New owner must start from scratch

K Giriprakash Bengaluru | Updated on October 09, 2021

Important task The group’s immediate priority will be to reduce the daily losses of around ₹25 crore   -  The Hindu

Though Tata Sons starts off with some advantages, there are challenges ahead

By pocketing the state-owned carrier, Tata Sons starts off with some huge advantages which include, the control of 4,400 domestic and 1,800 international landing and parking slots at domestic airports and 900 slots at airports overseas. They will also get hold of two profit-making entities, Air India Express and ground handling company, Air India SATS Airport Services Ltd (a 50:50 JV between Air India and SATS)

Apart from this, for the ₹18,000 crore, the group has paid to get 100 per cent of Air India, it will have access to 117 wide-body and narrow-body aircraft and Air India Express’ 24 narrow-body aircraft.

Manpower on a platter

The group will also get on board trained manpower including a highly experienced set of around 2,000 pilots all on a platter plus a near-monopoly of the Gulf traffic from Kerala. For example, an airline invests around ₹1 crore to train a pilot to fly a Boeing 777. If one takes into account flight engineers and other in-flight crew, Tata Sons will have immediate access to around 4,500 trained employees who can be deployed across their portfolio of airlines including Vistara and AirAsia India.

As Air India used to delay payment to vendors, it was finding it difficult to strike a good bargain for various services including those at the airports. Now, it will be easier to bag better competitive deals for the Tatas with three airlines under their belt.

Tata Sons will also have an upper hand while negotiating for lower lease charges because of its portfolio. As far as Air India is concerned, the airline pays around ₹18,000 crore as leasing charges. Tata Sons will now have to take over the debt of ₹15,300 crore and have the advantage of setting off the accumulated losses against the future profits of the group companies.

Even though the government has made it mandatory that no employee of Air India will be let go at least for another year, it is likely that all those over the age of 55 may be asked to leave after offering them a VRS. To its benefit, most of the employees in Air India are above 55 and hence the group will have a much younger staff at its command. Air India has a total of 12,085 employees of which 8,084 are permanent and the rest are temporary. It remains to be seen whether the temporary staff will be allowed to go within the one-year time-frame itself. Air India Express has 1,434 employees.

Immediate priority

Once Tata Sons starts operating Air India, its immediate priority will be to reduce the daily losses of ₹25 crore which can be carried out by going through every deal the airline has struck with the vendors some of whom could be with those connected with politicians. Even the manpower deployed for each aircraft will need to be tweaked to save on costs.

In the past, Air India has been negotiating with at least five countries including, Hong Kong, the US, Britain, France, Singapore and Germany on grant of additional landing time slots. Such issues will need to be taken up on a priority basis.

Brand and logo

As far as the airline’s brand and the logo is concerned, it will be mandatory for Tata Sons to retain them for the next five years and hence it remains to be seen how the integration of all the airlines in the portfolio will be carried out.

While there is a lot of jubilation at Tata House after winning the bid, the team picked to manage the entire portfolio of airlines will also need to make several changes to the way AirAsia India and Vistara are run in terms of routes, manpower and vendor management so that both these airlines can be put back on the path to profitability sooner than later.

Published on October 08, 2021

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