The business house’s affinity for the airline industry and expertise in the service sector will be tested as it seeks to nurse the perennially sick airline back to health
As news of the Tatas taking over Air India spread, snappy jokes about ghar wapasi, “airlooms” and “Tata does not always mean goodbye’’ flooded social media. The mood was overwhelmingly sentimental: A perennially sick airline had returned to its roots, and was waiting to be nursed back to good health. While the sale of Air India is a big boost to the government’s disinvestment drive, some wondered whether the investment, at a time when the aviation business is in the doldrums, made sound business sense for the Tatas. The deal bore the clear stamp of chairman emeritus of the Tata group, Ratan Tata, 83, an entrepreneur with a reputation for bold gambles, uninhibited by the bottom line, in acquiring marquee brands, whether in overbidding for the Anglo-Dutch industrial giant, Corus Steel, or purchasing Jaguar Land Rover when the auto sector market was down.
Unlike most business houses, the men at the helm of the Tata group will not have to face irate shareholders over their purchase. Sixty per cent of Tata Sons, the tightly held private company which runs the Tata empire, is owned by the two major Tata charitable trusts, with Ratan Tata as chairman. The Pallonji Mistry family owns 18.3 per cent of the company, but the Supreme Court ruled earlier this year that minority shareholders have really no say and cannot complain. A comforting monetary factor for Tata Sons is that it is the major shareholder of the flourishing Tata Consultancy Services (TCS), India’s second-largest company, a cash cow that has bailed out the group in the past.
Since the terms of the purchase agreement are yet to be clearly spelt out, it would be a mistake to assume that Air India is necessarily an albatross which the Tatas were strong-armed into purchasing for alternate considerations. The Tata group has coveted the airline ever since the Vajpayee government first talked of disinvestment, but was thwarted in its earlier attempts by politicians instigated by business rivals. Air India was, after all, the Tatas’ baby and cruelly snatched away by the government, and run slowly to the ground by bureaucratic mishandling. Praful Patel as civil aviation minister played the role of principal hatchet man.
The history of civil aviation in India is inextricably linked to the Tatas. It is thanks to the late Jehangir Ratan Dadabhoy (JRD) Tata, the group’s charismatic chairperson, that the first indigenous airline got off the ground in 1932. JRD, the first Indian to obtain a commercial pilot licence, joined the Tatas in the mid-1920s and started a postal air service from Karachi to Bombay via Ahmedabad in partnership with a former RAF pilot Nevill Vintcent. The Tatas’ original investment was only Rs 2,00,000. On October 15, 1932, JRD inaugurated the airlines, personally flying the Puss Moth from Karachi. From a mail service, it was a small step to flying passengers. Within five years of operations, Tata Aviation Service had a punctuality rate of 99.4 per cent. By 1946, Tata Airlines carried one in every three passengers in the country. After independence, JRD conceived of a grand plan to turn his airline international under the name, Air India International, as a joint enterprise with the government. The government had 49 per cent equity. Air India was the first Asian airline to link east with west. JRD knew he could never compete in size against the big international European and American carriers of those days such as Pan Am, Trans-World Airlines, KLM and British Overseas. His aim was to ensure that Air India was second to none in the quality of service, equipment, maintenance and timing. The bowing maharaja, conceived by the irreverent marketing genius Bobby Kooka, was the iconic logo of the royal Indian hospitality offered aboard Air India. On his frequent trips, JRD made copious notes, listing the minutest of complaints, from the shabby appearance of an armrest to changing the menu to include piping hot bacon and tomatoes along with eggs. His wife Thelly and Kooka often helped in recruiting airhostesses.
In August 1953, Jawaharlal Nehru as prime minister nationalised all privately-owned airlines and merged them into state corporations: Air India and Indian Airlines. JRD was deeply hurt that the one company for which he had such great dreams and had invested the maximum time and energy was snatched away from him. The government added insult to injury by offering a paltry sum as compensation for the airlines’ valuable assets. Still, in recognition of his role, JRD was appointed chairperson of Air India and a director of Indian Airlines. As unpaid chairperson, JRD continued to devote a large proportion of his time to the airlines and, as late as 1964, Air India topped the list of airlines surveyed by the London Daily Mail. In March 1977, the Janata Party Prime Minister Morarji Desai dealt the unkindest blow — JRD was dropped from the boards of both Air India and Indian Airlines and it was left to his embarrassed successor Air Marshal P C Lal to break the news to him.
Ratan Tata, JRD’s successor as Tata chairman, also has a fascination for flying. As a college student in the US, he did odd jobs, even washing dishes, so that he could take flying lessons. He was the first Indian to fly an F16 Falcon fighter at the age of 70.
But is the Tatas’ deep affinity for the airline business, the synergy that their other companies can provide and their known expertise in the service sector enough? The challenge, as PR honcho Dilip Cherian jokingly suggested, is, “To turn a babu brand into a Bawa brand”. But the airline business today is very different from what it was 68 years ago. Low-cost airlines with minimum overheads and minus frills have generally proved to be the most successful models. The magic carpet treatment of yesteryears does not necessarily provide the key for a turnaround of an airline.
The writer is the author of The Tatas, Freddie Mercury and other Bawas
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