Air India, a chronically money-losing Indian airline, has been privatized today. The government ownership has been sold for $2.4B (debt + equity) to an entity controlled by the original founder of the airline Tata Group.
Tata founded the airline in 1932, and it was nationalized in 1953. The Indian government has tried to find a way to privatize the airline for close to two decades. Tata is already the owner of two other airlines based in India: AirAsia India and Vistara.
Here’s an excerpt from Reuters:
The purchase of debt-ridden Air India will give Tata immediate access to valuable flying rights and landing slots, but industry executives say it will be an uphill battle to turnaround the carrier’s financials and service levels.
Since the mid-2000s, however, Air India’s reputation has declined as financial troubles mounted. It flew widebody planes with business class seats in poor repair and grounded some of its new Boeing (BA.N) 787 Dreamliners to use for spare parts. Customers faced many delays and staff and suppliers were not always paid on time.
Air India’s biggest competitive advantage is its ability to fly non-stop to destinations such as the United States and Europe, where it enjoys lucrative landing rights and where foreign carriers such as Emirates can only compete with stopover options.
And from Bloomberg:
The disinvestment of Air India concluded with the transfer of 100% shares of Air India to Tata Sons along with the management control, the department of investment and public asset management said in a tweet. A new board took charge of Air India, it said, without elaborating.
Reviving Air India — whose market share more than halved to less than 10% last year — will be a daunting task for the biggest conglomerate in India, which already runs two other unprofitable carriers. While Air India’s regional arm, Alliance Air, is not a part of the deal, the group is also gaining control of low-cost, short-haul international carrier Air India Express and an equal stake in a ground handling company with SATS Ltd.
Conclusion
Air India has been a complete mess, and the country’s government has tried to prop it up by putting up red tape for foreign airlines flying to the country.
The airline can be a reasonable option for those wishing to fly/to from India on direct flights after both Kingfisher and Jet Airways collapsed. However, I would advise against connecting at Indian airports, at least in Mumbai, after a less than stellar experience.
Not sure if Tata wishes to continue operating three airlines in India, although they are aimed at different passengers. AirAsia India is an LCC, while Vistara, a joint venture with Singapore Airlines, tries to be a luxury option.
