It has been hree months since Air India was handed over to the Tata Group. After a failed attempt to bring on board Ilker Ayci as the Chairman and Managing Director of the airline in February 2022, Tata Sons Chairman N Chandrasekaran himself took on the role of the Chairman of Air India in March.
Since then, new management talent has been on board Air India’s Management Committee, including Nipun Agrawal, who is widely known as one of the driving forces behind the Air India acquisition and was deeply involved in the due diligence process. He has come on board as the Chief Commercial Officer. From Tata Steel, Suresh Dutt Tripathi has boarded Air India as its Chief Human Resources Officer. Tripathi will have quite a task ahead of himself, bringing his expertise in industrial relations from SAIL and Tata Steel onto Air India, which is a private entity with a long-time public sector enterprise mindset.
Air India needs to capitalise on the opportunity
The business case for the Air India acquisition was built on the growing demand for travel. For International travel, Air India continues to be the only airline with a widebody fleet to serve connectivity between India and the rest of the globe. However, a lot of this fleet has been handed over in a grounded state to the Tatas.
Out of the 27 Boeing 787-8s which form a big chunk of the long-haul fleet of Air India, four haven’t been flown in months. Another four were not flown in April 2022, which could be an indication of checks ongoing or a grounding.
Out of the 13 Boeing 777-300ERs of the airline, which performs the ultra-long-haul flights, such as those to the US and Canada, three aircraft were grounded at various points in 2020 and 2021 and have not come back into service yet.
Even amongst the Airbus A320 family aircraft which are used for domestic and regional operations, many are not in use. Air India has handed over 5 A321 aircraft, each of them 14 years old, to the Defence Research and Development Organisation. Over 50 percent of the A319 fleet is also not operational.
However, Air India proposes to solve this problem by acquiring AirAsia India’s operations (owned 83.67 percent by the Tatas anyways), and merging it with itself. Both airlines have the A320 family aircraft, so this move will immediately give them 15.7 percent market share in the Indian domestic market, and a larger fleet of aircraft for domestic operations.
We don’t know yet if Air India plans world domination a-la-Emirates or Turkish Airlines in its new avatar, but here is the thing about aircraft, they don’t make money for the airline while on the ground. The average age of Air India’s 787 fleet is about a decade, and each of these aircraft could serve well for another 15-20 years if they were taken good care of.
This writer was on board a Boeing 787 flight operated by Air India recently. The aircraft are in deplorable condition on the inside with IFE screens not working, seat covers torn off, tissue paper stuffed in the airconditioning duct and much worse. The issues faced by Air India customers onboard their 777 aircraft to the US/Canada are well-documented on Social Media in a similar fashion.
A new hard product is needed
While many expected an immediate turnaround, yours truly has maintained that it would take years to execute this.
First things first, Air India needs to share the vision of what the future Air India product could look like. For instance, will Air India intend to continue offering First Class in the future, or instead offer Business Class as the top cabin and introduce a new Premium Economy cabin as well? Is Wi-Fi a part of the plan? Will there be a new in-flight entertainment system installed given the current one hardly works?
To refresh each of these aircraft into a good shape will easily cost Air India’s new owners a few million dollars each. But the airline is quiet about when will this refresh programme begin.
Alternatively, Air India could just induct new aircraft. Airbus had brought their A350-900 aircraft in March to Delhi and Mumbai to display to Bombay House their latest capabilities. However, even if Air India signed on for new aircraft, they would most probably be in addition to these 787 and not replace them.
A new loyalty programme is needed as well
Air India and Tatas have been working with what they inherited, and the airline has a lot to fix, including the state of their loyalty programme. Airline loyalty programmes, as a look at the US during the pandemic, have shown, are more valuable for shareholders compared to the airline as well. India’s most well-run and most-loved airline loyalty programme, JetPrivilege, which also had the most number of members, lost all its standing due to the shut down of Jet Airways.
While 80 percent of Indian travellers chose to give their business to no-frill carriers, the high-spending and corporate traffic still like to fly a lot of full-service airlines and loyalty programmes, which allow them to accumulate points, and then later use them for personal trips, are a major draw. Air India would do well to focus time and effort on this aspect of their airline as well.
While chairman N. Chandrasekaran had recently hinted that Air India would be on the Tata Neu platform shortly, it would be a step backwards for the airline, given it would indicate that all customers get a 5% passback on their fare paid, which could be a much higher amount than currently provisioned on the Air India balance sheet for the loyalty programme.
Overall, with India resuming scheduled aviation services as of March 27, 2022, Air India will fast notice the switch of customers to other carriers for long-haul travel, which is a much better market to be able to dictate fares compared to the domestic market where IndiGo commands the market pricing by virtue of their majority marketshare. Air India needs to at least indicate the start to putting its house in order at the earliest, even if the total turnaround will take years.
(Ajay Awtaney writes about Indian Aviation on livefromalounge.com and tweets from @LiveFromALounge)
