Privatization of Air India

Abstract

Air India is a classic story of how a successful and globally renowned PSU, which was considered to be the quintessential example of world-class hospitality, was mismanaged to the extent that once a “Maharaja of the Skies” had to be bailed out with equity infusions amounting to ~Rs 30,000 crores. Analyzing the Annual Reports of the state-owned carrier made us inquisitive about how such a profitable venture started bleeding losses of Rs 20 crores per day. Despite being high in debt, why was Air India and Indian Airlines merged together and a large order for wide-bodied aircraft was placed, the repercussions of which are visible to date. And finally, when Air India started making operating profits again, why suddenly the plans for privatization gained traction? After two unsuccessful attempts, the Tata Group announced the homecoming of Air India with a bid of Rs 18,000 crores. Air India is in a dire state right now, and we wanted to explore why Tata Group went ahead with the acquisition at a time when only one other bidder found it lucrative enough to invest in Air India. Although there are a lot of hidden synergies that would have to be explored to ensure that the loss-making airlines make a turnaround, but at the same time, challenges surmount ahead for the Tata Group especially given the diverse culture of one of the most reputed brands Globally versus a brand which is synonym to lethargy and bureaucracy.