Aviation Leader Interview with Air India CEO Campbell Wilson
Transcript
Adrian Schofield:We're very fortunate today to be joined by Air India CEO Campbell Wilson. I think a lot of you in the room are probably quite familiar with his background, but for those who aren't, Campbell spent several years in senior executive roles with the Singapore Airlines Group, including 2 stints as CEO of the group's low-cost carrier subsidiary Scoot. In 2022, Campbell was selected by the new Air India owners, the Tata Group, to be the airline's first post-privatization CEO. And in that role, he's overseeing a massive investment program that has included ordering more than 400 aircraft last year alone, as well as an upgrade initiative for the current fleet. So lots to talk about. So please join me in welcoming Campbell to the stage. Once again, welcome Campbell, and thanks for joining us.
Campbell Wilson:Thank you. I'm the second New Zealand speaker called Cam on the stage this morning.
Adrian Schofield:Yes, we planned it that way.
Campbell Wilson:I'm better dressed.
Adrian Schofield:Yeah, right. We won't tell him that. I wonder if we could start by, by looking at a bigger picture question, um, and, and perhaps a little background as well. Um, hoping you can talk about who Tata is, um, what, why they wanted to invest so much in the Indian aviation market, and what sort of potential they see in that market. Sure.
Campbell Wilson:Well, Tata Group is a very large Indian conglomerate. It's more than 100 years old. has interests in over 100 businesses, and some of you might be familiar with Jaguar Land Rover vehicles, TCS, the big IT consultancy. But the listed— just the listed entities alone have a market cap equivalent to about the GDP of Denmark. So it's a very substantial backing. Why did they get into aviation? Well, JRD Tata was India's first commercial pilot and flew the first flight of the airline that ultimately became Air India. That India, the airline was privatised by, sorry, nationalised by the government about 70 years ago, and when it came up for divestment, the Tata Group clearly were interested to bring it back into the fold, restore it to its former glory, and then ultimately to transform it to represent India in the way they would like India to be represented.
Adrian Schofield:Great, and what about in terms of the that the market potential they see for that level of investment?
Campbell Wilson:Well, India is already the world's 3rd largest domestic market. It's growing at a compound annual growth rate of about 10%. Internationally, it is, I believe, number 5, also growing at about 8%. So you can see the, simply the scale of opportunity just from the domestic market, and the domestic market's growth being quite significant. Add to that India's growing place in the global supply chain, a diaspora of 30-odd million people, including nearly a million people in Australia, and the fact that India was grossly underserved by Indian airlines in the past. At the point of privatisation, India as a nation only had 43 wide-body commercial aircraft operating. Singapore has 150. UAE has 250. You know, for the size of the population, the rate of growth, the geographic position that it enjoys, it was grossly underserved. And so we see huge upside to invest not just in the product, but certainly in the scale and the network reach.
Adrian Schofield:Right, okay. And the Indian market is known for its scale. I believe it is— it now has overtaken China with the world's largest population. So what about in terms of yield trends? Are you seeing a lot of change in that as demographics change in India?
Campbell Wilson:Well, absolutely. Depending how you draw the line of middle class, there are about as many middle-class Indians as there are Americans. If you look at income, the average annual salary in Australia is, what, $90,000 Australian dollars? There are more people earning that in India than there is people in Queensland and New South Wales combined. So it's very easy in macro terms to look at the scale of India, but when you slice it down to the different demographics or economic segments, Uh, each of those segments is pretty significant in its own right.
Adrian Schofield:Right, okay. And, um, the domestic market in India is fiercely competitive, um, so is the, is the biggest opportunity for Air India in the international market?
Campbell Wilson:Well, a short answer is yes, um, for the reasons I mentioned before, the, the underinvestment in fleet, the size of the, the diaspora, the size of the market, the supply chain participation, uh, all of those things lead to a lot of opportunity in, in the international market, particularly North America, Europe, but not to forget Australasia. Domestically, India was a bit of a chaotic market, to be fair, and, and part of the reason for that chaos was Air India itself being a government-owned airline without really a profit motive. It was a spoiler in the market, and so you— the entrants that came in were typically small, they were undercapitalized. When there was the inevitable ups and downs of the aviation industry, they couldn't survive, and so there was constant churn of players coming into and out of the market. That's now stabilised with Air India's privatisation under Tata. Between the 2 main airlines, we now have a market share of nearly 90%, which obviously is something in the short term good to stabilise the market, professionalise, build a profit pool, and in the long term that will then lead to more entrants coming in and hopefully a more dynamic and prosperous Right.
