Tata Group Acquires Air India

 - October 8, 2021, 10:26 AM
An Air India Boeing 787 approaches London Heathrow Airport. More than two-thirds of Air India's revenues come from international operations. (Photo: Flickr: Creative Commons (BY-SA) by Colin Cooke Photo)

Sixty-eight years after Air India's establishment as Tata Airlines and subsequent takeover by the government in 1953, life has moved full circle for Tata Sons as it becomes the new owner of the national carrier for $2.7 billion. SpiceJet founder Ajay Singh submitted the other bid for the flag carrier.

“I am confident the Tata Group will restore the glory of Air India," said a gracious Singh. "The  [government] ran a successful divestment. [It was] a transparent and flexible process.” A statement from Tata Sons chairman N. Chandrasekaran called it “a historic moment, and it will be a rare privilege for our Group to own and operate the country’s flag-bearer airline.” He paid tribute to J.R.D. Tata, whom he called a “pioneer of Indian aviation, whose memory we cherish.”

Air India becomes Tata’s third airline acquisition. It also holds a majority stake in full-service Vistara with Singapore Airlines and AirAsia India with Malaysian AirAsia. Once the sale closes by the end of the year, Tata will get full ownership of Air India, its profitable subsidiary Air India Express, and 50 percent of its share of the joint venture with Singapore Airport Terminal Services (SATS), which provides ground handling services across airports in India. It will also inherit a brand that will need to be refurbished, 2,000 engineers, 1,600 pilots, and a host of partnerships including Star Alliance. Rajiv Bansal, secretary of the Ministry of Civil Aviation, explained that the Tata Group would retain current employees of Air India for the first year. “In the second year, they will see who to retain and can also give voluntary retirement from service,” he said.

Jitender Bhargava, former executive director of Air India and author of Descent of Air India told AIN that Air India needed to divest or ultimately face liquidation. “Disinvestment was the only way out for Air India,” he said. “The government has taken it to a logical end. The task ahead is formidable but Tata has the vision to instill global standards and give a new life to the brand.”

Kapil Kaul, CEO of the CAPA India consultancy, said the move would create a long-term positive impact for the Indian aviation sector. “It will take three to five years [for] restructuring and for the airline to return to profitability,” he predicted. 

Air India’s fleet consists of a mix of 117 wide- and narrow-body aircraft and AI Express flies 24 Boeing 737-800s. In 2020, Air India flew 63 million passengers, giving it a 26 percent market share on 172 domestic routes. It operates 70 international routes, more than any other Indian carrier. More than two-thirds of its consolidated revenues come from the international market.