Ratan Tata

Tata…, Air India!

The last time I flew Air India was before the pandemic to Shanghai from Delhi and return. The reason to fly Air India was obvious. There were no direct flights from Mumbai to Shanghai (Yes, surprise of surprise, after Jet Airways stopped flying this sector) and to save time on transit, it made better sense to fly to Delhi and take the direct flight to Shanghai. For most of us, the reason to opt for Air India for international flights, particularly when travelling for business/work would be this.  In the absence of a better option and not necessarily being the first choice.

The other set of non-business travelers from India (Students, Senior Citizens, vacationers) opt for Air India for cheaper fares or the extra baggage allowance which comes handy.  In the past one or two decades, rarely I have seen or heard anyone opting to fly Air India for its superior service or for the flying experience.  And herein lies the sad and sordid tale of Air India as a National carrier of India. If this is the situation with Indians, one can imagine where Air India would stack up in the minds of foreigners.

The situation was not so bad all along for Air India. During my MBA days, way back in 1990, we did a survey of air travelers in Mumbai as part of a marketing project. International travel was not common those days as it is now. I vividly remember that Air India fared very well in terms of perception and I guess those were the heady days for the Maharaja. But in the subsequent years as International air travel picked up and when the market was actually exploding in India post liberalisation, Air India was imploding.

The reasons for the rot in Air India have been chronicled well in Jitender Bhargava’s (Former Executive Director of Air India) book – The Descent of Air India. In a deadly cocktail of an indifferent and unaccountable Top management, political interference and string pulling and a demotivated and tired staff, there was only one direction the airline was heading – southwards. Of course, he argues that the descent was accelerated by ill-timed and ill-advised decisions including purchase of new fleet at uncompetitive prices and signing of non-profitable bilateral agreements during the UPA regime.  Irrespective of the political regime, it is a known fact that PSUs like Air India and ITDC were treated like personal fiefdoms by both the executive and the bureaucracy to further their own personal interests.

Now and then, different governments have tried to revive Air India by blowing money on marketing campaigns and taking advantage of exclusive route agreements.  The Air India marketing campaigns have always been top notch. But as I have said before, the best marketing campaigns cannot save a floundering product. Some of the attractive routes, Delhi-San Francisco for example, are profitable and well sought after by Indians but such far and few successes in between cannot sustain a full airline.

The present sad state of affairs at Air India, the losses it has accumulated, the capital it guzzles on a monthly basis, the struggles of the staff in getting salaries on time etc. have been documented well overall and hence not repeating those points here. Enough to say that if there was any company which the Government of India should disinvest and exit in a hurry, it was Air India. So after a few attempts in that direction right from the first time under the Vajpayee’s regime to Modi’s current run, finally the disinvestment of Air India is a reality.

 

Air India is Ghar Wapsi for the Tatas. The story of how Tata Airlines became Air India by a forced nationalisation is also well documented. It will be interesting to observe how the Tatas embrace Air India and more importantly turn it around quickly. For Ratan Tata, there is an emotional connect with Air India. But then, we know how just having emotional connect doesn’t help in business. It calls for a Himalayan effort to start from scratch, change the culture, compete and build a world class airline. Tatas of course is not new to the airline business. They have been running Vistara in a joint venture with Singapore Airlines for some time now. Tatas also have investments going in Air Asia – a regional airline. But then, taking over a fledgling Airline like Air India and turning it around is another cup of Tetley tea!

Airline business is one business which is CAPEX intensive and OPEX intensive at the same time. There are businesses which are highly CAPEX intensive but once done, do not incur high operational costs (Like the mobile telephony business). There are businesses that don’t require high CAPEX investments but need working capital and operational efficiencies to remain afloat and profitable (Like trading businesses). Airline business is one which demands very high CAPEX investments (Planes, slots, infrastructure etc…), high operational costs on a daily basis (fuel, high salaries, marketing etc.) and require operational efficiencies of the highest order in order to be profitable. The moving parts are so many that with one wrong move, the business can get into a crisis mode. Ask Vijay Mallya or Naresh Goyal. This is one of the reasons why we have seen so many airlines folding up in India itself ever since the skies were opened up to private players.

In Airline parlance, there are this headwinds and tailwinds. Tailwinds propel the flights and headwinds have the opposite effect. In he history of Air India as a business though, it has seen only headwinds.

I am certain that Tatas would have obviously done their homework that too extensively, before bidding for Air India. Now that they have won, they have their task cut out. There are many things going for them, on top being the good will of Indians in general towards Tatas. That’s why we didn’t see much of opposition to the announcement of Air India being sold to the Tatas. With “revenge travel” post Covid expected to take off, the timing is just right for Tatas to soar into the Indian skies with Air India N.0! I am personally looking forward to the day when I would opt for Tata-Air India as my first and only choice when I fly abroad. For now, it’s Tata, Air India from GOI and as Amul says, a “Good Buy for Tata”!

Post Script: Interestingly, the Air India Staff Union expressed its happiness over Tatas winning the Air India bid! When was the last time a staff union was happy over privatisation in India? And when was the last time we saw no noise from the Left over privatisation?  Acche Din are here, guys!

Nano – Tata’s and India’s miss!

