Government officials indicate that Tata Group remains the leading contender to buy Air India. If the deal goes through, then life will come full circle for Air India because it was JRD Tata who founded Air India in 1932 as ‘Tata Airlines’. It became a public limited company in 1946 and was then renamed Air India. In fact, even JRD Tata was Air India Chairman until 1978 and even Ratan Tata was Air India Chairman between 1986 to 1989.
The two attempts that the government made earlier to sell Air India both the times Tata Group was among the potential bidders and now, if this deal goes through, then we can see a combination of synergies between Tata’s currently owned full-service carrier Vistara and Air India as well as between Tata’s currently own budget carrier AirAsia India and Air India Express, but we have to wait and see how this entire divestment process gets implemented.
Kapil Kaul, CEO & Director of CAPA said, “I think it is a historic decision, though on expected lines, it is just a formality with respect to the announcement, but I think a historic decision for the sector and with a very positive long-term impact. So I think it is one of the biggest reforms that the sector has seen since the 1890s. So very, very positive.”
Kaul added, “I would also like to congratulate the Government of India for demonstrating highest strategic determination and clarity and with respect to exit of Air India. Please keep in mind is not a very easy decision for the government to go ahead and possibly take such a large haircut so the determination and the clarity that the government demonstrated is extremely remarkable.”
On restructuring Air India he said it is a long haul, long haul ahead.
"It is not going to be a particularly post-COVID, it is not going to be a very quick, quickly turning around, it means about three to five years and when we say three to five years, you need very patient and very long-term capital. Any restructuring costs a lot of money, and mostly restructurings don't deliver the returns. So for me, possibly about in excess of 3 billion is what we can think will be the total capital required to make this work and you could see the results in three to five years from a balance sheet perspective in terms of profitability,” he said.
On merging the entities Kaul said it has to be one airline.
"I don't see any other way, but to be honest with you, it is to the government and for Tatas to decide what is good for them and they would have done some work on that. Our view is that it has to be one airline. So obviously for including Air India Express, Vistara, Air India, and AirAsia India will have to be one entity. That is my view, but I don't have information as to what they are planning, but I would think that it is going to be one airline,” he said.
For the full interview, watch the accompanying video...