Air India has a new chief operating officer (COO) at a fancy salary; it has a new board of directors, with some business stars agreeing to join; it has leased out some of its surplus aircraft; and it has reduced its losses, which the civil aviation minister says have come down from Rs 400 crore per month to Rs 300 crore. But since revenues are only about Rs 1,300 crore per month, it still looks as though the airline is deep under water. The uncomfortable question must be asked of what used to be an iconic brand: even with the best intentions of the people now in charge, does the airline have any hope of turning the corner?
For an answer, take a look at the competition and the realities of the aviation market. Both Jet and Kingfisher are now significantly bigger in the domestic market, accounting between them for 49 per cent of traffic, while Air India is a poor third at 18 per cent. Two low-cost airlines, Indigo and SpiceJet, whose combined fleet is much smaller than Air India’s domestic fleet, have 27 per cent of the market. These low-cost carriers also happen to be profitable, and both now plan international operations from next year — including forays into the Gulf route that used to be Air India’s milch cow.
Indigo is able to fill 74 per cent of the seats on its flights, compared to Air India’s 64 per cent; on top of that, it does more flights per aircraft/day because its business model (single aircraft type, no-frills ops) allows faster turnaround at airports. If each Indigo plane can carry 25 per cent more passengers than Air India, and if Air India also has heavy overheads because of legacy factors, can the airline ever hope to make money in the domestic market? Indeed, Indigo plans to take its fleet from 25 to 34 planes in the course of the year, so don’t be surprised if by this time next year this four-year-old airline is bigger than the domestic Air India. SpiceJet could overtake it not long afterwards, leaving the once monopoly airline as the smallest of the significant players in the market, but with higher costs than all the others.
While Indigo and SpiceJet win out in the low-cost segment, Jet and Kingfisher have walked away with the cream of the business class market. These airlines are losing money too, but not on the scale of Air India. They also have better market shares and a superior reputation for service. In other words, their situation is not hopeless, whereas Air India’s appears to be just that.
Air India’s spokespersons will come up with a number of reasons for this state of affairs: the difficulties of operating as a public sector airline, the social costs that it is asked to bear that its private sector competitors don’t, the heavy burden of accumulated debt, the constant government interference and a meddling minister. All of that may be true, but they are facts of life which the airline cannot get away from. If the new directors and the new COO can rewrite the rules, the airline might have a ghost of a chance, but it must seem like a long shot when unionised employees are not likely to cooperate with the management on many issues.
The new reality is presented in an outdoor advertisement now visible in Delhi; to illustrate the message of changing times, it shows the Air India maharajah but with the familiar moustachioed visage replaced by Kingfisher owner Vijay Mallya’s bearded grin! On present reckoning, the dethroned maharajah threatens to become a bottomless pit for taxpayer money.
