ECONOMIC APPLICATIONS PROJECT

NAME:- Gargi Kadam

CLASS:- 10th A
ROLL NO.:- 04
 Tata Sons taking over Air India
and
its Impact on the Indian Economy
 WAS AIR INDIA STARTED BY THE TATAS?

• JRD Tata spent his childhood in France in the neighbourhood of Louis Blériot, the
first person to undertake an international overseas flight in 1907, when he crossed
the English Channel in a monoplane.
• Three years on, JRD Tata founded Tata Aviation Service in 1932 with an investment
of Rs 2 lakh and piloted the first flight of Air India, then called Tata Air Mail.
• It was a cargo flight. It soon became a profit-making venture. In five years, Tata Air
Mail’s profit rose from Rs 60,000 in 1933 to Rs 6 lakh in 1937.
• Tata changed the name to Tata Airlines in 1938. After World War II in 1946, regular
commercial service was restored in India and Tata Airlines became a public limited
company under the name of Air India.
• Under the Air Corporations Act of 1953, the Government nationalized the air
transportation industry and Air India International Limited was born.
• Hence, Air India was started by Tata Sons(now Tata Group).
 BIDDING FOR PRIVATISATION

• In September 2021, government issued fresh tenders for selling the airlines,
where Spice Jet's Ajay Singh-led consortium and Tata Sons shown interest in the
bid.
• Finally, on 8 October 2021, Air India, along with its low cost carrier Air India
Express and fifty percent of AISATS, a ground handling company, were sold
for ₹18,000 crore (US$2.4 billion) to Talace Private Limited, a Tata Sons' SPV.
• The winning bid brings to the Tatas, a 100 per cent stake in Air India and its low-
cost arm, Air India Express as well as a 50 per cent stake in ground-handling
company Air India SATS Airport Services Private Limited (AISATS).
• This also brings to Tatas part of Air India’s debt. The government said as on
August 31, Air India has a total debt of Rs 61,562 crore. Tata takes over Rs 15,300
crore of the debt. The rest would be transferred to a special purpose vehicle (SPV).
• On winning the Bid, Mr. Ratan Tata greeted Air India by twitting, “Welcome back,
Air India.” after 68 years of nationalisation.
 IMPACT OF TAKEOVER ON AIR INDIA FLEET

The takeover of Air India by the Tatas is expected to increase the number of business-class and transfer passengers,
improve operational efficiency, and payment of dues on time, all of which will benefit airports.
The deal would make Tata Group the second-largest airline operator in the domestic market with 26.7 per cent
market share, and behind the market leader IndiGo (57 per cent market share). In the international segment
though, Tata Group would emerge as the leader with the lion's market share.
 Earning More Revenue-
• With the Tatas holding the controlling stake in two full-service airlines (Air India and Vistara) and two low-fare
carriers (Air Asia and AI Express), there will be synergy that will “help in spreading its wings across India, having a
positive pan-India impact in ATMs at Indian airports.”
• ATM refers to air traffic management, which is the aggregation of airborne and ground-based functions needed
to ensure the safe and efficient movement of aircraft during all phases of operations.
• Faster turnarounds and better slot utilisation by Tata Group airlines is expected to benefit airports, which will be
able to earn more by handling more flights.
Passenger Transfer-
• An FSC brings in more business-class passengers, who have higher potential to spend at airports, enjoy more
benefits including an increase in hub operations, leading to a higher number of transfer passengers.
• A pep-up in aero revenue at airports like Delhi where Air India has its base and other metro airports where Air
India will have significant operations in the medium term is expected.

Payment Of Dues-
• Air India also holds leased land at Delhi and Mumbai airports that the Tatas can now release so that airports can
collect market rates for airlines using them, according to the person associated with the airline industry for over
four decades.
• The national carrier has been surviving on taxpayer's money for the last decade.

The biggest challenge with Air India is that its quality of service has not been up to the mark for several years. "The
service standards have deteriorated over the last few decades. There is a lack of consistency of service too, which
has disappointed many loyalists. On the passenger front, the Tatas will have to, inter change the perception of Air
India in order to turn around the airline.
In the long term, by when the restructured Air India and the other Tata group carriers will have augmented their
fleet and marked their presence in India’s metro and tier-II city airports, as also regained Air India’s past glory, a
fillip to the aero revenue of these airports can be safely predicted.
 IMPACT ON EXISTING AIR INDIA EMPLOYEES

• Air India now has 12,085 employee on its books. 8,084 of them are permanent
while 4,001 are on contract. Air India Express has 1,434 employees.
• The Tatas will have to retain them for a year. About 5,000 employees will
automatically retire in the next five years.
• Tatas will have to retain all employees of Air India for one year but can offer
voluntary retirement scheme (VRS) in second year.
• Employees can be sacked on the basis of performance or as part of a disciplinary
action.
• Before nationalization the employees got their basic salaries on the 1st of the
month.
• But after nationalization until 2021 cash-strapped AI had not been punctual with
salaries and generally paid salaries on the seventh or tenth day of the month.

• Finally Air India employees will get their salaries on time.

 HOW WILL AIR ASIA INDIA, VISTARA CO-EXIST WITH AIR INDIA?

• The Air India is back to private almost after 68 years.

• It's likely that Air India and Air India Express would not compete with the existing airlines. That part Tatas would
have already figured out. Also, if all the airlines merge into a single entity a few years down the line, it's clear that
the Air India's brand name would be retained.
• The domestic aviation market is highly skewed towards LCC (low-cost carriers). Even though Vistara is a full-
service carrier, its back-end is operated like an LCC. With the acquisition of Air India, it remains to be seen if
Tatas continue to straddle across LCC and FSC segments in the future.
 Skills that Leaders/Entrepreneurs must possess considering the
current pandemic

• The most crucial characteristic of entrepreneurs is their ability to take risks. While the pandemic forced numerous
start-ups to halt their businesses, some decided to leverage it as an opportunity and make the best of it. Amidst
the lockdown when people were standing in long cues at grocery stories, numerous start-ups recognised the
need of online services and diversified their roots by delivering food items at doorsteps. Delivery giants, Swiggy
and Zomato, also started delivering groceries and other essentials, instead of pulling the plug.
• Leaders should be more adaptive to new changes and work accordingly.
• They should be more agile.
• Innovative ideas are must to make the work environment more easier.
• They have to be more humane as the employers are facing family member loss in this pandemic.
THANK YOU!