Air India purchase will bring new challenges for Tata Group

The government of India has finally found a buyer for Air India, with Tata Group selected to take over the flag carrier as expected. But although Tata has won the bidding contest, it will face many challenges in operating the airline as a viable business.

The primary question will be how to move Air India towards profitability. Despite the sentimental appeal of returning the airline to the company that founded it in the 1930s, before its nationalisation in 1953, Tata Group will no doubt intend Air India to be a financial contributor at some point.

This would be quite some turnaround, as the airline was loss-making even before the pandemic arrived to decimate demand. Now it must contend with a potentially lengthy demand recovery period, as well as the continued rise of LCC competitors.

Tata Group will also have to align Air India with its other airline holdings and determine what degree of consolidation it can achieve.