Tata's keenness to acquire gives Air India another shot at survival

Perhaps J R D Tata would have been pleased, for what rankled most of all his disappointments with successive Indian governments was Morarji Desai sacking him as a director of the airline he started in 1932. But as a practical man, JRD would also have remembered his friend, Singapore’s veteran Lee Kuan Yew, warning about the rot that had eaten into the old Tata Airlines after it became Air India in 1946 and was nationalised in 1953.

Lee would not have thought there was much chance of the beleaguered carrier recovering from its wounds by limping back to the nest where it was born. Yet, he was prepared to give it a chance. Singapore Airlines was probably the first to respond seriously in 2001, when Atal Bihari Vajpayee’s government (Arun Shourie was disinvestment minister) thought that selling some equity might enable the airline to recoup its $70-million debt and upgrade its fleet of 27 aircraft. This was at least partly because of Lee’s early admiration of what he regarded as one of the world’s finest carriers. He called it race discrimination when the British, who still ruled the Malayan peninsula, didn’t offer Air India shares in the new Singapore-registered Malayan Airline in which British Overseas Airways Corporation (BOAC) and Qantas held 51 per cent equity. But as his honeymoon with India faded, he saw Air India’s decline as symptomatic of the Indian state.

I asked Lee why SIA eventually withdrew from the bidding — the last to do so — in 2001 and he said there was “too much vested interest” in Air India for a slightly diluted ownership to make any difference to operations. SIA could not “change the culture, it is too ingrained”. There would be “too much opposition all down the line, within the company and in the government, in the civil aviation department and ministries, because this is the airline that services them”. Many heads would be broken and life would be miserable. Sellapan Ramanathan, then President of Singapore, agreed that investing in Air India would be throwing good money after bad. He mentioned deteriorating service, unionisation, and jobs for the boys. “I ask you, how do you run an airline when every chairman when he retires — he’s got a new job — still travels free? Every Tom, Dick and Harry has his share. Are you a commercial airline or are you not?” 

Lee’s prescription was predictably drastic. He would “let Air India die naturally” instead of trying in vain to revitalise it. It would be “better to start a new airline” and cater separately to VIPs. “You can have Indian Air Force One, Air Force Two, Air Force Three for the President, prime minister, and ministers and officials. A dynamic airline helps the economy. You have to take into account the number of tourists it will bring, the businessmen, the connections it will create.” Lacking his father’s sentimental attachment to India, Singapore’s present Prime Minister, Lee Hsien Loong, complains that air services remained static to protect Air India even if it meant discomfort and “ungodly” hours for passengers. 

Qatar Airways has shifted its interest from Air India to seeking 10 per cent of American Airlines. But Ratan Tata’s reported keenness on acquiring Air India indicates that his experience of AirAsia India and Vistara has erased unhappy memories of the fiasco of the $S846-million SIA-Tata joint venture company set up in Mauritius in 1994 for a domestic airline in India. That ambitious project was meant to illumine the way to an era of close India-Singapore cooperation at many levels. After protracted negotiations, it foundered on the rocks of India’s bureaucratic conservatism, military nervousness, political greed, professional jealousy and the ineffectiveness of three prime ministers who dared not confront vested interests. 

Air India’s fixed assets are valued at Rs 37,375 crore. Its 12,880 employees cost Rs 2,345.5 crore and are protected by a clutch of unions, which dedicatedly serve their, rather than the airline’s or public’s, interests. Debts are in the region of Rs 46,570 crore with accumulated losses of Rs 47,440 crore. The airline’s market share is under 13 per cent. There is a strong case for allowing Air India to follow such once-hallowed global brands as TWA, Swissair and PanAm into oblivion. Nearer home, today’s Indians hardly remember Jamair and Kalinga. But for the drama of Vijay Mallya in the London courts, Kingfisher, too, would be a forgotten name. In joining them, Air India might clear the skies for a more dynamic new Tata airline.


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