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Air India’s Contribution to the Indian Economy

 Air India’s Contribution to the Indian Economy

Air India's contribution to the Indian economy has been huge. Previously owned by the Government of India, it is now completely owned by the Tata group, which was also its very first owner.

Air India launched its operations in 1932 before India even attained independence from the British Raj. Back then, it was called Tata Airlines since it was launched by the Tata Group. J.R.D. Tata launched the airlines with the mission to transfer mail for Imperial Railways. The first flight was between Karachi and Mumbai (then Bombay). It then continued to fly to Chennai. In its first year itself, a profit of Rs. 60,000 was made by carrying mails and passengers. 

Air India played a major role in the second world war as well when it transferred soldiers from one point to another. Post-independence, it came under government ownership but was completely privatised in 2022.

History of Air India

To understand Air India’s contribution to the Indian economy, let’s first see how it came into being. Air India started its operations as Tata Air Services in 1932. One of the main objectives of Air India back then was to carry mail on a weekly basis between Mumbai and Karachi. In its first year, Air India (or Tata Air Services) flew 260,000 km, but the number of passengers that flew in was only 155.

Soon after, more destinations like Colombo and Delhi were added to the flight’s route. It was the decade of the second world war. Air India played a major role in carrying soldiers’ medical supplies and rescuing refugees in a timely manner.

In 1946, the name of the airline was formally changed to Air India. On July 29th 1946, it became a public limited company. In 1948, the Government of India acquired a minority stake of 49% in the company. In the same year, the airline made its first international flight going to London Heathrow from Mumbai.

Nationalisation of Air India

The Air Corporations Act was passed in 1953. Under this act, Air India was nationalised, i.e., the government bought a major stake in the company from the Tata Group. The airlines were bifurcated into two separate units – Indian Airlines for the domestic routes and Air India for the international routes.

It started taking more international routes between 1948 and 1950. Flights to Kenya, Rome, Paris, etc., were made. Asian countries like Hong Kong, Singapore, Tokyo, etc., were also covered eventually. 

In 1960, Air India started operations in New York as well. It got its first jet by the purchase of Boeing 707-420. By 1962, it was the first airline in the whole world to be an all-jet airline. 

Problems with Air India

The government of India, in an attempt to promote the competition, allowed private players to enter the aviation market. This led to the inauguration of numerous private airlines. Jet Airways was one of them.

Till 2006, Air India and Indian Airlines were making huge profits combinedly. But, the competition from other private airlines had started coming up. Earlier, Air India enjoyed a complete monopoly. As the competition was building up, it started affecting the company’s profits. The early 2000s was also the period when low-cost airlines were introduced. To a middle-class person, those low-cost airlines were more economical than the costlier Air India. 

While the other companies were making innovations, Air India was operating its previous fleet of jets. In order to survive, Air India had to make a major stride in its operations. In 2011, Air India and Indian Airlines were merged to become one unit so that managing the company could be easier. Major Indian cities like Delhi and Mumbai became major hubs for Air India to cover maximum destinations, both domestic and international. This merger is said to have resulted in the downfall of the company.

Since the government was facing massive losses in the company, it decided to privatise the airlines. An expression of interest came up in 2018, under which the government expressed its intent to sell 76% of its stake. None of the private companies came forward to make bids in the auction process.

In January 2020, a new expression of interest came up in which the government decided to sell its entire stake of 100%. In January 2022, the Tata group acquired a 100% stake in the airlines by bidding for Rs 18,000 crores. The current chairman of Air India is Natarajan Chandrasekaran, the chairman of Tata Sons. The Tata group wants to ensure that Air India’s contribution to the Indian economy is huge again.

Mission and Vision of Air India

The mission and vision of Air India is to provide the best service quality globally and display Indian values and Indian hospitality to the whole world. Its mission is to become the flag carrier of the country and provide seamless travel domestically and globally.

Air India’s contribution to the Indian economy has also been indirect in terms of the rescue operations that it has been a part of. During the Kuwait war, it airlifted thousands of stranded Indians and brought them all safely to India.

Even during the Russia-Ukraine war, Air India was at the forefront of bringing Indians stuck in Ukraine back to the country. It was one of the first operations that Air India was a part of since it came under the control of the Tata group.

Conclusion

Air India’s contribution made India a known name in the world of aviation globally, thus contributing to the Indian economy. It was the first airline to have boosted India’s aviation sector. It made huge profits for the Indian government. Even today, the Tata group believes in the potential of the Airlines and with the right management, it can become a huge asset for the group in the near future.