The only way to run a successful airline is to seek scale.
For nearly a century, the Tata name has been entwined with Indian aviation — not merely as a business venture, but as an expression of national ambition and personal devotion. By late 2020, two airlines and $845 million in losses had brought that devotion to a reckoning: the conglomerate must either reach for something far larger than it had dared before, or accept that passion alone cannot keep a plane aloft. The choice before Tata — absorb the broken, storied Air India or walk away from the skies entirely — is less a corporate decision than a question about the limits of legacy.
- Two airlines, $845 million in combined losses, and zero profits across their entire existence left Tata Group with no room left to drift — the pandemic forced a decision that years of underperformance had been quietly demanding.
- Foreign partners in Singapore and Kuala Lumpur effectively ran both airlines from abroad, leaving Indian executives sidelined and neither carrier able to build a strategy suited to the brutal realities of the Indian market.
- Internal dysfunction compounded the damage — Vistara's expat leadership operated in a bubble of five-star hotels and exclusive lunches, while AirAsia India's local managers couldn't make a move without approval from Malaysia, until corruption allegations forced Tata's hand.
- Neither airline studied IndiGo's winning formula, neither could place the bulk aircraft orders needed to lower costs, and both ended up cannibalizing each other's routes — structural failures that no amount of brand prestige could paper over.
- Tata is now reportedly working to dissolve a non-compete clause with Singapore Airlines, a quiet signal that consolidation is coming — and that an Air India bid, with all its political and financial peril, may be the only path to the scale that survival requires.
Ratan Tata has loved flying since adolescence — he once landed a plane after it lost an engine, and later piloted an F-16. But by late 2020, that lifelong passion had produced something closer to a wound. Tata Group's two airlines, Vistara and AirAsia India, had burned through $845 million combined without ever turning a profit. The pandemic had arrived to force a choice the conglomerate could no longer defer: go big by acquiring Air India, or exit aviation quietly and permanently.
The logic of scale was not complicated. Former Tata executive council member Mukund Rajan said it plainly — without massive capital and genuine ambition, success in aviation was probably impossible. The irony was rich: Warren Buffett had just dumped all his airline stocks, and Richard Branson's old joke about airlines being the fastest way to destroy a fortune had never felt more apt. What set Tata apart was not wisdom but stubbornness — a near-religious commitment to making aviation work, rooted in a history that stretched back to 1932, when J.R.D. Tata flew mail between Karachi and Bombay and founded what would eventually become Air India before independence took it away.
When India reopened its skies in the 1990s, Tata's appetite returned — only to be blocked by bureaucracy twice, in 1994 and again in 2000. When Vistara and AirAsia India finally launched in 2014 and 2015, they represented two simultaneous bets: one on budget travel, one on premium. The problem was execution. Both airlines were effectively run by their foreign partners — Singapore Airlines at Vistara, Tony Fernandes's team at AirAsia India — with top management appointed from Singapore and Kuala Lumpur rather than Delhi. Local executives were marginalized. At Vistara, expat leadership lunched together at upscale restaurants and lived in five-star hotels, insulated from the market they were supposed to serve. At AirAsia India, every decision required Malaysian approval until corruption allegations forced Tata to intervene and the CBI opened an investigation.
Neither airline had a true champion inside Tata's boardroom. Ratan Tata had retired when both ventures launched, and other directors showed little interest in aviation's specific demands. The two carriers ended up competing on the same routes rather than dividing the market, and neither could place the large aircraft orders that would have unlocked the cost savings IndiGo had used to dominate the industry year after year.
By late 2020, reports emerged that Tata was negotiating with Singapore Airlines to remove a non-compete clause — a signal that consolidation into a single airline, and possibly a bid for Air India, was being seriously considered. Air India was a wreck: unprofitable since its 2007 merger with Indian Airlines, surviving on government bailouts, burdened with a bloated workforce and political sensitivities that would make restructuring treacherous. But it also came with trained pilots, a ready fleet, and coveted airport slots in London and New York. For a group that had spent decades trying to reclaim the skies, it might be the only door still open.
Ratan Tata has always loved flying. At seventeen, he managed to land a plane that had lost its engine mid-flight. He has piloted an F-16 fighter jet. Yet his passion for aviation has rarely translated into profitable business, and by late 2020, that gap had become impossible to ignore.
Tata Group owned half of two struggling airlines: Vistara and AirAsia India. Together, they had burned through roughly $845 million and never once turned a profit. The pandemic had arrived to finish what years of mismanagement had started, forcing the sprawling conglomerate to make a choice it could no longer postpone. Either the Tatas would go big—acquiring the government's chronically unprofitable Air India to achieve real scale—or they would quietly exit aviation altogether, accepting defeat in a sector that had consumed capital and attention for decades.
The bind was real. Mukund Rajan, who had sat on Tata's executive council, put it plainly: the only way to run a successful airline was to achieve scale, and that would require deploying far more capital than Tata had invested so far. Without that ambition and that money, success was probably impossible. The irony was that Tata Group was not alone in this reckoning. Warren Buffett had dumped all his airline stocks in 2020, declaring the pandemic might have fundamentally broken the business model. Richard Branson had once joked that if you wanted to be a millionaire, you should start with a billion dollars and launch an airline. But what made Tata different was its stubborn, almost religious commitment to making aviation work, no matter the cost.
