Ajit Karn
One of India’s biggest and oldest conglomerates is going back to its roots by making a multibillion-dollar bet on the country’s growing middle class and its demand for air travel.
Air India was owned by the Indian government for a long time. Now that it is back in the hands of its original private owners, it has announced that it will buy 470 planes from Airbus and Boeing. This is one of the biggest orders in the history of aviation.
The news comes a year after the tea-to-software company Tata Group bought back the losing airline. The airline was started by the world-traveling Franco-Indian businessman JRD Tata, who flew the first flight in 1932.
Reports say that he often talked about how the day it was taken over by the government after independence was the saddest day of his life.
And it has been losing money for a long time. From 2009 until Tata bought it back for $2.4 billion a year ago, governments spent nearly $15 billion to keep it going.
“Welcome back, Air India,” Tata’s patriarch chairman emeritus Ratan Tata celebrated after completing the purchase.
It hasn’t bought any new planes since 2006, but its new owners want to bring back its reputation as the “Maharaja of the Skies” while also competing with Emirates, Qatar Airways, and Turkish Airlines, whose hub-and-spoke models have given them a large share of international travel.
In a message to employees, CEO Campbell Wilson said that Tuesday’s news was “not just the largest order ever made by an Indian airline, but also one of the largest single aircraft orders by any airline, anywhere, ever.” He called it a “major milestone” on the way to making the airline great again.
The Tata group “can build a world-class global brand,” Shakti Lumba, who used to be the head of operations at IndiGo, told AFP. IndiGo has long since replaced Air India as the country’s largest domestic airline.
Lumba said that in order to reach its goal of 30 percent of the market, it had to add capacity over a number of years. “With India’s captive market, there is enough domestic traffic for everyone,” he said.
India has the world’s fastest-growing major economy and is the world’s fifth-largest. There are still a lot of people living in poverty, but the middle class is growing and more and more people want to fly.
Airbus predicts that its air traffic will grow at a rate of 6.6% per year over the next 20 years, which is twice the global average. Aviation experts say that it will need at least 2,000 planes in the next 10 years to keep up with this growth.
Anas Rahman Junaid, the founder of Mumbai-based wealth analysts Hurun India, said that the “deal and its size reflect the state of the Indian economy, its growth trajectory, and the fact that more and more Indians will travel both domestically and internationally in the next ten years.”
“Tata has what it takes to take a local brand global because it knows how to run large organisations,” he said.
“Reputation and Image”
Jamsetji Tata started the company that bears his name in 1868. It owns Jaguar Land Rover, the software company TCS, and Tata steel. It has 29 subsidiaries that are publicly traded and have interests in areas like chemicals, hotels, steel, cars, and consumer goods.
Even with the new planes, Air India is just a small part of the Tata empire. Before buying the airline, the Tata family already owned publicly traded companies with a combined market value of around $250 billion.
But it has more recent aviation experience than the carrier’s previous incarnation: Tata is to combine Air India with Vistara, its existing joint venture with Singapore Airlines.
Nonetheless, CEO Wilson warned staff that “we still have a long road and much hard work ahead of us”.
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And Mark Martin, the CEO of Martin Consulting, warned that things could get rough.
He said, “They will have to hire good people and bring back the warm Indian hospitality that made it one of the best airlines in the world in the 1960s and 1970s.”
About half of the new planes will replace older planes in the fleet, he said.
