Captain Gopinath: Why are the Tatas so crazy about Air India?

Air India! The name, in the 1950s, ’60s and ’70s, during the days of the licence raj, conjured images of exotic destinations, distant glitzy cities, and mystic lands. It had romance. If you frequently travelled by Air India on work or vacations, it conveyed you had arrived in society. You belonged to a swish set of people.

It was an exclusive world that exuded discreet power, spelt high society, glamour, and wealth. If you had a job in Air India as a pilot, you were the most eligible and sought after bachelor. If you were an airhostess, you were a young goddess in the skies as unattainable as an Urvashi. That was then, when JRD Tata ran the airline.

Today it’s a doddering, decrepit, down and out airline with an overstaffed, disgruntled, and dowdy crew. Few opt to fly the airline either on domestic or international routes. It is perceived as an unreliable, and shabbily managed airline. It is another government department which has piled astronomical debt, and continues to bleed cash every day; and those who run it are unable to stop the losses. If you have a job there, you may be embarrassed to share your business card.

The Tatas won the Air India bid for Rs 18,000 crore. That is not all. The Tatas have to retain all the 13,500 employees for one year, and take on the load of retrenching the redundant staff with an attractive VRS scheme that will add additional burden to the sky-high debt.

Then there’s the Herculean task of re-engineering and re-equipping many of the grounded aircraft since long, which have been robbed of parts. They have to be liveried, refurbished and spruced up. That will take up a lot of cash and time, and haemorrhage more cash as they sit on the ground.

One wonders why would any sane person wish to sink tens of thousands of crores of rupees to acquire a broken airline when it would take an average of Rs 350-400 crore (the amount invested to start Indigo) to launch a new airline, and less than that of what Rakesh Jhunjhunwala has invested for Akasa. Why are the Tatas so crazy about Air India when they already have controlling stake in two other carriers — AirAsia and Vistara — which are also bleeding heavily since they were launched five years ago. They may have once owned Air India that shone like a jewel in their firmament, but does it matter when most of the current generation of Indians are unaware that the Tatas ever owned it?

The Tatas are at heart entrepreneurs, and great empire builders. The first seed of that empire was sown by Jamsetji Tata more than 150 years ago. A great visionary, India’s first Prime Minister Jawaharlal Nehru likened him to a ‘one man planning commission’. Like many empires they have risen and fallen, and risen again. When steel prices stumbled after World War I and Tata Steel was under severe financial crisis facing closure, Sir Dorabji Tata pledged his wife’s jewellery and personal assets to raise loans from banks to pay salaries of employees by obtaining a bank loan. When kings at times lose one of their precious principalities or possessions, no price is too high to repossess it. Such entrepreneurs are rare now.

JRD Tata was respected as a visionary business leader, and was revered for his humanitarian and charitable work through the Tata Trusts, a legacy he inherited from Jamsetji Tata and his son Dorabji Tata. He was also looked up to as an intrepid aviator, and as the man who built a great and endearing airline with an impressive 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 Madras via Ahmedabad, Bombay, Pune, Kolhapur, Bellary and Bangalore, in a single-engine tiny three-seater unpressurised de Havilland Puss Moth. This was the beginning of Tata Airlines that was eventually renamed Air India in 1946 when it became a limited company.

JRD was an extraordinary and daring entrepreneur. Though he founded TCS, Tata Motors, Titan, Tata Salt, Voltas, and Air India, Air India was closest to his heart which he nourished and cherished. He was 28 when he flew that flight carrying mail in 1932 and gave wings to Air India. He was 49 when it was ‘stolen’ from him by Nehru (then Prime Minister), who was also his friend. It was not only the crown jewel of the Tatas, it was India’s pride.

Still hurting from that loss, the Tatas under the stewardship of Ratan Tata, attempted to re-enter the aviation space when successive governments opened up the sector to private players along with dismantling the licence raj. The Tatas’ attempts were thwarted earlier not only by entrenched players such as Jet Airways but also by Air India. A mocking irony.

Now, not long after the Tatas launched two airlines (Air Asia and Vistara), the Narendra Modi government put up for auction a debt-ridden Air India. Ratan Tata, a passionate aviator and entrepreneur extraordinaire cast in the mould of JRD, is now at the helm of affairs but still hurting and humiliated by what the Government of India had done to the Tatas, is resolved to bring back Air India.

Only cold analysts can fault such an insane decision. Who can put a value to that emotion, that haunting nostalgia, and mystique of that lost diamond that is still alluring to the Tata scion? Air India is still a much-loved brand with immense value of bilateral rights, and network and infrastructure. The Tatas’ war chest is loaded. For example, a sale of one percent of the shares of TCS (a company built under Ratan Tata’s reign) will fetch Rs ~14,500 crore.

However, things can nosedive at a rapid pace. When Air Deccan was losing money I once remarked that my cheques flew faster than my planes. That said, this may seem an impossible dream, but it’s doable and a worthy challenge.

The pitfalls are many, and real. There are now three airlines in the Tata kitty. Merging the three entities will result in huge cost savings of reduced employee and infrastructure by eliminating three separate CEOs with three boards of directors and similarly three departments each of finance, engineering, operations, IT, revenue management, etc. It will prevent the three airlines competing with each other, and cannibalising each other’s passengers, instead of competing as one major carrier against Indigo, Spice, and Go Air. If the airlines can put aside their ego and convert all domestic routes to single-class all-economy on the lines of Air France and other European major carriers, and only international flights with business class and economy, the Tatas might just be able to pull it off, and compete against the giants such as SIA, Emirates, British Airways and Lufthansa.

They must bear in mind no full service carrier has succeeded against low cost carriers in the domestic market anywhere in the world. The full service is an inherently flawed model.

The three Tata airlines do not have a cultural fit. There are partnership dissonance between the Tatas and Tony Fernandes of Air Asia who still holds shares, and between Singapore Airlines and Vistara. All this needs lightning speed, the ability to fuse the three entities into a single homogenous, tight knit, vibrant company, with a common heartbeat and vision.

Ratan Tata is in his eighties, and N Chandrashekharan, the Chairman of Tata Sons who wants to rebuild Air India to its glory days, has no time to lose. He must find the right man to lead Air India — someone who has the heart and brains of JRD — if he has to deliver on his promise to make it a jewel of Tata Group and pride of India again.

No one seems on the horizon.