Air India Express-AIX Connect merger will drive long-term profitability: MD

Tata Group's low-cost carrier, Air India Express, has completed its merger with AIX Connect (formerly AirAsia India), a strategic move to create a unified budget airline under Air India with a focus on achieving sustainable profitability without straining its financials, a top company official said.

Dismissing concerns regarding the merger of AIX Connect, a loss-making entity, Air India Express managing director Aloke Singh told PTI, "The merger process was completed in October. The integration of AIX Connect will expedite our path to profitability by achieving significant scale, optimising costs, and better utilising our assets. The objective is to build a robust, scalable network that supports long-term growth."  Compared to a profit of Rs 117 crore in FY'23, Air India Express reported a net loss of Rs 163 crore in FY'24. This was despite a robust 33 per cent year-on-year (Y-o-Y) increase in income to Rs 7,600 crore, driven by higher passenger volumes and improved operational capacity. However, expenditure rose 38.3 per cent to Rs 7,763 crore during the year.

AIX Connect, which merged into Air India Express in October, reduced its net loss significantly to Rs 1,149 crore in FY24, down from Rs 2,750 crore in FY23, reflecting early benefits of the integration and efficiency improvements.

The restructuring has resulted in two distinct entities under the Tata Group Air India Express, a low-cost carrier (LCC), and Air India, a full-service airline that merged with Vistara. Singh said, "This alignment has given us clarity to focus on different business models and markets."  Acknowledging that the airline's expansion phase might temporarily impact profitability, Singh emphasised a focus on measured and sustainable growth. "When you launch a new route, you have to develop the market with offers, incentives, and promotional fares," he explained.

Singh highlighted Air India Express's ambitious plans to double its fleet to 175 aircraft within the next two to three years and expand its presence in both domestic and international markets. He noted that 50 per cent of the airline's capacity is allocated to domestic operations, with a strong focus on connecting Tier 2 and Tier 3 cities to Metro hubs.

"These routes form two-thirds of the market and are the fastest-growing segment," Singh said.

On airfare trends, Singh said fares have remained lower than inflation, despite significant cost pressures. He explained further, "When I say rational,' I mean fares that allow the airline to earn a reasonable return on investments while remaining attractive and competitive for customers."  Fuel costs, which constitute 40 per cent of airline expenses, have not been matched by fare hikes. Singh clarified that the dynamic nature of passenger demand makes it difficult to implement a fixed fare mechanism, unlike stable consumer sectors such as power.

"With airline market consolidation, we are seeing more rational pricing. This is good for the industry, players, and the entire ecosystem, enabling robust growth and investments going forward. We see this positive shift happening in the Indian market now, with serious players taking a long-term view of the business," Singh said before signing off.