Media reports indicating approval of financial bids by Government of India in the AI disinvestment case are incorrect. Media will be informed of the Government decision as and when it is taken. pic.twitter.com/PVMgJdDixS— Secretary, DIPAM (@SecyDIPAM) October 1, 2021
There are multiple media reports of Tata Sons emerging as the clear frontrunner in the bid for India’s carrier, Air India. Reports from Bloomberg, Moneycontrol and CNBC TV18 sources indicate that Tata Sons is all but the winner of the bid, with only the political approval pending for the official declaration.
At the same time, government officials have clarified that the reports are incorrect and the winner of the bid would be announced when the decision is taken.
“Media reports indicating approval of financial bids by Government of India in the AI disinvestment case are incorrect. Media will be informed of the Government decision as and when it is taken,” tweeted the Secretary of Department of Investment and Public Asset Management (DIPAM), under the Ministry of Finance.
A storied past
But many have already celebrated the return of the Maharaja to the group which founded it in the first place. Air India was launched in 1932 by the legendary industrialist and India’s first commercially licensed pilot Jehangir Ratanji Dadabhoy (JRD) Tata. Being inspired by Louis Bleriot, the first man to fly over the English channel and a close friend of his father, JRD had started the venture carrying mail from Karachi to Bombay with a fleet of two de Havilland Puss Moths.
The airline soon expanded to passenger shuttles, and in 1938 to international trips, by adding Columbo to its list of destinations. In the same year, it was renamed Tata Air Services and later Tata Airlines. It even flew support missions for the British Royal Air Force during World War II in Burma.
After the conclusion of the war, the airline changed its name to the now-iconic Air India. A year later, it became one of the first private-public ventures in the country, with the government of India buying a 49 percent stake in the company. But with the passing of the Air Corporations Act in 1953, the government took over the company from Tata Sons and nationalised it.
JRD was disheartened at the development and made no secret of what he felt -- that nationalisation would not benefit the public. While the government did not change its decision, after much discussion JRD was appointed a board member and chairman, a position he held for nearly 20 years before being sacked by then Prime Minister Morarji Desai, the first non-Congress Prime Minister of India.
On having his chairmanship taken away, JRD had said, “I feel as you would feel if your favourite child was taken away.”
The troubling years
While Air India had remained a pioneer and inspiration for other Asian airlines during its heyday, the airlines had started to struggle by the early 1990s. The group’s issues with competing airlines and opening up of the airspace only exacerbated its troubles during the economic liberalisation.
The rise of low-cost carriers further eroded into its base of customers while Emirati airlines like Emirates, Qatar Airways and others quickly used their strategic location as a travel hub to their advantage.
However, what sealed the fate for Air India was perhaps the merger with the domestic public carrier, Indian Airlines. The two airlines had been running up debts quickly with mismanagement and inefficient operations. The combined losses for Air India and Indian Airlines in 2006-07 added up to $110 million and after the merger, it went up to $1 billion by March 2009.
The road to privatisation
As the airline bled, government studies pointed to privatisation. In 2013, the UPA government highlighted that privatisation was the only way out but nothing came of it due to harsh opposition from both the BJP and CPI(M).
Four years later, during the tenure of the BJP-led government, the airline was finally cleared for privatisation. In 2018, the government floated an expression of interest (EoI) with a 76 percent stake in Air India, along with low-cost airline Air India Express, and a 50 percent stake in AISATS, a ground handling joint venture with Singapore Airport Terminal Services (SATS). However, there was very little interest from private entities to take on the indebted carrier.
The government again issued a new EoI in 2020, with 100 percent stake of Air India and Air India Express, and the burden of $3.26-billion debt. Four bidders expressed their interest, but only Spicejet CEO Ajay Singh and Tata Sons finally remained in contention.