Exactly two years after the Preliminary Information Memorandum (PIM) — a document that gives potential investors an overview of a deal — was released by the government, the Tata group took control of Air India on January 27, 2022.
Today is a year since Talace Pvt. Ltd, a Tata group subsidiary especially created to bid for Air India, won the bid. While airlines the world over were being bailed out by their governments, India was working on privatising the state carrier, and saw the process through to conclusion.
For an airline to make money it has to fly, and to fly it needs planes, and that is where the erstwhile state carrier’s expansion had been stuck. The Tatas inherited an airline with a grounded fleet. They worked tirelessly to get more and more aircraft back in the air in ship-shape, by repairing engines, doing up the interiors, etc. The next phase could see improvements in the product experience, like ground handling, meals, and fixing the in-flight entertainment (IFE), among others.
The new owners started off on the wrong foot with the appointment of Ilker Ayci as CEO. Ayci declined Tata Sons’ offer to head Air India as certain sections of the political establishment had voiced concerns over Ayci’s appointment, as he was supposedly close to Turkish President Recep Erdogan.
The group then announced the appointment of Campbell Wilson, a Singapore Airlines veteran with experience in both full-service and low-cost segments, to captain the ship.
The Russia factor
Within a month of the formal handover to the Tata group, Russia attacked Ukraine. The war is ongoing and has had an impact on aviation in more ways than one.
While oil prices skyrocketed and the rupee slipped against the dollar, an opportunity like no other presented itself. The sanctions on Russia and reciprocal sanctions by Russia meant that most airlines couldn't fly over Russian airspace.
This led to cancellations, longer flight times, and in some cases, technical stops. The likes of Finnair, which were heavily dependent on the use of Russian airspace, had to cancel flights and launch new routes like those to Mumbai, to utilise their planes.
Air India, on the other hand, continued to fly over Russia. As other airlines started dropping routes, Air India continued apace and most often had the shortest route as well.
The pending order
Sanctions on Russia also meant that new aircraft meant for airlines in Russia were suddenly available for others. There were strong rumours of an order for new planes from Air India — an order that has so far not been placed.
Instead, the airline is leasing five B777-200LRs aircraft, and will also introduce a premium economy class. This is an interesting development as it had recently come out with a tender to sell the three B777-200LRs it owns.
The order, in all likelihood, is still in the works, but would be placed after thorough due diligence regarding long-term fleet renewal for the entire group comprising three airlines, if not four (Air India, Vistara, Air Asia India, Air India Express).
People and processes
Among the issues pending is the small matter of employees vacating government colonies. The Tatas have also offered a VRS scheme for employees to streamline its manpower requirements.
Ground stuff
The changes are visible on the ground. Air India’s on-time performance is going up gradually, as are the load factors.
An airline can earn more with fewer passengers at higher average fares, or with more passengers at lower average fares. Currently, it seems Air India is following the latter approach — it wants more people to experience the new Air India and push up total revenue rather than yields.
While it works on new meals and IFE, the silver lining is standardisation, on the back of which IndiGo built its entire experience. However, Air India is dependent on ground handling by erstwhile arms of the airline, and does not have full control over the experience at all times and across airports.
What next?
More often than not, the passion of patriarch and Chairman Emeritus Ratan Tata is cited as the reason for the group to re-enter the aviation sector after many decades, despite the failure of many airlines. But passion hardly drives profitability in aviation. If that was the case, Kingfisher Airlines would still be around.
The Tata group has stated that it is targeting 30 percent domestic market share within five years. With Vistara under its fold, it looks like a cake walk, but without Vistara, it is a steep target. On the international front, Air India has started expansion by adding capacity and new routes. It has introduced flights to San Francisco from Mumbai and Bengaluru, reinstated flights to Birmingham from Delhi, and upped the frequency on the Amritsar-Birmingham sector.
Will this coincide with an economic slowdown or lift-off? A long and turbulent flight lies ahead. Integration of the multiple group airlines, sorting out people issues, and a lot more needs to be done in order to compete with IndiGo on the domestic front, and everybody else internationally.
