1. Trending

The $113 Billion Tata Group faces Tough Decisions Over Their Airlines

Tata Group’s two airlines – AirAsia India and Vistara, were struggling before the coronavirus pandemic. Tata Sons owns a 51% stake in each airline. 

“The Tata’s are caught between a rock and a hard place,” said Mukund Rajan, a former member of the group’s executive council who’s now the chairman of an investment advisory firm focused on the environment, social, and governance issues. “The only option to run a successful airline is to seek scale. This would require the Tatas to deploy significantly more capital than they have done this far. Absent ambition and scale, the prospects for success are probably very remote.”

The airline was founded by J.R.D. Tata, named as Tata Airlines in 1932. In 1953, the Government of India passed the Air Corporations Act and purchased a majority stake from Tata Sons. The company was renamed as Air India International Limited and the domestic services were transferred to Indian Airlines as a part of a restructuring.

In 1994, the group came up with an ambitious plan to start an airline with 100 planes in partnership with Singapore Airlines, but the government refused a foreign entrant, and the project was rejected. Later in the year 2000, Tata again teamed up with Singapore Air to bid for a stake in Air-India, but the plan was dropped due to political opposition. 

Tata Group is concentrating on making an airline work at any cost. Vistara and AirAsia India have never made money and have lost around $845 million (~Rs 8,450 lakhs), according to estimates from the Centre of Aviation. They have to make a decision on whether to sell the loss-making business or to further scale it up and make it a profitable one.