The BIG news of today in the Indian corporate world was that of Tata’s making moves to take over majority stake in Jet Airways.
Many have been asking this question, “why would Tata’s want to take over a troubled airline?”
Well, the answer is very obvious – Tata’s are the pioneers of aviation in India; its their Tata Airlines which flew the Indian skies for the first time in the country that the Govt took over and is now the beleaguered Air India, itself in desperate need of rescue.
Apart from sentimental reasons, it makes a lot more business sense. Tata’s are not new to the airline sector. After relinquishing Tata Airlines, the Tata’s kind of gave up on dreams of flying but under Ratan Tata, there was the JV with Singapore Airlines but red tapism and the refusal of Tata to pay a bribe to a minister led to the project being shelved. Tata never revealed the name of the minister.
Call it the twist of fate or life’s penchant to poke fun, a retired bureaucrat M.K. Kaw, in his book, An Outsider Everywhere - Revelations by an Insider, wrote that it was C.M. Ibrahim who had blocked Tata's bid to set up the airline during the 1990s and this was done at the behest of Jet Airways. And now life comes a full circle, where Tata’s are themselves gearing up to take over Jet Airways.
The new age Tata’s are not novice in the sector – the group has a 51% stake in Vistara and 49% stake in AirAsia India. And if it does manage to get hold of Jet then it will become the second largest airline in India, in terms of market share – Indigo is number one with a market share of 42% and Tata’s will go up to 24%. Tata’s will become third largest in terms of fleet size – Air India leads with 163 aircrafts, Indigo at 192 and Tata’s will be at 160. The disappointing part – in terms of employees, Tata’s will be more than even Air India, the largest. Air India’s employee strength as per DGCA's Handbook on Civil Aviation Statistics 2017/18 is at 13,518, Indigo at 14,604 but Tata’s will shoot higher at 18,774, making up for 32% of the entire sector’s staff count in India.
The same news about Tata’s and Jet Airways had surfaced in Oct and the company had denied it as being “purely speculative.” Today, the stock exchanges have sought clarification but Jet is yet to revert with a reply.
But the sad truth is that Jet is in desperate need of money and the situation might have become grimmer than what it was a month ago. With third consecutive year of loss, a volatile rupee and crude price, debt of over Rs.8000 crore of which 65% is in dollar, inability to pay staff salaries, approaching banks for moratorium, letting go of non-core staff, grounding a few aircrafts, obviously the arithmetic has changed now.
One does not yet know how this aviation cookie will crumble. For Tata’s, this buy of Jet Airways would be better than Air India. But the question is whether Jet and more importantly, is Naresh Goyal ready to relinquish control? There is talk also of Goyal approaching Mukesh Ambani directly for a bailout. We do not know how that panned out. Only thing we know for certain – Jet needs a bailout and soon!