1.6 lakh miles (2,57,495.04 km), carrying 155 passengers and 10.71 tonnes of mail. The first pilot on the airline's payroll was Homi Bharucha. JRD and Vintcent were the other pilots.
A Tata Airlines plane. Image courtesy: Youtube/Vistara
The frequency of the Karachi-Madras flight was made twice a week in 1934. In 1935, weekly service was started between Bombay and Trivandrum, with stops at Goa and Cannanore. The Bombay-Trivandrum route was the airline's longest domestic route, which was launched with a six-seater Miles Merlin aircraft. The first passengers were JRD's colleague Jal Naoroji and Seth Kanji Dwarkadas, a well-known merchant from Bombay, who wore a traditional dhoti, a long black dagalo coat and a small black cap.
Tata Airlines' services now started to expand further. In 1937, a flight from Bombay to Delhi, via Indore, Bhopal and Gwalior was begun. And a year later, Tata Airlines spread its wings overseas for the first time, with a flight started to Colombo in Ceylon (currently Sri Lanka).
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So the airlines ventured into commercial services apart from the usual mail delivery and going overseas in just six years after birth signalled a growth story that had few matches worldwide.
During the Second World War (1939-1945), Tata Airlines was involved in a survey of the south Arabia route, movement of refugees from Burma (currently Myanmar), carriage of supplies to Iraq, and overhaul and maintenance of RAF equipment.
After the War, commercial service was restored in India and in 1946, Tata Airlines became a public limited company and was renamed as Air India. The airline operated in those days from the second floor at Bombay House. The booking office was opened opposite the Churchgate railway station in Bombay. Genell Moots of TWA arrived from Kansas City in the US to train India's first batch of air hostesses.
Vistara, through its Retrojet, had sought to pay tribute to the contribution made by JRD Tata to lay the foundations of Indian civil aviation in the 1930s. The Retrojet remembers the role played by Tata Airlines as the ancestor of Air India and Vistara.
To celebrate this rich ancestry, Vistara painted an Airbus A320 in the colours of the Tata Airlines. The aircraft carried the same registration VT-ATV, which was found on the Tata Airlines Douglas DC3 in the 1940s.
The Vistara Retrojet was unveiled on September 1, 2018, and is one of the most distinctive, popular and photographed aircraft today. The cabin crew don retro uniforms inspired the Tata Airlines look and the golden age of flying in the 1950s and 1960s.
The retro flights are highly anticipated by aviation enthusiasts and the common public alike and add more weight to the Vistara brand.
After independence, the Government of India took up 49% of the airline. That happened in 1948. That very year, Air India flew to Europe with the iconic 'Maharaja' as its mascot. The first international flight of the airline took place on June 8, 1948, as a Lockheed Constellation L-749A named Malabar Princess (registered VT-CQP) took off from Bombay for the London-Heathrow airport.
A 1948 Air India International stamp of India. Image courtesy: Wikimedia Commons
After independence, there were talks that Air India would be nationalised. The government apparently wanted to restore order in the industry as carriers were going bankrupt.
However, JRD Tata was not in its favour. "JRD objected at once: If nationalisation could be shown to be in the public interest, he said, then he would be entirely in favour. But there was no evidence that this would be the case. India’s new government had no experience in running airlines and, particularly in so far as passenger safety was concerned, it was vital that management stayed in experienced hands," Canadian author Morgen Witzel writes in his book Tata: The Evolution of a Corporate Brand.
However, the government went ahead with the nationalisation and passed the Air Corporations Act in 1953 and bought a majority stake in Air India from Tata Sons. JRD Tata, however, stayed on as the chairman of the airline at the request of the then prime minister Jawaharlal Nehru. He continued in this position till 1977, when he was removed by the then prime minister Morarji Desai.
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After nationalisation, the carrier was renamed as Air India International Limited, with focus on foreign operations. The domestic business was transferred to the Indian Airlines Corporation, which was formed by a merger of Deccan Airways, Airways India, Bharat Airways, Himalayan Aviation, Kalinga Airlines, Indian National Airways and Air Services of India and the domestic wing of Air India. From 1948 to 1950, Air India introduced services to Europe, Africa, Southeast Asia and East Asia.
A vintage photo of an Air India plane. Image courtesy: Wikimedia Commons
In February 1960, Air India took delivery of its first Boeing 707-420, named 'Gauri Shankar', thereby becoming the first Asian airline to enter the jet age. The airline spread to New York in the US that year itself. In June 1962, the name of the airline was officially shortened to Air India and that month itself, it became the world's first all-jet airline.
