JOIN USTatas to fly Air India again but turbulence aplenty
The Tata Group welcomed back the 'Maharaja' Air India with opened arms on Friday as it won the bid for the debt-ridden national carrier.
As the Tatas are back in the Air India's cockpit, it would have to fly the national carrier through turbulence to make this deal work and turn the airline profitable.
While the management of staff, fleet and restructuring of the work flow will keep the conglomerate engaged in initial stages, aviation experts believe that this deal would cost the Tata Group a lot of money and people to bring about the airline’s recovery.
Air India’s internal woes
Ailing Air India has been paying huge amounts in rents for planes, maintenance contracts, repairs of aircrafts and upgrades of engines that have been in use for over nine years, according to a report by The Economic Times. The airline also has thousands of excess staff, who are given the benefit of free travel on the airline.
Tata may have to shell out around Rs 15 crore to Rs 37 crore ($2-5 million) to overhaul Air India’s aircraft. The work culture of the carrier, which is very much like that of a government-run office, will also need to be changed.
Integration with Tata’s own airlines
Tata Group now has four airlines — Air India, Air India Express, Vistara and AirAsia India. These carriers operate flights on 150 domestic routes, according to a report, of which Air India has the highest number of routes covered (121). AirAsia India covers 46 routes while Vistara and Air India Express have 42 and 13 routes, respectively.
The overlap of the schedules of these flights is another challenge for Tata Group because while it may help cover areas previously not done, it also means crowding of flights on particular routes.
For example, Air India has no presence in the six sectors where Vistara operates. These are Bengaluru-Guwahati, Bengaluru-Chandigarh, Mumbai-Chandigarh, Kolkata-Pune, Delhi-Chandigarh and Bagdogra-Dibrugarh. This would be a boon in the competitive market over rival IndiGo, as the four companies combined will have higher connectivity.
But this also means that popular routes like Bengaluru-Delhi, where there are multiple flights and Vistara and AirAsia already have back-to-back flights, Air India’s entry will complicate things further.
Global aviation losses pile on
The Covid-19 pandemic hit the aviation industry across the world hard, as the pandemic all but shut travel. The International Air Transport Association (IATA) says the industry had losses to the tune of $138 billion in 2020 and could be close to $52 billion this year.
As on August 31, Air India has a debt of Rs 61,562 crore and out of this, Rs 15,300 crore will have been taken over by the Tatas. The remaining Rs 46,262 crore debt will be transferred to Air India Assets Holding Limited (AIAHL), an SPV formed by the government that will also get hold of the non-core assets.