Presenting Air India - by Tata. Legacy unfolds

Presenting Air India - by Tata. Legacy unfolds

by: Vidit Baya

Air India take over by Tata
UT WhatsApp Channel Join Now

The Tata group regained ownership of Air India on Thursday, nearly seven decades after relinquishing control. With a proposal of Rs 18,000 crore, the group was the winning bidder for the airline last year. The Tatas will receive 100% ownership of Air India, Air India Express, and a 50% investment in ground handling firm AI-SATS as a result of this deal. This is the first large unilateral privatization of a government-owned company in recent years. Though the government's privatization initiative has been criticized for its speed and manner, the symbolic significance of this deal is difficult to overlook.

The Tatas will now have the difficult task of turning the airline around. This will be difficult, especially because the aviation sector is still dealing with the effects of the pandemic. It will also have to cope with a slew of legacy challenges, including a deteriorating fleet and human resources. The Tatas will be required to keep all employees for a year under the bidding conditions. Devas Multimedia and its investors are attempting to enforce their arbitration awards on Air India's worldwide assets, which the group must deal with. According to reports, Air India is attempting to end the action on the basis that the change in ownership precludes any claims for collection of arbitration verdicts. According to reports, Air India is attempting to end the action on the basis that the change in ownership precludes any claims for collection of arbitration verdicts. There's also the matter of the group's two competitive airlines, Vistara and AirAsia India, to consider. It's feasible that the Tatas will contemplate combining their aviation businesses into a single corporation at some time.

Air India has been added to the Tata Group's list of loss-making businesses. Tata, excluding its cash cow (Tata Consultancy Services, or TCS), has been in the red for three years in a row, despite significant improvements in group operations and purposefulness under N. Chandrasekaran's leadership. This could change this year, with Tata Steel reporting bigger profits than TCS due to rising steel prices. Moreover, even if Air India continues to lose money, the size of the losses should be reduced soon. The interest burden should be minimized, the residual debt should be reduced, and seat occupancy should be improved by leveraging synergies with the group's existing airlines. Tata may also discover that it is no longer publicly chastised by ministers.

Even while this is a significant step forward, it will do little to help the government's disinvestment revenues. Only Rs 2,700 crore of the Rs 18,000 crore winning bid will be paid to the government, with the remaining Rs 15,300 crore held in debt by the company. According to DIPAM data, the government's disinvestment proceeds have fallen far short of the plan — against a target of Rs 1.75 lakh crore, collections have only reached Rs 9,330 crore so far. The government, for its part, is hoping that the LIC IPO would be completed by the end of March, however, given the complexities of such a transaction, it is unclear if this will be possible. Similarly, the privatization of BPCL and public sector banks are projected to continue into the next year.

To join us on Facebook Click Here and Subscribe to UdaipurTimes Broadcast channels on   GoogleNews |  Telegram |  Signal