Air India CEO outlines initiatives to fulfil post-privatisation growth ambitions
Two years after its privatisation, Air India is making good progress on the initiatives launched by its new owner, Tata Group, to overhaul the airline and set it up for dramatic expansion.
Air India attracted significant attention in 2023 when it placed orders for 470 aircraft. Although this move highlighted its long-term aspirations, there has also been a lot of work under way on shorter term projects - such as merging with other Tata airlines, upgrading the existing fleet, and building new training and maintenance facilities.
There is undoubtedly huge growth potential in the Indian market. However, Air India has to improve in many areas to take advantage of this, CEO Campbell Wilson said during the CAPA Airline Leader Summit Australia Pacific held in Brisbane on 12-Sep-2024.
Tata "bought an airline [in 2022] that had been under government ownership for 70 years and had not had the investment it needed," Mr Wilson said. "The last two years has been about stabilising [the airline], because it was in terminal decline."
Air India's efforts have been aimed at halting this decline, and putting the right foundations in place to support its growth strategy.
Improving the cabin product has been a priority - via new deliveries, leases and retrofit programmes. And the mergers that are poised for completion will streamline the group's airline operations, allowing for more efficient expansion.
- Air India’s international capacity is 9% ahead of 2019 levels as its fleet grows.
- Merger between Air India and Vistara is due to be completed in mid-November.
- Vistara branding may stay for some time, although network changes are likely.
- Retrofit on previous A320neo deliveries has started, although widebody upgrade has hit delays.
- New MRO facility is being built to reduce reliance on former engineering operation.
Air India has already rebuilt international capacity beyond pre-pandemic levels, with more to come
The airline was still at 63.8% of its 2019 international capacity levels when Tata completed its takeover of Air India on 27-Jan-2022, as the chart below shows.
Air India has rebuilt its international capacity, boosting its overall fleet by 104 aircraft since the takeover. This includes new deliveries and stored aircraft returning to service.
The airline's international capacity has been above 2019 levels for all of 2024, and was nearly 9% above pre-pandemic levels in the week of 16-Sep-2024.
Domestic capacity is still slightly behind the 2019 levels.
Air India: international capacity, as measured in weekly seats, 2019 to 2024
Mergers of Tata's low-cost and full-service carriers are set to be completed this year
Some major pieces are starting to fall into place in Air India's restructuring, such as the consolidation of Tata's airline interests.
Air India is absorbing Vistara, which is a joint venture between Tata and Singapore Airlines. In a parallel process, Air India's low cost carrier subsidiary Air India Express is merging with fellow Tata Group LCC AIX Connect (formerly AirAsia India).
The regulatory steps needed for the Vistara merger have been completed, and many organisational steps have also been taken.
"All going well, we should affect the legal closure of that merger in mid-November," Mr Wilson said.
The main difference that Vistara customers will see immediately is an Air India flight number. The crew, aircraft and schedule will remain the same, for now.
Over time, however, there will be some benefits to be gained through "synergies and deconflicting certain routes", Mr Wilson said.
The Vistara brand will likely still be seen in the fleet for the medium term, and Air India has not yet decided how long it will take to phase it out.
The amalgamation of the two LCCs is "nearly at the final hurdle", said Mr Wilson. The legal and operational merger is expected to be executed in early Oct-2024.
Combining the four Tata Group airlines into two airlines "gives us commonality [and] scale, and we can use the capabilities of Vistara and AirAsia India to catalyse and accelerate the transformation of Air India and Air India Express", Mr Wilson said.
India's domestic capacity, as measured by share of seats for the week of 23-Sep-2024
The charts above and below show that the four airlines combined would have a 28.3% share of India's domestic seat capacity, and a 24.8% share of international capacity.
India's international capacity, as measured by share of seats for the week of 23-Sep-2024
Narrowbody retrofit has started, and widebodies are set to follow next year 2025, after seat delays
The other way Air India is increasing its scale is by adding aircraft.
The airline's new orders have started arriving, and it expects to receive one new delivery every six days on average this year. In addition to the 470 orders, Air India secured another 36 leased aircraft to boost capacity in the short term.
Air India's new aircraft deliveries have an improved cabin product. The airline has also just begun a USD400 million multiyear upgrade project to retrofit the interiors of its existing fleet to the same standard.
The retrofit starts with 27 of the airline's Airbus A320neos, which were generally delivered before the COVID-19 pandemic. Work started on the first aircraft on 16-Sep-2024, and the remainder are expected to be retrofitted by the middle of 2025.
Airline Leader keynote interview with Air India CEO Campbell Wilson at the CAPA Airline Leader Summit Australia Pacific, held in Brisbane on 12-Sep-2024.
Source: CAPA - Centre for Aviation.
Air India expects to launch a refit programme for 40 of its widebodies in early 2025. The cabin product can already be seen on the airline's recently delivered A350s, Mr Wilson said.
However, this part of the upgrade is behind schedule, due to delays with seat deliveries. The widebody cabin upgrade was supposed to have started by now, Mr Wilson said.
The new seats for its Boeing 787s and 777s - made by different manufacturers - have been delayed by more than 12 months.
"We're not the only airline affected, but it's painful," Mr Wilson said. "Especially when you are in this process of dramatic transformation, and a key element of that transformation is the customer experience."
New training centres and a massive maintenance facility are important precursors to fleet growth
Another initiative was the establishment of an integrated training academy for pilots, cabin crew and other staff, to help provide the workforce needed for the airline's expansion plan.
The airline intends to add other training facilities - such as a flight training organisation that is due to open in 2026.
Such steps were necessary because India "is not particularly well-served with training infrastructure," said Mr Wilson.
The airline also began construction of a major new MRO facility in Bengaluru on 4-Sep-2024, and that is slated to be finished by the end of 2025. This is a strategic priority for Air India, as the airline's former engineering unit was not included in the privatisation and is now a separate entity.
Air India is contractually obligated to use the existing entity in the short term, "but thereafter we want to have a lot more control [over MRO] in our own hands", Mr Wilson said. "We want to have our people and our processes, to our standards, maintaining and keeping our aircraft presentable and airworthy."
Air India is working on several fronts to ensure there is a solid platform for its planned growth
There is a remarkable amount of activity going on at Air India at the moment, with major projects under way across the business. The Tata Group is proving that it is following through with its vow to pour investment into Air India to restore the airline's reputation.
This must surely be the outcome that governments would look for from privatisation efforts - a new owner with deep pockets who is prepared to improve the product, expand the network, and also develop other aspects of the aviation industry.
A successful and revitalised Air India will help the entire sector.
There are obviously still challenges that Air India faces in its new iteration, such as growing competition from the giant LCC IndiGo in the domestic and international market.
However, Air India is doing everything it can to set itself up to compete successfully. The airline and its backers are confident that the massive promise of the Indian market will be sufficient to accommodate all players.
VIDEO: Aviation Leader Interview with Air India CEO Campbell Wilson
Watch the full interview with Campbell Wilson in this exclusive CAPA TV video...