Tucked in between the noisy and newsy headlines in India in the last week around Love Jihad, Rahul Gandhi’s religion, Ivanka Trump’s costumes in Hyderabad and other inanities, was a poignant news bit about the Nano car. Poignant, because it said that dealers have stopped placing new orders for the car and in the month of October, just a measly number of 57 cars were shipped. And this led to political jibes from Rahul Gandhi that the PM’s pet ‘Make in India’ project just died. He also tweeted that Rs. 33,000 crore of tax payer’s money and that too of Gujaratis’ turned into ash. Coming in the midst of a vitriolic election campaign in Gujarat, one can excuse politicians for spicing up their speeches without looking at the larger picture. The point is taking potshots at Nano’s failure is taking potshots at India. Failure of Nano is not just a failure of Ratan Tata or the Tatas but a blot on India.

Cut to year 2008, when Nano was first launched, it was the biggest story of India Inc. ever. When Ratan Tata initially announced that Tata Motors is working on a Rs. 1 lac (US$2500) car, it was met with excitement and skepticism in equal measure. So, finally when Tata did launch the car with a price tag of Rs. 1 lac, the world did look up and notice. Finally, here was a car which was conceived in India, designed and developed by Indians with indigenous technology and manufactured in India that broke all cost frontiers unimaginable by car manufacturers till then. Overnight, Ratan Tata was the toast of the nation.

Around the 2008-10 time period, whenever I met any foreigner from Japanese to Americans, our conversations invariably touched upon the Nano car and how this was pulled off. And those visiting India always wanted to see a Nano car on the road and take a picture in front of one. Selfies didn’t exist then! The Chairman of a well- known Indian group who drove a Camry, proudly told me that he was the first among to book a Nano in Mumbai and to get delivery as well. At that time, Nano was yet to be seen in big numbers in Mumbai. But on a visit to Colombo in 2011, Nano had already captured the “Budget Taxi” space there. Media was full of interviews of not just Ratan Tata but also of the R&D engineers who had designed the Nano.  Nano’s launch was the culmination of a series of stories in which India Inc. was part of then. It was believed that Nano would be a live case study for C.K. Prahalad’s “Fortune at the bottom of the pyramid” theory!

That was not be and the excitement around Nano soon started tapering. Unfortunate incidents of the Nano going up on flames on the road didn’t help at all. For a product which was expected to expand the car market by 65% or so, the sales was plateauing around 70,000 Units a year for 2-3 years before nose diving to what is a few hundred cars this year. The failure of the Nano car must be one of the most analyzed and discussed case study in B- Schools, I reckon. Most of what I have been reading, attribute its failure to the “positioning” of the car as the world’s cheapest car in the beginning.  The Quality failures adding “fuel to the fire”. Attempts to re-position the car as a “Cool Urban car”,… didn’t help either. I have a different view on the reasons for the failure of the Nano car. But will keep that for another blog.

In business, they say there is no room for emotions and decisions need to be taken based on just commercial considerations. The ousted Chairman of the Tata Group, Cyrus Mistry recently said that during his time it was decided to pull the plug on Nano as it didn’t make commercial sense, after attempts to revive the project failed.  As of now it hasn’t happened. The current Chairman Chandrasekhar has been more considerate, probably towing Ratan Tata’s emotional line. He has said that there is a need to take a more “holistic” view on the Nano project. And I tend to agree.

Nano was not a Tata story. It was and is an India story. Ergo, failure of Nano in a way is an indictment on the capability and potential of Indians. And as somebody said, “Nano was not an Idea. It was an ideology!” Ideas can fail. Ideologies need to linger! The failure of Nano soon opened up to “We told you so” and how can Indians pull it off” jibes. For a 3rd largest economy (GDP-PPP) in the world, India is yet to throw up globally renowned home ground brands. So far, it’s been the soft power brands like Ayurveda, Yoga, IIT and the likes which have been torch bearers for India globally. Let’s keep aside the Software brands like Infosys, Wipro,… aside for the time being. In one of my very early blogs (read here) on different styles of management, I had opined that for the world to recognise, acknowledge and adopt the “Indian style of Management”, we need stories of successful Indian companies and brands. Just like how the world adopted the American way or Japanese style when their companies were successful. And that opens the door for Indian companies, Indian products and we Indians in the global arena. Nano was uniquely positioned to be the 1st homegrown successful Indian product brand. There was an opportunity for India Inc. to have “arrived” in style. Not just that. Success of the Nano would have led to similar pushing of cost and design frontiers by other Indian companies in many other product categories. It would have opened the floodgates for Indian CEOs to apply the “frugal innovation” concept in other products. Hence my fervent hope that Nano should succeed.

So, when it failed as it has now, it has pushed back the India Inc. story by few years till we stumble upon the next Big Idea. In the meantime, Nano I believe, is slated to make a comeback in an electric avatar.  Will this avatar help Nano to claim the position of “the common man’s car” in Indian market that Ratan Tata originally envisioned 9 years ago? The world in no longer watching it with the same excitement of 2008. Away from the arc lights, the original billion dollar opportunity still beckons!

A quote alluded to Ratan Tata says, “I don’t believe in taking right decisions. I take decisions and make them right!” Nano might have been a glaring exception to this. For Ratan Tata’s sake, Nano-II should set the record straight. For India’s sake too.