In 1971, it took delivery of its first Boeing 747-200B, named 'Emperor Ashoka' and came up with a 'Palace in the Sky' livery and branding. In 1986, an Airbus A310-300 joined the Air India fleet and in 1993, it introduced a Boeing 747-400, named 'Konark', and operated the first non-stop flight between New York and Delhi.
Tatas' interest in aviation intact
India started to allow private airlines in the early 1990s, and the Tatas' interest in aviation was still intact. In 1994, the Tatas came up with a plan to start an airline again, this time with the help of Singapore Airlines and with 100 planes, a Bloomberg Quint report pointed out. But the idea had to be scrapped as the government was not willing to allow a foreign player.
At the turn of the millennium, efforts were made to re-privatise Air India, and the Tatas again tried to regain control of the airline that went out of its hands a few years after independence. The Tatas partnered with Singapore Airlines again, but the plan had to be dropped after political opposition.
Air India-Indian Airlines merger
An Indian Airlines plane. Image courtesy: Wikimedia Commons/Aero Icarus
In 2007, the government announced the merger of both Indian (along with Alliance Air) and Air India (along with Air India Express, which started in 2004) into a new entity called the National Aviation Company of India Limited (NACIL), which is now known as Air India Limited and is India's national carrier.
Debilitating financial problems
Air India, however, ran into major financial troubles and has not made profits since its merger with Indian Airlines in 2007-08. According to a Live Mint report last year, Air India witnessed a record loss of Rs 8,556.35 crore in 2018-19. It is surviving on taxpayer money, which could have been better spent.
According to Air India Chairman and Managing Director Rajiv Bansal, the airline could end up making a loss of around Rs 8,000 crore this fiscal. According to an Economic Times report, from March 31, 2007, to March 31, 2009, Air India's losses went up over 800% from Rs 771 crore (Air India + Indian Airlines) to Rs 7,200 crore.
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The ET report identified as the reasons for this enormous increase in losses as the way Air India and Indian Airlines were merged, aircraft were leased or purchased, capacity gifted away to foreign airlines under bilateral agreements, flights withdrawn from profitable routes, pilots not sent for proper training, and relinquishing of ground-handling services in Bangalore and Hyderabad and plans to do so elsewhere.
Air India was the first Asian carrier to induct a jet plane, with the Boeing 707-420 Gauri Shankar. Image courtesy: Wikimedia Commons/Steve Fitzgerald
Passengers in south India could book really cheap flights to the Middle East and Singapore and Indian Airlines and Air India Express flights competed with each other even after the two merged. Also giving up share on the money-spinning ground-handling services was a blunder. "The airline earned Rs 900 crore in 2007-08 from ground-handling. From next year, the airline will have to pay AISATS even to handle its own flights," ET quoted a senior airline official as saying.
Air India had to sell its planes to finance the debt. It had to sell three Airbus A300s and a Boeing 747-300 Combi in March 2009 for $18.57 million. It had sold 13 aircraft in 2008. A total of 21 aircraft were sold off between 2007 and 2009 for $451.88 million, the Financial Express had reported.
In 2009, Air India had made the Frankfurt airport as its international hub for onward flights to the US from India but had to shut it down the following year due to high operating costs. Air India was invited to be a member of the Star Alliance in 2007, but it was suspended in 2011, as the airline failed to meet the minimum standards. The membership, however, came about in 2014.
Star Alliance is the world largest airline alliance, consisting of 26 members at present. The members share airport terminals (known as co-locations). Alliance members join hands to offer smooth connections across a vast global network. Star Alliance activities include co-locations at airports, infrastructure, communication initiatives and other services. The alliance comprises the likes of Air Canada, Air China, Air New Zealand, Lufthansa, Singapore Airlines, United Airlines, Avianca among others.
"Air India passengers will enjoy enormous benefits, including seamless transfers while travelling across the world, more frequent flyer mileage points, code sharing, leading to a wider choice of flights and access to facilities at over 1,000 lounges worldwide," Air India says in its website.
The Comptroller and Auditor General (CAG) had slammed Air India's purchase of 111 aircraft and blamed it for the company's financial woes. The CAG said that the decision to buy 68 Boeing aircraft for Air India and 43 Airbus planes for Indian Airlines in 2005-06 was ill-timed and driven from the top, which resulted in the airline accumulating a massive debt of Rs.38,423 crore as on March 31, 2010, the Free Press Journal reported.
