Where lies the Window of Opportunities for Air India and others for international growth?

For Q2-CY23 (Q1-FY24), airlines from India had a 44.49 percent share of passengers travelling to India from foreign shores.

The share was 43.4 percent for passengers flying out of India. IndiGo, which rules the domestic skies, continued its leadership on the international front as well, with 17.6 percent of total passengers flying out of India.

Air India comes in next with 12.5 percent. The not-so-surprising third-place occupant is Emirates with 8.5 percent, ahead of other Indian carriers like Air India Express, Vistara, and SpiceJet.

Four out of the top 10 airlines are based in the Middle East. This includes Emirates, Qatar Airways, Air Arabia, and Etihad. Over the years, the Middle Eastern carriers have built very effective hubs with feeds from east and west and invested heavily in new aircraft and new-age products.

All of this has helped them get a significant share of the Indian market to Europe, Africa, and North America. Emirates ferried out 7,620 passengers a day on average in the last quarter from India to the rest of the world via Dubai.

A window of possibilities?

Air India can and should replicate the model of the Middle Eastern hubs with a focus not just on India but relying on traffic coming in from the ASEAN region, which will connect via Mumbai or Delhi to Europe and North America, where Air India has relative strengths right now.

Airline hubs work on multiple connections. For example, there may not be enough traffic between the hub and point P, where there is a trickle of traffic between A to P, B to P, and so on. All of this does not warrant a non-stop flight to P, but when these passengers are grouped together at the hub, the hub to P flight suddenly has the necessary demand to sustain the flight.

This template, if replicated, could mean starting flights from Delhi, building an effective connection to ASEAN, and then expanding to Mumbai while continuing to explore standalone opportunities from Hyderabad, Bengaluru, Chennai, and Kolkata.

Service: The key differentiator

A large chunk of Indian business for airlines originates from the six metros, but there is business beyond those six. To compete effectively with the Middle Eastern carriers, Air India will have to invest in routes beyond Delhi since the current hub at Delhi makes a passenger transfer at Delhi that the passenger would have otherwise done at Dubai, Doha, or Abu Dhabi. The attraction of duty-free shopping at foreign airports has always been high for Indian passengers.

What, then, would make a passenger move to Air India for the long haul? The answer would lie in product and service. With Air India investing substantially in the hard product, the focus would be on getting it ready soon, improving the service levels by retraining the crew, improving food, and most importantly, maintaining the hardware, a pet peeve of many with Air India.

Tail note

When Kingfisher Airlines was setting new benchmarks in luxury, the airline continued to make huge losses. Everybody believed that the group chairman had deep pockets to sustain them, but nobody knew how deep they were.

Eventually, the airline went down. With the Tata Group, the group chairman has made it clear that they are "all-in", but the costs involved are colossal.

The inheritance of brand Air India has been looked at in multiple ways -- from inheriting a brilliant brand, along with its troubles, to inheriting an old Tata connection with a challenge to turn around. Commercial aviation in general and Indian aviation in particular has been very cyclical in nature, and not many have been able to garner as much cash to sail through bad times. If there is one thing right in the face, it is the opportunity—it is now for all airlines in India to grab it like never before.