With Tata Sons and Spicejet CEO, Ajay Singh, bidding for the State-owned Air India, it remains to be seen who has a better chance to acquire the Maharaja.

Three weeks from now, the winner of the financial bid is expected to be declared while sources say that it may take longer. As far as SpiceJet' Ajay Singh’s bid is concerned, there has been no official confirmation so far.

Winner outlook

The winning bidder will not only get complete control of the airline but will also have access to 1,800 international landing and parking slots at domestic airports; 900 at foreign destinations and membership of the Star Alliance. The airline also has 1,500 well-trained pilots to operate Airbus, 2,000 trained engineers and of course, a fleet of 173 aircrafts including 27 Airbus 321 New Engine Option aircrafts; 13 Boeing 777-300 extended-ranges (ER); three Boeing 777-200 Long-ranges; and 27 Boeing 787-800s.

As per the latest figures, as disclosed in Parliament, the total debt of the national flag carrier as per provisional figures of 2019-20 stands at ₹38,366.39 crore after a transfer of debt amounting to ₹22,064 crore to a special purpose vehicle called Air India Assets Holding in FY20. The net loss of the airline during FY20 was ₹7,982.83 crore. Separately, various departments of the government owe Air India ₹498.17 crore as of December 2020 as airfares including VVIP flights. The current loss of the airline is around ₹20 per day.

Between the two bidders, Tata Sons owns 84 per cent of the low-cost Air Asia India and 51 per cent of a full-service carrier, Vistara. At one point in time, it owned Air India, earlier known as Tata Air Services but was later taken over by the government. Hence, Tata Sons is bidding for an airline it owned nearly 70 seventy years ago.

Airline revenue

Both Vistara and AirAsia India are loss-making airlines as are the rest of the domestic airlines. According to reports, AirAsia India’s losses have nearly doubled to ₹1,533 crore in FY21 while Vistara’s losses have reduced to ₹1,612 crore from ₹1,814 crore in the same period. But the narrowing of losses was largely because of gains from foreign exchange.

AirAsia India’s revenue decreased 63 per cent to ₹1,359 crore while that of Vistara fell 52 per cent to ₹2,243 crore. AirAsia India operates on 240 routes; with 17 domestic destinations and has a total of four hubs. Vistara, in which Singapore Airlines owns a 49 per cent stake, has a total fleet size of 46 aircrafts, and has flown more than 22 million customers since starting operations in 2015. The airline also operates international flights to five destinations, including Frankfurt.

If Tata Sons successfully acquires Air India and consolidates Vistara and AirAsia India under its brand, the industry will convert from six to four airlines, comprising Tata Group, IndiGo, SpiceJet and Go First. The total market share of Tata will then be around 25 per cent, making it the second-largest in the market share after IndiGo’s 59 per cent.

The other main bidder, SpiceJet doesn’t have a parentage as hallowed as that of Vistara and AirAsia India. It has had a chequered history so far. In its earlier avatar, it was called ModiLuft, which commenced operations in 1994 as an air taxi service. It was later acquired by the current owner, Ajay Singh in 2004 and re-christened as SpiceJet. In 2010, media baron Kalanidhi Maran acquired a controlling stake in the airline, which was sold back to Ajay Singh in 2015. The airline has a total of 113 aircrafts. It operates 63 daily flights under UDAN or the Regional Connectivity Scheme.

During the previous quarter, the airline operated 309 charters to various countries, including UAE, Saudi Arabia, Georgia, Bangladesh, Uzbekistan, Croatia, Sri Lanka, transporting over 52,000 passengers. It also operates long-haul flights to and from Toronto and Rome.

During the first quarter of the current financial year, SpiceJet reported a net loss of ₹729 crore against a net loss of ₹593 crore in the same quarter of the previous year as flight operations were severely impacted due to Covid-19 second wave. Its total revenue was ₹1,266 crore for the reported quarter as against ₹705 crore in the same quarter of the previous year. As per ICICI Securities, SpiceJet had a negative net worth of ₹3,300 billion as of Q1FY22 compared with ₹2,600 billion in Mar’21.

On paper, the chances of Tata Sons winning the bid to acquire Air India looks brighter because of its rich history in the airline industry and lesser debt its two airlines carry, but it won’t be that easy for either of the airlines to take over Air India.

The airline will be handed over to whoever offers the bid for the highest price for the public sector carrier.