Adrian Schofield:And that 90% share is just for the, for the international market?
Campbell Wilson:Just for the domestic market.
Adrian Schofield:Oh, just the domestic market, okay.
Campbell Wilson:So Indian carriers collectively have an international market share of less than 20%, which given the size of the market is, is crazy.
Adrian Schofield:Oh, okay, sorry, you mean for Indian carriers collectively, that's the 90%?
Campbell Wilson:Yes.
Adrian Schofield:Gotcha, okay, thanks. Yeah, um, so what is the potential for Air India and Indian hubs to be, um, international connecting points for, for third countries?
Campbell Wilson:Well, the potential is huge. If you look at the geography, it's exactly the same geography as, as the, the Gulf, Middle East, uh, even Southeast Asia.
Adrian Schofield:Yeah.
Campbell Wilson:So we can participate in all those same traffic flows. The difference being is that, uh, for, for Indian-based airline, it is going— always going to be an add-on rather than something they're dependent on, uh, just because of the, the huge size of the third, fourth market. So maybe 20% of our traffic will be what we call 6 freedom, or international, international connecting traffic. There's a few things that need to come into play to allow that to happen, including obviously expansion of networks, connectivity, airport infrastructure, but all of that is coming. And indeed, even in Air India, we've seen our international to international connectivity go from basically nothing to nearly 10% of our traffic in the last 2 years.
Adrian Schofield:Oh, wow, right. So that is a bit of a focus going forward for you to try and drive more of that connecting traffic?
Campbell Wilson:Yeah, it's healthy for an airline to have diverse source markets, to have diverse seasonalities, to have different holiday periods in different parts of the world, because it means that in average you can, you can fill more of your seats more profitably.
Adrian Schofield:Yeah, where would you like to see that connecting ratio sitting at?
Campbell Wilson:Well, as I say, we'll probably stabilise at about 20% simply because we will have so much third, fourth traffic to and from India that we won't need to pursue much else, but If the opportunity arises, then of course we can.
Adrian Schofield:Right, right. There's always been a sense that overseas-based airlines have benefited, profited from the Indian international market a lot more than Indian carriers, as you alluded to before. So, so how do you change that, like, you know, bring that ratio back more towards—
Campbell Wilson:Well, first and foremost, you buy lots of aircraft, which is why we've placed the order for 470, on top of which we've already leased and operated another 36. So Over the course of the 2 years since privatisation, we've taken delivery of 104 aircraft, or at least taken delivery and put back in service 104 aircraft, which, which is not far off the total fleet of Qantas in the last 2 years. We're taking delivery of an aircraft now every 6 days, and, and so that capacity allocation is clearly part of building the opportunity for market share. Clearly there's a product upgradation process that needs to be done. Air India didn't have the investment in product that a normal airline would make. Many of the new aircraft that we've inducted, the leased aircraft as well as 5, 6 A350s, already have world-class interiors, in-flight entertainments, and proposition. And over the next couple of years, we'll be refitting all of the legacy widebodies to the same standard. Refitting the narrowbodies is well advanced. By June of next year, pretty much all of our narrowbody fleet would have been restored to international standards.
Adrian Schofield:Right, okay, and I guess your order mix is more heavily skewed towards narrowbodies than widebodies?
Campbell Wilson:It is for the moment because that's the domestic market, the short-haul international market is probably the lowest hanging fruit from an ease of addressing perspective, and the delivery timelines are obviously faster, but the widebody is where we see really the the, the hugest potential for growth given the, the sparse network of, uh, hitherto Indian airlines and, uh, and, and the opportunity.
Adrian Schofield:Right, okay. Um, I, I think I'm correct in saying there's, there's more than 1,600 aircraft currently on order by Indian airlines, and, and given that it's a market where profitability has been a little elusive in the past, is there a risk that, that Indian carriers will grow too quickly? Despite that massive potential?
Campbell Wilson:Well, I mean, those aircraft have been bought for the fundamentals that I've described, both the, the relatively low base that we were operating from and the very significant growth environment and population and, and opportunity. So I— there's always a risk, but I don't think that that risk is going to manifest anytime soon.
Adrian Schofield:Great, yeah, and you touched on this briefly, but could you tell us a little bit more about what sort of cabin improvements we're going to see, particularly in the international fleet, with some of the new aircraft coming in and the upgrade program?
