Can Air India become the Maharaja of Indian skies again?

Air India has come a long way from its glory days, when it dominated the Indian skies. Today, IndiGo is India’s biggest airline by domestic market share. July data from the national aviation regulator showed that IndiGo commanded a 58.8 per cent share. Vistara, a Tata Sons-Singapore Airlines joint venture, was the second-biggest with a market share of 10.4 per cent. Behind IndiGo and Vistara was Tata-owned Air India with a 8.4 per cent market share.

The Tata Group, which took over Air India and Air India Express in January this year, has decided to remedy the situation. Air India has unveiled a five-year transformation plan that aims to increase its domestic market share to 30 per cent, up from the current 8.4 per cent. They have named the plan Vihaan.AI. It involves investments in new aircraft and technology, along with improvements in customer service, to achieve its ambitious goal. Air India also plans to significantly grow its international routes to put itself “on a path of sustained growth, profitability and market leadership”.

But, what are the implications of setting such a goal, and, how can Air India go about achieving it? The answers are interrelated. According to aviation analyst Ameya Joshi, the plan’s announcement indicated that a merger would happen between Air India and Vistara, after which, a total group market share of 30 per cent would be achievable and sustainable. Joshi contended that on its own, Air India would find it difficult to increase its domestic market share to 30 per cent in five years.

This could be one strategy since the combined domestic market share of Tata Group airlines, which include Air India, Vistara and AirAsia India, already stood at 23.4 per cent in July.

But, in September, Vistara CEO Vinod Kannan told a national daily that all possibilities, from a merger to continuing with two separate airlines, were still being discussed. Kanan said that the discussions had begun and clarity on the issue would emerge in the next few months. So, a merger is far from being a done deal. Meanwhile, the Tata group has already received the Competition Commission of India's approval to merge Air India and AirAsia India.  

Vinamra Longani, Head of Operations, Sarin & Co says, some sort of alignment is expected between Air India and Vistara in due course. Two full-service airlines owned by the same group and competing each other makes no sense. 

Air India’s narrow-body fleet has 70 aircraft, of which 54 are in service. Its wide-body fleet has 43 aircraft, of which 33 are operational. The rest of the existing fleet will return to service by early 2023. After a long time, Air India has resumed expanding its fleet. In September, Air India leased 25 Airbus narrow-body aircraft and five Boeing wide-body ones. These will enter service starting December. Once the planes are delivered, the airline's fleet size will increase to 143 aircraft. Air India will also purchase planes and is in discussions with both Airbus and Boeing.

In a change in its business model, Air India has also decided to introduce a premium economy class in all newly-leased planes. Its existing fleet is mostly limited to economy and business class seats, while a few of its planes have a first class section. At present, Vistara is the only other airline in India that offers premium economy class.

The carrier is also taking other steps in line with its transformation plan. Earlier in September, Air India said it would redesign flight schedules, hold daily meetings, and ask its employees to accurately report flight delays and their causes, all in a bid to improve its on-time performance.

While a start has been made on the transformation plan, key challenges remain. While Air India’s revenues jumped 64 per cent in FY22, its net loss swelled by a third to 9,556.5 crore rupees. On a standalone basis, it posted a net revenue of 19,815.9 crore rupees for FY22. In FY21, the carrier had reported a net loss of 7,017.4 crore rupees and a revenue of 12,104 crore rupees.

Enhanced competition is also likely. Air India is the market leader on long international routes that go as far as the US. But, IndiGo is also planning to become a significant player in that segment. If IndiGo chooses to have a business class on its A321XLR planes, which it will start receiving from 2024-end onwards, it would become a strong competitor for Air India on certain routes.

So, can Air India achieve the goal it has set out for itself?

Vinamra Longani, Head of Operations, Sarin & Co says Air India can turn around, but the transformation may take some time. Tata Group enjoys good credit, thanks to its experience and reach across the globe. Tata Group has it all to return Air India to its former glory. 

Mark D Martin, MRAeS, CEO of Martin Consulting says Air India should do best if it focus on international earnings. Presently, it makes sense for the airline to earn in dollars and foreign currencies, instead of rupee to balance its expenditure. 

Experts feel that the transformation plan is well thought out. Going ahead, whether or not Air India becomes the Maharaja of Indian skies again will depend on its execution. The good news is that there is a lot of confidence in the Tata group's ability to translate its intent into action.