An Air India Boeing 787 Dreamliner in a special Star Alliance livery. Image courtesy: Wikimedia Commons/Richard Vandervord
Praful Patel, who was the civil aviation minister at that time defended the decision by saying that most of the aircraft in the Air India and Indian Airlines fleets in 2004 were 20-years-old and "there was no way the airline could have withstood competition or survived with these planes".
In 2020, former Union finance and home minister P Chidambaram was questioned by the Enforcement Directorate (ED) over losses suffered by Air India due to an alleged multi-crore aviation scam and irregularities in fixing air slots for international carriers. Patel was quizzed by the ED in 2009 in the Air India scam. The scam relates to the buying of the 111 planes for the national carrier for about Rs 70,000 crore.
Shoddy safety culture
A New York Times report quoted a United Airlines pilot, who had joined Air India, as revealing that the pilots of Air India had completely covered the windows of the cockpit with newspapers mid-flight to keep out the sun, creating a terrible visibility hazard. The pilot said that it was a "normal thing at Air India".
There were numerous other safety issues related to basic operations at Air India. Air India is "just so far behind the ball I don’t know how they will ever catch up," said Alexander Garmendia, who joined Air India in 2009 after retiring from American Airlines, NYT reported. Veteran Air India pilots also often left the cockpit door unlocked. This was a practice that was abandoned by most airlines around the world after the 9/11 terror attacks in the US. Air India pilots often left the cockpit, leaving co-pilots at the helm alone for long periods and pilots smoking in the cockpits was not uncommon, the report said.
Calls for privatisation
In 2012, a study commissioned by the corporate affairs ministry recommended that the airline should be partly privatised. Then in 2013, the then civil aviation minister Ajit Singh stated that privatisation was necessary for the airline's survival. But this faced political opposition.
The plane that JRD Tata first flew displayed at the Aero Club of India HQ in Delhi. Image courtesy: Wikimedia Commons/Alec Wilson
According to a recent RTI response by Air India, there were outstanding dues of over Rs 822 crore towards VVIP charter flights as on November 30, 2019. Rs 9.67 crore towards evacuation operations and Rs 12.65 crore towards transporting foreign dignitaries were also pending. Alarmingly, Rs 526.16 crore was due to the airline on account of tickets taken on credit by government officials as on March 31, 2019. These factors, apart from high interest rates, fluctuating exchange rates due to a weakening rupee and competition from low-cost carriers have put a burden on the airline's finances.
Late last year, the airline announced that it would stop issuing tickets on credit to officials from government agencies like the Central Bureau of Investigation, Enforcement Directorate, Information Bureau, Central Labour Institute, Border Security Force and Indian Audit Board, each of whom owes the airline more than Rs 10 lakh, IANS reported.
"I feel like a woman with 1,000 husbands," a male Air India executive was quoted by NYT as saying, referring to the constant demands from government officials.
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According to Puri, considering the debt pile that Air India sits on, the choice for the government is to either privatise it or shut it down. The airline has received equity infusion from the government to the tune of Rs 30,520.21 crore since FY 2011-12 till December 5, 2019, Live Mint reported. However, according to an Economic Times report in July, the government has declined to provide equity support to the airline any further given that it had taken over 60% of the airline's debts, thereby reducing its total debt from over Rs 60,000 crore to Rs 23,286 crore.
Air India, however, made a Rs 2,556.60 crore profit till August 31 as a result of the Vande Bharat flights at a time when international scheduled commercial passenger flights continue to be suspended, the civil aviation minister revealed.
JRD Tata's pilot licence. Image courtesy: Youtube/Vistara
The Economic Times reported in August that aircraft manufacturing behemoth Boeing suspended spare parts replacement pact for Air India's wide-bodied 787 Dreamliners due to non-payment of dues. This programme would have helped the airline save up to 30% of maintenance costs and it was feared that the suspension would hurt Air India immensely given that it heavily uses the Dreamliners for Vande Bharat flights. Air India owes Boeing $33 million in dues, finance charges and penalties since 2017.
Employee troubles and other issues
Over the years, Air India has copped considerable criticism over allegations of mismanagement, employee-management discord, and has at times fallen foul with foreign entities. It was banned by Hong Kong and Dubai administrations for carrying Covid-positive passengers onboard. According to another recent report, a senior Air India Express crew member was allowed to fly despite testing Covid-positive.
