Air India- Homecoming

National carrier Air India returns to the fold of the Tata group, where it receives an emotional welcome. But the billion-dollar question is: will this goodwill translate into performance? We take a close look at what this acquisition really means for the conglomerate

- Krishna Gopalan

TIM CLARK IS KNOWN TO pick his words carefully. The 71-year-old President of Emirates has spent over half a century in the cut-throat aviation industry. Not surprisingly, when he speaks, people stop to listen. In early October, he was asked by an Indian media organisation what the impending sale of Air India would mean to his company. Clark, a Briton by birth, had bluntly said it would affect Emirates, quickly adding: “As times change, you adapt and adjust. But this one is a bit of an outlier. They should have had a national carrier the size of Singapore Airlines, or look at Emirates.”

Less than a week later, on October 8, the decision to sell Air India to the Tata group for ₹18,000 crores (equity plus debt) was announced. (Read the interview of Tuhin Kanta Pandey, Secretary of the Department of Investment and Public Asset Management on page 44 for more details.) The deal gave India’s most diversified business house the airline, its low-cost carrier Air India Express, the Air India brand name, and a strong network with over 6,000 slots in domestic and international markets.

With a fleet of 128 aircraft (according to Air India’s website) and another 25 belonging to Air India Express, the buyer would appear to have hit pay dirt. However, juxtapose that against the accumulated losses of close to ₹78,000 crore, debt in excess of ₹61,000 crore and a bloated workforce, and a turnaround looks tough. It’s not as if Clark does not know all this. With a hub in Dubai, Emirates flies to pretty much every part of the world and is known for everything Air India is not— high-quality service, spotlessly clean aircraft and sound financials, among other things. Yet, he is worried.