Air India’s sale to Tata Sons is going to redefine India’s aviation industry – The Economic Times

Clipped from: https://economictimes.indiatimes.com/opinion/et-commentary/view-air-indias-sale-to-tata-sons-is-going-to-redefine-indias-aviation-industry/articleshow/86875784.cmsSynopsis

Whether that happens or not, time will tell. But what will certainly undergo a paradigm shift is the dynamics of the sector. If the Tatas pull off the merger of their two existing assets, Vistara and AirAsia India, into Air India, as they have indicated informally in the build-up to the sale, this new entity will emerge as the second-largest airline in India.

Saying that the sale of India’s national carrier Air India to Tata Sons will change airline dynamics in India irrevocably sounds almost silly. Yet, here I am sticking out my neck and saying      it.

For a young private airline sector that took to the skies only in 1991 with East West Airlines as the first national-level private player, Air India has been the big elephant in the room since its birth. Nobody knows, or has seen, a world without the country’s national carrier looming large, be it at the height of its glory way back in the 1960s-70s, or at its nadir after the 2007-08 merger.

The announcement of sale of Air India to Tata Sons yesterday is a momentous occasion for India’s aviation sector. This sale promises to change the country’s aviation sector in ways we are yet to fully grasp.

For one, the industry hopes – although it is far from certain – that after the sale and GoI’s withdrawal from the national carrier, the government’s attitude towards privately-owned airlines will alter. Through the history of Indian aviation – and certainly as long as I can recall – private airlines have alleged that the powers-that-be favour Air India, and the best slots, airport lounges and space, privileges and treatment are reserved for the Maharaja.

In contrast, both Air India and Indian Airlines top management have always maintained that most politicians and ministers have favoured various private airlines at various points, usually for their own vested gains. The jury is out on this matter. But, in most such cases, there is no black or white, and the truth usually lies somewhere in the middle. The hope is that post this sale, GoI and regulators will treat everyone on a more even keel.

Whether that happens or not, time will tell. But what will certainly undergo a paradigm shift is the dynamics of the sector. If the Tatas pull off the merger of their two existing assets, Vistara and AirAsia India, into Air India, as they have indicated informally in the build-up to the sale, this new entity will emerge as the second-largest airline in India. It will eventually offer credible competition toIndiGoNSE 0.76 %, currently in its worst shape ever due to the Covid-19 pandemic. This will redefine the positions of these two and all other players operating in the Indian milieu.

But it will also change the dynamics for foreign airlines – be it Emirates and other UAE carriers, Singapore Airlines or US carriers – several of which depend on Indian traffic for a large part of their existence. Here will be a new, well-funded and reasonably hefty player with access to traffic rights, slots, pilots, technical expertise and, presumably, the determination to pull off a success – many of these features which Air India also enjoyed barring the last one.

Between the new Tata entity and IndiGo, they can give the foreign carriers, who have in the past enjoyed an almost free run of Indian traffic, a serious run for their money. As an Indian, I’m delighted, and hopeful this will happen.

Depending on what aircraft the new, merged airline decides to rely on, manufacturers will gain or lose. Either Boeing or Airbus may be favoured by the new entity. Expect competition between these two age-old rivals to intensify manifold. Boeing, on the losing side of this battle for a while, can regain some of its lost ground in India if it plays its cards right.

Pilots, crew and aviation managers will now have a new possible employer, more trustworthy than most of the existing players. So, hordes will jump ship.

This is good news. For a sector that has witnessed one tragedy (e.g.,Jet AirwaysNSE -0.10 %‘ closure) after another (e.g.,KingfisherNSE -11.11 % Airlines’ demise) for no fault of theirs, my heart goes out to many sincere and talented professionals in the industry. They deserve some respite from this battered, wrecked and wretched battleground.

The sector should also regain some of its sanity. Air India was often leading the senseless undercutting of fares. Fares were often cut on one route or the other when one of the directors woke up and asked his juniors why the carrier was faring worse on loads than rivals. The stock response: cut fares. Since taxpayers – you and I – paid the bill for these mindless cuts and nobody was held responsible, this was rampant.

The industry, therefore, is certainly heaving a sigh of relief, since it stands to lose its most ‘mercurial’ player. Decision-making will become more commercial, and less driven by the whims and fancies of bureaucrats and politicians.

The sale of the national carrier will redefine Indian aviation in ways we can’t fully envisage yet. But it’s something to celebrate, no matter from which angle one comes at it.

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