In June, the US transportation department had restricted Air India's Vande Bharat flights alleging "discriminatory and restrictive" practices by India with respect to the operating rights of US carriers to and from India.
The department alleged that Air India's so-called evacuation charters had gone beyond true evacuations and involved sales to any member of the general public able to enter the US while pointing out the Indian ministry of civil aviation's (MoCA) inaction regarding Delta Airlines' request to operate repatriation charters similar to those undertaken by Air India.
JRD Tata piloting a plane. Image courtesy: Youtube/Vistara
There have been numerous employee strikes, over operational and salary issues. A 58-day strike from May 7 to July 3, 2012, "crippled Air India International's operations and caused an estimated revenue loss of Rs 625 crore. Even after the strike was called off on July 3, the airline was not operating all its 45 international services till early August," Ratna Sen writes in Air India Merger: A Tale of Messed Up Industrial Relations, published in the Indian Journal of Industrial Relations. The study pointed towards the Dharmadhikari panel highlighting that in many areas of HRM, integration, even five years after the merger, remained elusive.
"The country’s once-prosperous national carrier is now probably the most infamous company, for which mismanagement, discontent and conflict have become bywords. Stuck in a quagmire of financial mess and a humongous unpaid workforce, things have just started looking up for Air India (AI), after the Indian Pilots’ Guild (IPG) ended its strike after 60 days on July 4, leading to losses worth Rs 600 crore," The Asian Age wrote after the 2012 strike was called off.
Work stoppages have not only caused immense loss to the company, they have severely inconvenienced passengers, with many flights being cancelled.
Covid-19 pay cuts
The Air India employees have been unhappy with the management for pay cuts during the time of Covid-19 as well.
The airline first announced a 10% cut in allowances for all employees except cabin crew for three months with effect from March 2020 to battle the Covid-19 downturn. It also withdrew the special allowance for pilots and revised downward the layover allowance for the cabin crew.
Significantly, flying allowances of Air India pilots constitute 70% of their salaries. Thus the pilots who are at the frontline of the Covid-19 battle are forced to bear the greatest hardships, while the austerity measures would hardly affect the top management as their allowances are relatively quite small.
According to a Times Now report in June, the debt-ridden airline also planned to reduce the guaranteed 70 hours flying allowance for the pilots to 30-35 hours as a cost-cutting measure in view of the pandemic.
Then in July, it cut the monthly allowances of its employees who drew a gross salary of over Rs 25,000 per month by up to 50%.
According to media reports in July, the pilots alleged that they had to bear a 60% pay cut, including a heavy cut on allowances, while the salaries of the top management were reduced by a mere 3.5-4%. The pilots of the airline had alleged that they had not been paid 70% of their salaries since April.
An Air India Boeing 747-400 aircraft used as Air India One for 25 years. Image courtesy: Wikimedia Commons/José Luis Celada Euba
The airline also approved leave without pay (LWP) scheme of six months or two years extendable up to five years for its employees, subject to suitability, efficiency, competence, standard of work, redundancy and health of the employees, and also based on the service history of the employees of non-availability for duty due to ill health or otherwise, Business Today reported.
The Air India unions pointed out in the letter to the pilots that while other major airlines have revised the pay cut for their employees, the national carrier is yet to resolve the issue, even after being a public sector undertaking (PSU).
The Air India unions had earlier cited the government's instructions on employee welfare and timely payment of wages without deductions. They gave the example of IndiGo in this regard.
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Two prominent Air India Unions earlier this month directed the pilots of the national carrier not to take part in the employee bids for the strategic sale of the airline. The unions cited the "disproportionate" pay cut for the pilots as compared to that of the top management officials in the wake of the Covid-19 pandemic as the reason for this directive.
Moreover, the All India Cabin Crew Association (AICCA), in a letter to Air India Chairman and Managing Director Rajiv Bansal, flagged the issue of over Rs 1,400 crore of employee arrears outstanding. The AICCA said its members would not be participating in the employee bids for the airline.
It may be noted here that a consortium of over 200 Air India employees has bid for the airline with the help of a private equity fund. According to a highly-placed source with knowledge about the matter, the plan is that at least 51% stake would rest with the Air India employees if they succeed in their bid.
