Transforming a traditional national airline can be a difficult task, but privatising or selling it off can be equally difficult (ask anyone in Italy about Alitalia). While some “flag carriers” have made a journey towards becoming a comeptitive player on a modern market, many of these still today rely on their heritage as national airlines (e.g. BA, Lufthansa, Air France etc.).
Air India is the national airline of India, also known as “the Maharaja” (symbolised by its mascot, which refers to a historic title of rulers of states in India). It was founded in 1932 by a prominent member of the famous industrialist family Tata and was named Tata Airlines. In 1953 the Indian government bought a majority stake in the airline, split it into domestic and international operations and renamed the international part as Air India (and the domestic part as Indian Airlines).
In 1960 Air India became the first airline in Asia to bring a jet aircraft into its fleet in the form of a Boeing 707, and it was in 1993 first with direct flights from Delhi to New York. Air India is the largest international Indian airline, with a market share just below 20% and 60 international destinations (all of this pre-COVID). However, the currently highly competitive landscape of aviation in India has been difficult to handle for Air India. The airline has since its merger with Indian Airlines in 2007 not managed to achieve a net profit in any year.
Already in 2000-2001 there was an attempt to privatise Air India, but since 2017 this has been the explicit goal of the government. The first offer to the market was a 76% stake in Air India, including its more profitable low-cost arm Air India Express and a ground operations company. However, the new owner would have had to take on a debt of 4.7 billion USD and fulfil a number of other conditions, many that would make a restructuring difficult. As it turned out there was no explicit interest from any company to buy Air India at the time. The Indian government tried again in January 2020, this time with an offer of 100% of the airline and a reduction of the dept to 4.2 billion USD. The response was just as muted as to the previous one.
However, now it looks like there may be progress in the sale of Air India. According to the Indian news site livemint.com (link below), the industrial conglomerate Tata is “firmly in the driver’s seat” to take ownership of Air India – yes, this is the same Tata that started the airline in 1932. Interestingly, Tata is also involved in a joint venture with Singapore Airlines in India, in the form of the airline Vistara. This puts the potential Tata takeover of Air India in a possible conflict of interest, or perhaps sets up for a secondary merger as a consequence of a takeover. There are also rumours that Singapore may join Tata in the Air India takeover, but this is unconfirmed by official sources.
The latest update (link) is that the process will be delayed another three months due to that the current COVID situation in India prevents site inspections for potential buyers. However, this long and drawn out process has again shown the magnitude of the challenge in transforming or letting go of traditonal national airlines. Many nations still face the same challenge as India does with its Air India. If nothing else, hopefully there will be lessons to learn from the sale of Air India that can guide other nations in what to do with their national airline.