If Tatas win the Air India bid, it will be poetic justice

The news that Tatas have put in a bid to acquire Air India brings much cheer. Jawaharlal Nehru nationalised the airline in 1953 without any dialogue or notice to the Tatas. It bewildered many as to why the government would take over a well-run private enterprise and run it into the ground.

JRD Tata was heartbroken. He rued this, and he was deeply hurt that the government took over the airline through the backdoor. He was retained as chairman of Air India till 1978, and took it to great heights. It was a much-loved airline globally.

Can you believe that Singapore Airlines — considered the world's best airline — was set up by Air India at the invitation of the Singapore government? And what a fall from grace it has been for our national carrier, in its service standards and operational efficiency.

Though Nehru erred in nationalising the airline, he and his successors gave autonomy to JRD to run Air India without interference. After JRD's exit, the decline began. Successive governments treated the airline as their private carrier. Political and bureaucratic interference without accountability turned the iconic airline into a loss-making decrepit carrier. And stiff competition from the private sector reduced it to irrelevance. The airline haemorrhaged cash at an alarming rate.

The current debts and accumulated losses are an astronomical ₹1 lakh crore. And the question arises that if Air India can be saved, why were Kingfisher Airlines with ₹6,000 crore of debt, and Jet Airways with ₹8,000 crore of debt, not rescued, when their bank debts were minuscule in comparison to Air India? The promoters could have been prosecuted for recovery of dues, but why punish the airline and its employees for the sins of the promoters?

They may be in the private sector, but their assets are national assets. The blood that runs in the veins of the private sector is not different — or less red — from that of the public sector employees.

It is only befitting that the great airline, now run down, may go back into the hands of the business house that founded and nurtured it in its formative years. The government cannot unilaterally hand Air India back to them for a negotiated price. The Tatas have to participate in a bid to earn back what was taken away from them. That is a cruel irony.

JRD was respected as a visionary and was revered for his charitable work through the Tata Trusts. He was also looked up to as an intrepid aviator, and as the man who built a great airline with a huge national and international network.

JRD was India's first licensed pilot in 1929. He also flew the first commercial flight in 1932 that was carrying airmail from Karachi to Chennai (then, Madras) via Ahmedabad, Mumbai (then, Bombay), Pune, Kolhapur, Bellary and Bengaluru (then, Bangalore), in a single-engine three-seater unpressurised de Havilland Puss Moth.

This was the beginning of Tata Airlines which was eventually renamed Air India in 1946 when it became a public limited company. Air India is still a jewel, though jaded. It has an enviable national and global route network, invaluable bilateral rights with foreign countries, prime slots and aviation infrastructure in Indian airports as well as in the airports of overseas capitals and key cities of strategic and commercial importance.

It has many highly qualified and trained pilots, engineers and crew, though burdened with redundant staff who are deadwood put in there by many ruling parties and bureaucrats over the last few years. This can be dealt with, with a helping hand from the government.

It is probably late now, but the bidding should have been through an open and transparent electronic tender, instead of sealed, opaque covers. The shortlisted bidders must first deposit the reserve price in an escrow account and the bid must close within six to eight hours of commencing. The auction should be open, where each bidder can increase the bid price after viewing the offer prices of other bidders. That's how the Tatas won the Corus Steel bid. As Air India is not listed, this is also the best way for price discovery for the government to realise the highest value from the sale.

The acquisition of Air India is fraught with huge risks. The Tatas already have two airlines — Air Asia and Vistara — that are bleeding cash. There are problems in those partnerships. Tony Fernades, the mercurial entrepreneur who still holds some stake, and is in trouble with his other airlines in Asia, has dissociated himself from the Indian airline that he floated with Tatas. He is under investigation by the Central Bureau of Investigation.

But the Tatas may succeed if they can merge all three airlines into a single entity, with a new vision and a dynamic leadership team to steer it. They have the management depth, skills and wherewithal along with the capacity to raise that kind of capital to compete with the likes of Emirates, Singapore Airlines, British Airways, Air France and Lufthansa and others.

Tatas have the global exposure and appetite for this kind of entrepreneurial risk. And with Ratan Tata, a keen aviator, who is still active in the conglomerate and at the helm of the group, the stars are aligned to bring Air India back into the family. Such an acquisition is full of challenges, but it's a worthy effort. That will be good for Air India, its employees and consumers. The government will be able to redeem itself.

It will be crowning glory and a fitting tribute to JRD, who can at last smile down from the heavens.

Captain Gopinath is the Founder of Air Deccan

Disclaimer: This article first appeared on Hindustan Times, and is published by special syndication arrangement.