On Friday (October 8), Department of Investment and Asset Management (DIPAM) secretary Tuhin Kanta announced that Talace Pvt Ltd (a wholly-owned subsidiary of Tata Sons Pvt Ltd) made the winning bid for Air India. The EV quote by Talace was ₹ 18,000 crores, which included a debt of ₹15,300 crores and a cash component of ₹2700 crores.
Ratan Tata, the former chairman of the Tata Group shared a tweet saying ‘Welcome back, Air India’. In a heartfelt note, he stated, “…Air India, under the leadership of JRD Tata, at one time, had gained the reputation of being one of the most prestigious airlines of the world. Tatas will have the opportunity of regaining the image and reputation it enjoyed in earlier years. Mr JRD Tata would have been overjoyed if he was in our midst today.”
Welcome back, Air India 🛬🏠 pic.twitter.com/euIREDIzkV— Ratan N. Tata (@RNTata2000) October 8, 2021
Foundation of Air India and the role of JRD Tata in shaping it
The story of Air India began in 1932 when the visionary industrialist JRD Tata laid the foundation of Tata Aviation Service. Dubbed as the ‘Tata Air Mail’, he started the airline with an investment of ₹2 lac rupees. His fascination for the airline business began in 1927 while sketching Charles Lindbergh (who had crossed the Atlantic solo that year). When Flying Club opened in Mumbai 2 years later in 1929, JRD Tata enrolled on a flying programme. He spent hours mastering the art to fly a plane.
In 1932, he piloted the first cargo flight (carrying 25 kg of airmail) of Tata Aviation Service from Karachi to Madras through Ahmedabad, Pune, Bombay, Bellary, Kolhapur and Bangalore. It was a three-seater, single-engine, unpressurised de Havilland Puss Moth. It was a historical moment for the Indian aviation industry and JRD Tata saw to it that his airline business turned it into a profit-making venture. Within 5 years, the airline had made ₹6 lac in profits.
In 1938, the name of the airline was changed to ‘Tata Airlines’ from ‘Tata Aviation Service’. However, World War II broke out the following year. And the British government took control of all the aircraft that were owned by JRD Tata. It was only after the end of WWII that he restored control over his own company. In 1946, he renamed ‘Tata Airlines’ to ‘Air India’ and relaunched it as a joint-stock company.
A Himalayan blunder and Nehru’s treacherous ways
Perhaps, the first ‘nail in the coffin’ came from the end of Tata Group who were oblivious to Pandit Jawaharlal Nehru’s treacherous ways. In 1947, the Tatas gave the Congress government a proposal to acquire a 49% stake in Air India Ltd, with a provision to later increase it by 2% (i.e. a total of 51% majority stake). Tata Group was to hold 25% ownership in the company while the rest was to be publicly traded.
JRD Tata was not a fan of ‘nationalisation.’ When talks were rife about nationalising private entities in India, he had remarked, “There is an overwhelming case against nationalisation of India airlines.” By 1948, the Nehru-led-Indian government held a 49% stake in Air India Ltd. JRD Tata was unable to fathom the drastic move by Nehru which was to wreak havoc on the airline industry and the empire he built.
The year was 1953. The Indian government decided to nationalise Air India and the airline industry. In his own words, Tata recounted, “(I was) indignant at the manner in which the government had treated the air transport industry.”
Nehru acquired the remaining 2% to become the majority stakeholder in Air India Ltd. At a mere ₹2.8 crores, the then Indian government purchased the stocks of Air India. By shelling out an additional ₹3 crore of taxpayer money, PM Nehru purchased other domestic airlines and nationalised the entire industry. As a gesture of tokenism, the Congress government allowed him to remain the ‘unpaid’ Chief/Chairman of the airlines for 25 years until 1978. Later, the Indira Gandhi government re-appointed him as the Chairman between 1980-1986.
Nehru used backdoor channels to get Air India nationalised, upset JRD Tata
Interestingly, the decision of ‘nationalisation’ was made by Nehru without consulting the Tata Group. Air India was a successful private venture, which was even invited by the Singapore government to set up the Singapore airlines. It thus came as a surprise when the first Prime Minister insisted that there was no option other than nationalisation. “(The government was) driven to the conclusion that there was no other way out except to organise [the airlines] together under the State,” Nehru claimed in a letter to JRD Tata.
“My friend Nehru stabbed me in my back. I can only deplore that so vital a step was taken without giving us a proper hearing,” JRD Tata lamented on the betrayal of his ‘friend’. And the rest remains history. The once successful private player in the airline industry was reduced to a loss-making venture. With subsequent government interference and bureaucratic red tapeism, Air India ended up with an accumulated loss of ₹80,000 crores.
Nationalisation of Air India and Aftermath
Alok Bhatt, in an article in News18, quantified the loss and provided a fresh perspective. He estimated that ₹80,000 crores (had it not been a lost cause) could provide ₹ 5 lakh Ayushman health benefit to almost 10 crore citizens or could have been used for the construction of 9,000-km long (4-lane highway)/ 5,250-km long(6-lane highway). He added that the bailout package provided to Air India in the last decade could support the Union government’s POSHAN project for 2 long years.
In his parting note, JRD Tata said, “And now the time has come to say goodbye. As we turn the last page and put away the book, regret or bitterness has no place in our hearts. Instead, we may find content in the thought that what we did was worth doing, that we set our standards high and would not lower them, that we never need part with our memories…” From being an excellent aviator to pioneering India’s first airline enterprise to losing his dream and hard work to the government, JRD Tata saw it all in his lifetime. With the Tatas finally acquiring Air India from the government, a historical wrong has been set right. In his heavenly abode, JRD Tata can now take a sigh of relief.