The roots ran deep. J.R.D. Tata, the legendary industrialist who preceded Ratan, had been India's first licensed pilot. He founded Tata Airlines in 1932, flying mail between Karachi and Bombay before the airline was nationalized and became Air India at independence. When India opened its skies to private carriers in the early 1990s, the Tatas' appetite returned. In 1994, they proposed a joint venture with Singapore Airlines to launch an airline with a hundred planes, but the government blocked it because it would have allowed a foreign partner. In 2000, they tried again to buy a stake in Air India itself, but political opposition killed the deal. The family's aviation dreams kept colliding with India's bureaucracy.
When Vistara launched in 2015 and AirAsia India in 2014, the Tatas seemed to be trying two different bets simultaneously. AirAsia India was supposed to be the scrappy low-cost carrier, luring passengers away from trains and buses with fares that sometimes cost just a few cents. Vistara pitched itself as the premium option, with business-class cabins on every plane, targeting wealthy Indian executives flying to London and New York. The problem was not the strategies themselves but how they were executed. Both airlines were run almost entirely by their foreign partners—Singapore Airlines controlled Vistara, Malaysia's Tony Fernandes controlled AirAsia India. The top management at each airline was appointed by executives in Singapore or Kuala Lumpur, not Delhi. They struggled to build a business model that actually worked in India.
Inside Tata's aviation operations, a culture of exclusion had taken root. At Vistara, Singapore Airlines appointees would lunch together regularly in high-end restaurants near the airline's headquarters, creating an insular world. Those executives lived in five-star hotels and sent their children to the most expensive schools—perks not extended to Indians hired by Tata. At AirAsia India, local executives had to get approval from Malaysia for every decision until the end of 2018, when corruption allegations forced Tata to intervene. India's Central Bureau of Investigation was investigating whether bribes had been paid to influence policy. Neither airline had a champion inside Tata Group itself. Ratan Tata had retired around the time both ventures were established, only returning as interim chairman in 2016. Other board members were neither familiar with nor interested in aviation's specific demands. The two airlines ended up competing for the same passengers on the same routes instead of dividing the market. No one studied how IndiGo, the market leader, had made money year after year by selling cheap tickets and running on time. Neither Vistara nor AirAsia India could place the massive plane orders needed to secure the discounts that would have made their economics work.
By 2020, the question was no longer whether the Tatas could make aviation work but whether they would finally accept that they could not. Reports suggested Tata was negotiating with Singapore Airlines to remove a non-compete clause that would allow Vistara to bid for Air India. If that happened, consolidation into a single airline might follow. Air India itself was a wreck—it had not made money since merging with Indian Airlines in 2007 and was surviving on massive government bailouts. But it came with hundreds of trained pilots, a ready-made fleet, and slots at lucrative airports in London and New York. The catch was that Air India also came with a bloated bureaucracy, a unionized workforce, and a brand so politically sensitive that the government might never allow a new owner to cut staff or retire the name. Still, for a group obsessed with aviation, it might be the only way forward.
Citas Notables
The only option to run a successful airline is to seek scale. This would require the Tatas to deploy significantly more capital than they have done thus far. Absent ambition and scale, the prospects for success are probably very remote.— Mukund Rajan, former Tata executive council member
Ratan Tata is obsessed with airlines and you can't get it out of the blood. He's not going to give up on airlines so easily.— Arun Kejriwal, founder of Kris Capital
La Conversación del Hearth Otra perspectiva de la historia
Why did Tata keep pouring money into two airlines that were never going to work?
Because Ratan Tata's predecessor, J.R.D., founded India's first airline in 1932. That history matters to them in a way that's almost spiritual. When you're a 152-year-old conglomerate and aviation is part of your founding mythology, you don't just walk away.
But they had two different airlines with two different strategies. Wasn't that a hedge?
It looked like a hedge, but it was actually a mess. Vistara was premium, AirAsia India was budget. They competed for the same passengers instead of dividing the market. And neither one was actually run by Tata—Singapore Airlines ran Vistara, Malaysia ran AirAsia India. The Tatas were funding the losses but not controlling the strategy.
So the foreign partners were the problem?
They were part of it. The real problem was that Tata Group had no aviation expertise at the center. No one was asking hard questions. No one was studying how IndiGo actually made money. The board members weren't interested. Ratan Tata had retired. It was a vacuum.
What about the culture inside these airlines?
It was toxic in a very specific way. At Vistara, the Singapore Airlines people lived in five-star hotels and sent their kids to expensive schools. The Indians hired by Tata didn't get those perks. At AirAsia India, local executives couldn't make any decision without approval from Malaysia. That's not how you build a business.
So what's the way out?
Consolidate into one airline, probably by acquiring Air India. It's the only way to achieve the scale you need. But Air India comes with its own problems—bureaucracy, unions, a brand that's politically untouchable. It's not a clean solution. It's just the least bad option.
And if they don't do it?
Then they exit. They accept that aviation is not their business, no matter how much history they have in it. But I don't think Ratan Tata will let that happen. He's obsessed with airlines. You can't get it out of his blood.