Why Is Tata Group Not Interested In Air India?

Even as the government looks to privatize Air India, Tata Group has hardly shown any interest. Though the group has shown its interest in the airline sector in the past, there are doubts whether the conglomerate will ever participate in the privatization bid. That is primarily due to two reasons. Since its earlier proposals failed to find favor with the government, the group opted to have a stake in two airline companies in India. The second is the terms and conditions attached to it.

Tough Terms

If Livemint report is any indication, the government has set tough terms for acquiring the state-run airline firm. It was widely believed that the Tata Group could bid for Air India because of its past involvement, i.e., before the government took over. It was in 1948; J.R.D. Tata had launched Air India International to cater to the foreign destinations. However, the group appears to be not keen on acquiring the debt-driven firm. The government wants to sell the loss-making firm since it did not want to keep on accumulating losses.

Therefore, the central government has planned to offload 76 percent stake in the company besides offloading debt approximately $5.1 billion. Its plans, which were finalized in late March, suggested that winning bidder would not be allowed to integrate Air India with the bidder’s existing businesses. The terms would be applicable until the government has a stake in the firm.

Safeguarding Employee Interests

Another key point that will restrict Tata Group from bidding is that the winning bidder should abide by terms meant to protect the interests of employees. This is interpreted as curtailing the bidder’s capability to reduce the staff numbers. As a result, no airliner came forward to show their interest in the company. Jet Airways and IndiGo have made it clear that they were not in the race.

As far as Tata group, it fails to see any workable deal under the current terms and conditions. The group is also having stakes in two joint-venture airline companies operating from India. The report indicated that there was no clarity on what the government expects the buyer to do or allowed to do especially in respect of the big workforce. It was quite natural that when a bidder is allowed to acquire 76 percent, the buyer should be allowed to have full control.

Tatas Showed Interest Earlier

Before the terms were disclosed, Tata Group had shown its interest in Air India. This was also evident when Vistara CEO, Leslie Thng, indicated in January that its promoters were exploring the possibility of bidding the government-run airliner. Vistara is a joint venture firm between Singapore Airlines and Tata group. In October last year also, Tata Sons chairman, N Chandrasekaran, told media that his group would take a look at the airliner.

Effectively, the government’s proposal to divest a major stake in Air India failed to meet the expected end. That will mean that the establishment will not have any alternative but to carry on the burden of running the loss-driven airliner for some more time. As the elections are due in a year’s time, no government will risk attracting employees’ ire.

Leave a Reply

Your email address will not be published. Required fields are marked *