This brings to end years of speculation on the airline, and the uncertainty surrounding its future, as the company has been in the financial doldrums for a significant period now. Last week, several news channels had pre-emptively forecast that the reins of Air India would be handed back to its founder group Tata Sons after 67 years. While the Centre denied it back then, industry observers had remarked that the salt-to-software conglomerate was placed comfortably to bag the winning bid. It may be recalled that Tata Sons had emerged as the top bidder for the takeover of Air India, but the bid was yet to be approved by the Group of Ministers headed by Home Minister Amit Shah. The Centre intends to complete the sell-off by December 2021, as per sources. The other bidder was SpiceJet’s Chairman Ajay Singh, who had bid for the airline in his personal capacity.
Just this week, former deputy chairman of the erstwhile Planning Commission, Montek Singh Ahluwalia had said that no other corporate house in India was in a better position for the takeover. He may have a point considering that the quantum of total debt accumulated by the national carrier is a staggering Rs 61,562 cr. Over the past five years, the airline has been posting consecutive net losses, with Rs 8,556 cr in FY19 and Rs 7,982 cr in FY20. Interestingly, Ahluwalia spoke in favour of divestment as he mentioned that it was pointless (for the government) to stick with an airline for two decades and let it run up massive losses, just because it could help evacuate Indians once in 20 years, a veiled reference to the Vande Bharat Mission evacuation flights that were kicked off in the peak of the pandemic.
Stakeholders believe that the value of being in the right market at the right time cannot be overstated. The takeover is happening at a very crucial juncture in the Indian aviation ecosystem as competing airliners are on a rapid expansion spree. Every operator worth its salt is now wanting to claim a stake in the passenger base of 200 mn plus flyers travelling in and out of India on an annual basis. This number is expected to grow to over 500 mn passengers in the next few years.
Last month, it was also reported that the Indian government may revisit bilateral air service agreements, which has created quite the furore in aviation circles. An air-service bilateral is essentially a treaty between two nations, which governs commercial air transport and the movement of passengers and goods between two countries. In the case of the UAE, India’s generous allocations allowed airlines based in the Middle East to tap into the coveted Indian traveller base, and in turn, connect them to onward destinations in Europe and beyond via airports in their country. The adverse economic impact of this has been borne by Indian airlines and airports, and all stakeholders in the value chain.
On the domestic front, as many as 50 new routes under the Centre’s ambitious plan to connect smaller towns and cities to India’s wide air travel network via the regional connectivity scheme (RCS) could become operational by the end of November. It will be interesting to watch how the Indian aviation space evolves in the aftermath of the privatisation of Air India. We are already a nation with some of the cheapest airfares globally. Undoubtedly, the takeover could inspire a flurry of service-centric improvements among competing airlines vying for passenger share. But in the larger scheme of things, the smooth handover of a legacy PSU could set the future blueprint for the government to shift its focus away from business, and concentrate on the all-important cause of governance.