Tatas to lead consortium to bid for 40% in Air-India
Business Standard — October 6, 2000

The Tata group will be the majority partner in a consortium to bid for 40 per cent stake in Air- India. Negotiations are on with several international carriers, including Singapore Airlines, in this regard.

Tata Sons chairman Ratan Tata told reporters here yesterday that the Tata-led consortium would formally bid for the 40 per cent stake in the airline. He justified a tieup with foreign carriers saying it would provide synergies for global operations.

As per the expression of interest guidelines, foreign airlines can pick up to 26 stake in Air-India. However, the Tatas are aiming at a majority stake in the consortium. "Our aim is to be the majority holder and acquire 26 per cent of the 40 per cent being divested to a strategic partner," he said.

The group is in touch with a number of airlines, but Singapore Airlines appears to be on top of the list. Tata ruled out any alliances with any American or Indian (domestic) airlines. When asked, he also ruled out any alliance with British Airways or Virgin Atlantic.

Two merchant bankers have also been shortlisted to advise the company on the deal, and the final advisor will be selected in a fortnight. Details of the deal will be available after the expression of interest is formally put in.

The most important thing will be the shareholders agreement, in case the shareholders agreement does not grant the complete right to manage and run the airline, the Tatas will not be interested in the acquisition.

"It is important for the airline to have a policy independent of government policy," Tata said. He ruled out any interest in Indian Airlines and the Hotel Corporation of India-the wholly owned subsidiary of Air India.

Asked which subsidiary of the group will manage the airlines, Tata said that it had not been decided so far. The turnaround strategy of the consortium will be to expand the Air India fleet to enable full utilisation of the tremendously valuable bilaterals that Air India already has but is underutilising.

The strategy will also focus on the excess staff issue. Air India currently is highly overstaffed with an aircraft to employee ratio of 1:680. The industry average is 1: 350. Tata said to finance the strategy, the options being weighed were leasing of aircraft or a suppliers credit mechanism.

The most important factor for the turnaround was the motivation of employees, where Air India lags behind, "Employees need to know that the management is fair," he said. He cited the example of British Airways which appointed consultants to bring out the best from of the employees following privatisation.

"Concern for the customer needs to be inculcated in the employees," he said. He said that alliances were a must for an airline to excel, and regional alliances did not work in today’s world of global alliances. Air India had become an ethnic airline, he said, adding that the image of Air India had to change.