Indian government denies awarding Air India bid to Tata Group

Conglomerate ceded control of the airline to the government more than 50 years ago

Multiple governments have tried to sell Air India but those attempts were either met with political opposition or a lack of interest from potential buyers. Photo: Reuters

The Indian government denied media reports that the Tata Sons is set to take over ailing Air India again. The conglomerate had won the bid for Air India more than half a century after it ceded control of the national carrier to the government, according to Bloomberg.

“Media reports indicating approval of financial bids by Government of India in the AI disinvestment case are incorrect,” the Department of Investment and Public Asset Management said in a tweet.

A panel of ministers accepted a proposal from bureaucrats, who recommended the conglomerate’s bid ahead of an offer from entrepreneur Ajay Singh, according to the Bloomberg report.

Multiple governments have tried to sell the airline – which began life as Tata Airlines in 1932 – but those attempts were either met with political opposition or a lack of interest from potential buyers.

For Tata Sons, the holding company for the salt-to-software empire and owner of British luxury carmaker Jaguar Land Rover, the recommendation could mean coming back to an asset it started almost 90 years ago.

Established by legendary industrialist and philanthropist J.R.D. Tata, who was India’s first licensed pilot, the airline originally flew mail in the 1930s between Karachi in then-undivided, British-ruled India and Bombay, now known as Mumbai.

Once it turned commercial and went public in the 1940s, Air India quickly became popular with those who could afford to take to the skies. Its advertisements featured Bollywood actresses and passengers were treated to porcelain ashtrays designed by surrealist painter Salvador Dali.

However, with the advent of private airlines in the 1990s and then a rush of low-cost, no-frills airlines in the mid-2000s, Air India lost its edge in both domestic and international markets.

The airline, known for its Maharaja mascot, suddenly wasn’t the only option for flying overseas and its reputation for impeccable service and hospitality began to ebb.

Gulf airlines, including Emirates Airline and Etihad Airways, also began to offer seamless and cheaper connections to Europe and the US via their hubs in Dubai and Abu Dhabi, hurting Air India even further.

After Air India merged with state-owned domestic operator Indian Airlines in 2007, losses started to mount and by 2013, the country’s then-Civil Aviation Minister said privatisation was key to its survival. In 2017, the government approved that route and a committee was set up to start the process.

This most-recent sale attempt hasn’t been easy either. IndiGo, the only airline to have publicly shown interest in buying parts of the carrier, dropped out of the reckoning in 2018, saying it didn’t have the wherewithal to acquire Air India in its entirety and make it profitable.

Ultimately that time around, there were no bidders and the government had to sweeten the deal by allowing suitors to decide how much of the airline's debt they wanted to take on.

For Tata Group, winning control Air India will add a third airline brand to its stable, considering the conglomerate already holds a majority interest in AirAsia India and Vistara, a joint venture with Singapore Airlines. The Economic Times newspaper had previously reported that Tata may emerge as the winning bidder.

Air India – which hasn’t turned a profit since its 2007 merger with Indian Airlines and is now saddled with a debt of around 600 billion rupees ($8.1bn) – does have some attractive assets, including prized landing and parking slots at London’s Heathrow airport, which may help Vistara lure business travelers with direct flights to Europe.

The purchase, if it goes through, will be a test of the group’s aviation acumen. Tata Group has faced criticism for not running its existing aviation businesses efficiently, even though they represent a tiny portion of overall revenue.

With inputs from Bloomberg