Dubai: Air India, which is finally back under the Tata’s management, could quickly emerge as a formidable long-haul carrier and take on the leading Gulf-based carriers on key international routes.
The Tata-led Air India will be operating in a market where several countries have relaxed pandemic-related travel restrictions and some major hubs like the UK have done away with PCR testing altogether for fully vaccinated passengers. “If Air India is able to get the basics right - like operating flights on time and offering consistent service - I see no reason why they cannot compete with the Gulf airlines, especially on routes to,” said Vinamra Longani, Head of Operations at Sarin & Co, a law firm specialising in aircraft leasing and finance. “To win back Business and First Class passengers, Air India would however need to refurbish their long-haul fleet and upgrade their inflight experience.”
UAE bound flights
Tata now owns four airlines, out of which three fly to UAE, a crucial air route for both Indian and Gulf carriers. Despite the conglomerate’s rapidly growing clout in the market, it does not look like it will be able to expand its operations in the sector any time soon. “Unless the air bubble is expanded, or in the case of Dubai–India route, the BASA (bilateral aviation safety agreement) renegotiated, Air India may not be able to add any more flights than they operate already,” said Longani.
Prior to the pandemic, UAE and Indian carriers were using almost all seats allocated to them under the aviation agreement. Now, flights operate under an air bubble agreement imposed by the Indian government and which places restrictions on flight frequency and capacity.
No more domestic?
Some industry sources have speculated that Air India, under Tata, will now significantly reduce its presence in its domestic market. But Longani is not one to think of such a reduced presence. “I see no reason why domestic demand would not return as cases fall,” said Longani. “Hence, I do not foresee AI scaling down domestic operations. “Prior to the third wave, which is now starting to plateau, pent up demand for travel ensured Indian airlines were operating at 90 per cent plus of their pre–Covid domestic capacity.”
India is the world’s third largest domestic aviation market, but state-wide restrictions imposed to curtail the spread of the Omicron significantly reduced passenger numbers in recent weeks. Air India will also continue to face stiff competition from current market leaders such as Indigo and Go First. Reports have also emerged stating that the company has been working on a plan to combine its joint venture with Singapore Airlines Vistara – into a broad alliance with Air India and AirAsia India.
Spate of challenges
Although Air India’s return to Tata after a near 70-year gap is seen as a positive sign by many in the industry and the Indian government, the new management has several hurdles to clear. Guiding the airline, which reportedly loses $2.6 million a day, towards profitability is a “monumental” task and will require deliberate and decisive actions, said Satyendra Pandey, Managing Partner of aviation advisory firm AT-TV.
“A strategic overhaul will include a core focus on the sources of the losses, traffic streams and consolidation scenarios,” said Pandey. “Overall, for consumers across categories there should be a marked improvement in services, schedules and schemes as airlines compete for demand.”
9,000
Air India's workforce strength. Tata has given assurances there will be no retrenchments during the first year.
Culture shift
Fixing the balance-sheet is a big priority, but an even bigger challenge would be dismantling the age-old bureaucratic culture. In the 1960s and 1970s, Air India was the airline of choice for travelling overseas. The carrier had professional staff and crew and, most importantly, it had India’s corporate doyen J.R.D Tata as chairman.
Air India’s decline set in once Tata was fired from his role in 1978 by then Prime Minister Morarji Desai. After his exit, the airline was run by bureaucrats who were not professionals from the aviation industry and neither were they customer-focused. Losses started to mount almost immediately, and once profitable routes saw other international carriers taking over Air India’s dominance.
Air India's current staff strength is about 9,000 plus. As per the deal struck with the Indian Government, Tata will retain all employees for a one-year period.
