Tata’s acquisition of Air India approved: what now for India’s national carrier?

The Indian Competition Commission has approved the acquisition by Tata of Air India, AI Express and AI-SATS Airport Services. The process started a few months ago when the Tatas won the auction and is now close to being completed. The Tata Group has until January 23, 2022 to take full control of the airline and start piloting it as a private entity under its brand.

The Indian Competition Commission (ICC) has approved the acquisition of Air India by Tata. Photo: Getty Images

The countdown begins

Following the signing of the sale-purchase agreement on October 25, the process of obtaining authorizations from regulatory agencies was underway. Now that the CCI has given the green light, others like the General Directorate of Civil Aviation (DGAC), lenders and third-party sellers will likely give a green signal very soon.

Once all the requirements are met and the old and new owners are happy with the balance sheet, the Tatas will prepay 2,700 crore ($ 355 million) to the government, as decided, and take possession of the carrier.

And then ?

Prior to the acquisition, the Tatas would most likely want to address the ongoing salary issues of current AI employees. One of the first things new owners would do is make sure AI operations are maintained and even improved.

The Tatas have created a new subsidiary to manage the deal with Air India, known as Talace, which is in talks with banks for a one-year loan to the tune of ₹ 23,000 crore (3.02 billion of dollars). While the bulk will be used to purchase Air India, some will be used for the carrier’s operating costs.

Tata's acquisition of Air India approved: what now for India's national carrier?
The Tatas are expected to make a lot of changes within the airline, including fleet management and optimization. Photo: Getty Images

Changes in the airline’s management team and working culture are all on the cards, and the Tatas have come up with a 100-day plan to improve the airline’s services, such as on-time performance. , resolving customer grievances and simply raising the general standard of basic service. While it’s impossible to dust off years of malpractice in just 100 days, the Tatas hope to make improvements and set the tone for things to come.

Then there is the big question about the merger. Although there are plans to merge AirAsia India and AI Express, there has been no official announcement regarding Vistara and Air India. Will the new owners eventually merge all the airlines under the Tata umbrella to form a single carrier or operate two separate entities: a full service (AI and Vistara) and its low-cost branch (AI Express and AirAsia India) ? For the moment, the second option seems more plausible.

Fleet and network

Another key and urgent problem facing the Tatas is the optimization of the fleet and the network. They will have to take a call about the grounded planes of Air India and how to remedy the poor conditions inside many of its planes.

Just over 80% of the AI ​​fleet is functional. This means that a lot of planes are on the ground, collecting dust and not making any money. The refurbishment alone would cost millions, with up to $ 300,000 per widebody. Many of its A320 Family planes are also awaiting new engines, the costs of which are expected to run into the hundreds of millions.

The Tatas may not be ready to pay such high bills to fly all the old planes again. Instead, we might see new orders for aircraft, both from Airbus and Boeing.

Tata's acquisition of Air India approved: what now for India's national carrier?
Many AI planes need new engines and maintenance, which will cost the Tata Group millions. Photo: Getty Images

In the long run, a private Air India airline will have to outdo itself in expanding its network, not only in India but also internationally. There is huge demand for direct non-stop flights after the pandemic, but AI must add more destinations in the future to compete with foreign carriers.

AI currently serves five airports in the United States and eight in Europe; Emirates flies to 15 in the United States and over 40 in Europe. While the two airlines have very different structures, AI will have to think about expanding its fleet and network eventually, which will again cost the Tatas billions in long-term investments.

Are you delighted to see Air India acquired by the Tata group? What are your expectations for future AI operations? Please comment below.

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