Air India Express much healthier
Unlike its struggling parent, Air India Express has been performing far better, even in this time of the pandemic. The budget carrier reported its highest-ever net profit of Rs 412.77 crore in FY20, according to a Hindu Businessline report. This is its fifth consecutive year of profit.
President Ram Nath Kovind used Air India One's new B777 aircraft for its inaugural flight to Chennai
Air India Express had first turned profitable in 2015-16 with a net gain figure of Rs 362 crore. It reported net profits of Rs 297 crore in 2016-17, Rs 262.05 crore in 2017-18 and Rs 169 crore in 2018-19. Notwithstanding market headwinds due to Covid-19 in the last quarter of FY20, the operating revenues of Air India Express grew by 25% from Rs 4,172 crore in FY19 to Rs 5,219 crore in FY20. Passenger numbers increased by 11%, from 4.36 million in 2018-19 to 4.84 million in 2019-20.
Final push for privatisation
On June 28, 2017, Air India was cleared for privatisation by the government of India with a plan to set up a committee to start the process. After the failed attempt to privatise the national carrier in 2018, the airline was put on the block on January 27 and the initial deadline for submission of bids was March 31. It was first extended to June 30 and then to August 31. It was again extended to October 30 in view of the situation arising out of the Covid-19 pandemic before the final deadline was set as December 14.
Also read -- Now Air India cabin crew may also stay away from employee bid
According to the EoI floated by Department of Investment and Public Asset Management (DIPAM) in January, the buyer would have to absorb Rs 23,286.5 crore, or more than one-third of the airline's total debt, while the rest would be transferred to the Air India Assets Holding Ltd (AIAHL) -- a special purpose vehicle.
However, further sweetening the deal to attract bidders, the government announced that the bidding would take place on the enterprise value, instead of the equity value, of the airline. While the enterprise value of a company includes its equity value, debt and cash with the company, its equity value is the value of the company’s shares. What that means is that the investors would have the flexibility to absorb the amount of debt they want.
Out of whatever the enterprise amount that the bidder quotes, 15% would have to be given to the government as the price of Air India and 85% would be debt that the winning bidder would absorb, civil aviation secretary Pradeep Singh Kharola was quoted as saying by PTI. The willing bidder would have to pay 15% of the quote as upfront cash payment, disinvestment secretary Tuhin Kanta Pandey said, according to a Business Standard report.
President Ram Nath Kovind used Air India One's new B777 aircraft to visit Tirupati to offer prayers at the Sri Venkateswara Swamy Temple
According to the DIPAM's replies to clarifications sought by interested bidders on the PIM, on the date of closing of the transaction, the debt, which is lower among 1) the outstanding debt of Air India and Air India Express combined, and 2) 85% (or lower) of the enterprise value quoted by the financial bidder would be debt retained. The remaining debt would be allocated to the AIAHL.
A national hero
Despite barbs, Air India has been at the forefront of India's Covid-19 battle, evacuating stranded people both from abroad and from India. It has played a stellar role in the government's Vande Bharat Mission, and according to ministry of civil aviation (MoCA) data, till December 13, the Air India group operated a total of 11,341 flights, carrying 9,19,049 in-bound and 5,63,429 out-bound passengers.
Air India is playing a major role in the bilateral air bubble pacts that India currently has with 23 countries, under which, the carriers of India and the partner country are able to carry passengers both ways and enjoy reciprocal rights. These initiatives have been significant at a time when the government continues to suspend scheduled international commercial air operations in view of the Covid-19 pandemic.
An Air India Airbus A310-300. The debt-ridden Air India had to sell three A300s in 2009. Image courtesy: Wikimedia Commons/Alain Durand
The national carrier had also been the linchpin of the government's Lifeline Udan project, which was launched on March 26, to transport medical cargo and other essential supplies to the remotest corners of the country, with special focus on the Northeast, island territories and hill states, as the government imposed a strict lockdown and suspended all scheduled passenger flights to break the Covid-19 infection chain.
Not only these, but Air India had also operated numerous evacuation flights to countries like China and Italy, which were some of the worst-affected by coronavirus at the start of the year. It brought back not only Indians but even foreign nationals, notably from the quarantined cruise ship 'Diamond Princess' docked off the coast of Yokohama in Japan. It had also carried foreign nationals stranded in India home.
Also read -- Air India pilot unions fume at 'disproportionate' Covid pay cut, ask members to avoid airline bid
The Air Indians had done all these even at the cost of their health and even in the face of pay cuts due to the Covid-19 crisis. According to reports, in July, two leading Air India pilot unions said in a letter to CMD Rajiv Bansal that 55 pilots had already contracted the virus. In an internal circular dated July 20, the airline noted that some of its employees had died due to the disease.
