Tata Group may be likeliest buyer of stake in ailing Air India

The Tata Group is believed to have held preliminary discussions with senior government officials for buying back the beleaguered Air India, of which it was the original promoter.

According to several reports today, the group is open to purchasing a stake in Air India, which J R D Tata launched in 1932. If the talks fructify, the national carrier's history may come full circle.

A few weeks ago, group chairman N Chandrasekaran is reported to have had an informal meeting with union finance minister Arun Jaitley and civil aviation minister Ashok Gajapathi Raju in New Delhi, triggering speculation about India's largest conglomerate renewing interest in a possible deal to buy Air India.

While it is not known whether the talks were held at the behest of the government or the Tata group, a source close to the developments said preliminary discussions had been held but were yet to reach a ''serious'' stage.

According to The Times of India, sources in Bombay House, the Tata headquarters, said that the $104-billion Tata group is not particularly keen to acquire AI unless the government significantly reduces the airline's debt of over Rs50,000 crore.

When contacted by Business Standard, a Tata group spokesperson said, ''We do not comment on such matters.'' Senior civil aviation ministry officials, who are at the Paris Air Show, could not be contacted.

The Tatas run two joint venture airlines - AirAsia India and Vistara - both of which are relatively small operations compared to Air India. Being late entrants in the domestic market, the rise of both carriers has been hindered by slot constraints and pilot shortage. On the other hand, Air India is an established brand and has the third-largest slot share in the domestic market and second-largest share in international market (ex-India) with prime slots in domestic and international airports. This makes it attractive for potential suitors, BS reports.

Sixteen years ago, the conglomerate along with its current partner Singapore Airlines had shown interest in Air India when the government had decided to sell 40 per cent in the carrier. Subsequently, the Vajpayee-led NDA government called off the divestment move.

The Tatas have a long history in aviation. J R D Tata began the first air mail service by an Indian company – operating a flight between Karachi and Mumbai in October 1932. This was followed by passenger services within the country as Tata Airlines, heralding the birth of Air India. Tata Airlines became a public company in 1946 and was renamed Air India. Its iconic mascot Maharaja was also created in the same year.

After Independence, the government bought a 49-per cent stake in Air India in 1948, and nationalised the carrier in 1953. However, J R D Tata remained its chairman until 1978, when he was removed from the post by the Moraraji Desai-led Janata Party government. Almost a decade later, Ratan Tata was named the chairman of Air India. He held the post for three years, from 1986 to 1989.

Inter-ministerial consultations have taken place on the future road map for Air India and the cabinet will have to take a call on the matter. Air India is under a Rs30,000-crore government bail-out plan and is saddled with a debt of over Rs46,000 crore.

However, the government is yet to take a decision on selling stake in Air India. ''They (civil aviation ministry) have raised some reservations on privatising Air India,'' a finance ministry official told BS, adding that the matter was being deliberated upon. ''They are in favour of continuing operating the national carrier by retaining a majority stake,'' the official said.