By now, you must have seen the new topical Amul ad showing Tata Sons' chairman emeritus Ratan Tata sitting next to Air India's Maharaja mascot on a flight. They're celebrating the homecoming of the carrier, founded as Tata Airlines in 1932, before the Indian government nationalised it in 1953. Tata Sons' recently confirmed winning bid of Rs 18,000 crore ($2.4 billion) ends decades of attempts by the Indian government to offload the debt-laden airline.
Tata Sons has ambitious plans of restoring Air India to its days as "one of the most prestigious airlines in the world". It will become the third airline in the conglomerate's stable after Vistara and AirAsia India, which are joint ventures with Singapore Airlines and the AirAsia Group. This gives Tata access to about 140 aircraft, thousands of trained pilots and crew, and prized landing and parking slots at airports around the world.
But Air India isn't out of turbulence yet because the market is about to get crowded. There are the two ambitious new players waiting in the wings—the reborn Jet Airways, and Akasa, promoted by deep-pocketed investor Rakesh Jhunjhunwala.
They will add to market leader IndiGo, SpiceJet, and Go First (formerly GoAir). An aviation sector analyst told Sheela that more than three carriers is a crowd in the Indian domestic market—as it leads to "unsustainable competition". Remember what happened to Kingfisher Airlines and the original Jet Airways?
As it is, the sector is bleeding profusely because of the pandemic. I haven't taken a flight since December 2019, for instance. Aviation consultancy CAPA expects Indian airlines to lose $4.1 billion in the year ending March 2022. In an already dire environment, competition and the resultant fare wars could spell doom.
So, was this really a "good buy" for Tata? Or is India's aviation sector headed towards another nose dive? A study!