The national carrier has had a rich history of national service, be it taking an active part in evacuations from the Gulf in 1990 after Iraq invaded Kuwait that led to the First Gulf War, or evacuations from strife-torn Yemen in 2015, among others.
Air India One
Air India also operates the Air India One, which are planes used exclusively by the President, Vice President and Prime Minister of India. Earlier this year, India got two Boeing 777 planes as a replacement for the B747 planes that had carried the three premiers on international state visits for 25 years. The new planes can reportedly fly over 17 hours without refuelling.
According to a Hindustan Times report, then Air India One has its own missile defence system called the Large Aircraft Infrared Countermeasures (LAIRCM) and Self-Protection Suites (SPS), capable of countering missile threats. These equipment can divert heat-seeking missiles by interfering with their guidance systems and jamming enemy radar.
These planes are equipped with advanced and secured communication systems that allow audio and video communication functions mid-air the risk of hacking or being taped, sources familiar with the details told ANI.
As on August 25, 2020, Air India has a mix of Boeing and Airbus and wide-body and narrow-body planes. It has four Boeing B747-400, three Boeing B777-200LR, 15 Boeing B777-300ER, 27 Boeing 787-8 Dreamliner, nine Airbus A320-214, 22 Airbus A319-112, 20 Airbus A321-211 and 27 Airbus A320-251 Neo planes in its fleet. Air India Express currently operates 24 Boeing B737-800 planes.
The Air India Express has been in much better health than its parent. Image courtesy: Air India Express
A big brand
According to civil aviation minister Hardeep Singh Puri, Air India is still a first-rate brand. Air India and Air India Express together currently have over 150 planes and connect numerous domestic and foreign destinations. Air India boasts of wide-bodied aircraft and long-haul routes. The buyers of the airline would get these apart from the immense brand value gained from the airline's rich history of national service and the fact that it is the national carrier of India. The Tatas feature prominently in that legacy, and it is possibly one of the reasons that they want to acquire back what was theirs.
But Tatas have to be wary
However, even the Tatas' path would not be smooth. According to former Tata Sons chairman Cyrus Mistry, the group had an adjusted net loss of Rs 13,000 crore in 2019, which was the worst loss in three decades, PTI reported.
Vistara's pre-tax loss widened to Rs 1,800 crore in FY20 from Rs 831 crore in FY19 due to higher operating costs, according to a Business Standard report. This was the highest single-year loss for Vistara since beginning operations in 2015.
More trouble is brewing for the Tata's airline business, with AirAsia Berhad, Tatas' joint venture partner in the low-cost carrier AirAsia India, hinting at exit owing to financial stress. According to a Live Mint report, AirAsia India's revenue dropped to Rs 221.55 crore in the second quarter of the current fiscal as opposed to Rs 724.24 crore a year ago in the wake of the Covid-19 pandemic. In the September quarter, the carrier's fleet capacity also diminished by 64% from a year ago.
ET Now had quoted a Tata group director as saying that the chairman had stated that the airline businesses of Tata have to be consolidated and there cannot be multiple airlines. Therefore, Air India being a full-service carrier, it was only sensible to bring it under the umbrella of Vistara, which is also a full-service carrier, the Tata group director had further told ET Now.
However, according to TOI, since AirAsia India was formed before Vistara, its charter allows it to enter the full-service business, while the Covid-stressed SIA was not too keen to take up a distressed company as Air India.
According to Directorate General of Civil Aviation (DGCA) data, in October 2020, Air India carried a total of 4.94 lakh passengers and had a domestic market share of 9.4%, which was ranked third after IndiGo and SpiceJet. The two Tata group airlines Vistara and AirAsia India carried 3.39 lakh and 3.74 lakh passengers respectively, giving them market shares of 6.4% and 7.1% respectively.
The Tata Group would pin its hopes on the leadership of its patriarch Ratan Tata, who, as a Bloomberg Quint report pointed out, once landed a plane that had lost its only engine mid-flight and had even piloted the supersonic F16 fighter jet. According to several estimates, the deep pockets of the Tata group would allow it to provide long-term commitment to run even loss-making airlines.
(Display image courtesy Youtube/Vistara and Wikimedia Commons/Jose Luis Celada Euba)