Tata group likely to acquire Air India next year

The buzz in aviation circles is getting louder that the Tata group could be in the Air India’s cockpit as early as the New Year, if it is the sole eligible bidder for India’s national carrier.

If the Tata bid is put in on or before the final submission date of Aug.31 and as it looks at the moment, Tata will likely be the sole eligible bidder.

Thereafter, if the Tata bid is deemed accepted, the 90 day period for handover shall commence and end by Nov.30 or at the most, by Dec.31. So, one possible scenario is for Tata to take control of Air India by Jan.1, 2021.

An IANS query sent to Tata Sons went unanswered. The Tata group, which already has a footprint in the airlines business, has shown interest in acquiring Air India, which at one point of time was under the Tata umbrella.

While the other bidders are not known yet, globally, airlines are under severe stress due to the COVID-19 pandemic and resultant disruption on air travel and tourism. Tata is widely believed to emerge as the sole bidder for Air India and the salt to software conglomerate is likely to place a bid before Aug.31, the last date for bids for Air India, which the government has repeatedly said it will not be extended.

The group already has an airline venture in Vistara and it is not yet clear as to how or if it will consolidate the airline ventures including Vistara, Air Asia and the possible acquisition of Air India.

According to reports, the Tata group has already begun due diligence and is likely to put in a formal bid soon.

On the ensuing structure for the airline business, there is speculation that Tata is planning to merge its existing stake in AirAsia with Air India into a single entity.

Air India has been passing through a critical financial condition from much before the Covid-19 onslaught. The crippling effect of the pandemic, especially in the aviation sector, has further brought its finances to a precarious position. Recently, its pilots and other employees are on the warpath as Air India has laid off employees and started a Leave Without Pay (LWP) scheme.

From Tata Airlines and Air India to Vistara and AirAsia India, the Tata group has been an important part of the growing aviation sector in India.

From Tata Air Lines and the long-since nationalised Air India to strategic joint ventures with AirAsia Berhad and Singapore Airlines (SIA) for AirAsia India and Vistara, respectively, Tata has been present in the aviation sector.

The two joint venture airlines operate independently with their respective business models - low-cost (AirAsia) and full-service (Vistara).

Despite the economic turbulence due to the COVID-19 outbreak, Vistara is committed to the overall orders it had placed with Boeing and Airbus in 2018, a top company executive said recently. In 2018, the airline had placed an order for 50 Airbus A320 Family aircraft. At the same time, it entered a deal to purchase six wide-body 787 Dreamliner aircraft from Boeing.

The airline has inducted its first wide-body aircraft, the Boeing 787-9 Dreamliner, for long-haul international operations in March this year.

Subsequently, the first Airbus A321neo aircraft intended for use on short to medium-haul international routes, within seven hours of flying time, was inducted in July.

Vistara’s Chief Commercial Officer Vinod Kannan said that despite the COVID-19 induced economic disturbance, the airline is committed to all its orders placed in 2018.

“We may make necessary adjustments to the delivery schedule, but we are committed to the overall order placed with Boeing and Airbus in 2018,” he said.

At present, the airline has a fleet of 34 Airbus A320s, six Boeing B737-800NG and one Boeing B787-9 Dreamliner and A321neo each. On the impact of Covid-19 on passenger traffic, Kannan said: “At present, demand for air travel is sluggish, especially with states imposing their respective travel restrictions or quarantine requirements.”

“The industry average of load factors continues to be in the range of 50 to 60 per cent. However, we believe that demand will return to the market in a graded manner.”

In July 2020, the domestic passenger traffic was 20.6 lakh, as against 118.6 lakh in July 2019, a Y-o-Y de-growth of 83 per cent.

The domestic passenger traffic witnessed a sequential improvement of 4 per cent over 19.8 lakh in June 2020.

Regarding the expected performance of different travel segments, he said: “We do believe that leisure travel will pick up but it will also depend on the various restrictions and regulations from the respective state governments.”

Indo-Asian News Service