Campbell Wilson:Yes, so I think it's probably important to go back 2 years and give a little bit of flavour as to what we bought. We bought an airline that had been under government ownership for 70 years and had not had the investment it needed. There were some 30 aircraft that were on the ground for the want of spare parts because there wasn't the money to pay for them. There was a company that, to the extent people used the email, they used Gmail because the company system was so bad. It was the last airline in the world on a particular reservation system. It was the last company in the world on a mainframe SAP system. The last recruitment of non-flying staff was in 1999, leaving an average age of 54.
Campbell Wilson:with a mandatory retirement age of 58. You know, I could talk for the next 20 minutes on all of the things that we inherited, but so the last 2 years has been very much about— first 6 months, just stabilize the ship because it was on terminal decline, make sure that we were operating safely, make sure that we were addressing the million refunds that had been outstanding through COVID, completely Paid out within 6 months.
Adrian Schofield:A million, did he say?
Campbell Wilson:A million, yep. And then the subsequent year was about putting the platforms and foundations in place to enable the growth that we obviously have committed to with 470 aircraft. So we've had 3,000 people voluntarily leave the business, we've recruited 9,000 new people into the business, we've replaced 85 core IT systems, we've built a new training academy with 22 flight simulators, We're in the— we've broken ground on a new MRO facility that can accommodate 12 aircraft concurrently. As I say, we're now taking delivery of an aircraft every 6 days. And so in addition to that, we've been addressing the interior aircraft issue. As I say, we're in the process of refitting all of the narrowbodies that will be finished by June of next year and starting on the process of refitting all of the widebodies. And the ultimate product You can already see on the 6 A350s that we have flying to London Heathrow and soon to be New York, that is a product that is second to none. It has an NPS of over 70, which in the aviation context is extraordinary. It just shows where the new Air India can be once we get the rest of the product and equipment up to the standard that we're operating on a subset of the fleet already.
Adrian Schofield:Right, after years of underinvestment under government ownership.
Campbell Wilson:Yeah, look, a description I use in the Indian context, which I think also is well understood in Australia, is that this transformation, it's been described by The Economist magazine as the Everest of corporate turnarounds, but it's a Test match, not a T20. Right, okay.
Adrian Schofield:Another really important priority for the Tata Group was streamlining its aviation holdings, and part of that is merging Air India with Vistara. So could you give us an update on, on how that process is going and what the next steps are?
Campbell Wilson:Well, okay, so I forgot to mention that on top of all the other things that we're doing, we're merging actually not just 2 airlines but 4 airlines. We have a low-cost airline called Air India Express, and Tata had an interest in AirAsia India, which we've subsequently fully— we now fully own. We've subsidiarized, now in the process of merging the 2 low-cost airlines together. Nearly at the final hurdle for that. We should execute the, the final legal and operational merger on the 1st of October. In parallel, we're merging Air India with Vistara, which is a joint venture between Singapore Airlines and Tata. All the regulatory approvals in place, all of the organization fitment is done, the P&R migration is happening this week, and all going well, we should affect the legal close closure of that merger sometime in mid-November. And so then thereafter we've tidied up 4 airlines in the ecosystem into 1 full-service, 1 low-cost, Air India, Air India Express.
Adrian Schofield:Right, okay, and I guess the Vistara branding and livery will gradually sort of cycle out of the fleet?
Campbell Wilson:Uh, I mean, jury is a little bit out. Vistara has done exceptionally well over the last 9 years, it's created a very strong following particularly in India. We're not rushing into anything, the only thing that consumers will really see on day 1 is an Air India flight number. The crew, the aircraft, the schedule, everything else remains the same. But over the course of time, clearly there's some benefits to be gained in synergies and deconflicting certain routes. And then in due course, we can make a decision on what ultimately happens to the Vistara brand. Does it get, you know, put on a particular product set? Does it get put on a particular geography? We're not, not close to that yet.
Adrian Schofield:Oh, okay, so there is a potential that the Vistara brand may, may remain in some form?
Campbell Wilson:Okay, I think clearly Air India is 92 years old as a brand. It has recognition all over the world, even if in some places it's a little bit tarnished because of the last couple of decades. But we're doing our best to put it back into its former glory, and we absolutely will. So with a brand like Air India, I think ultimately that's going to be the international moniker.
Adrian Schofield:Yeah, right, okay. And again, you touched on this briefly, but could you tell us a little more about the importance of the, um, the new MRO facility and also, um, the, the pilot academy? Both very exciting initiatives.
Campbell Wilson:Well, the pilot academy is really a necessity because of the sheer scale of our growth. The Indian market is large, but it's not particularly well served with training infrastructure. And so in addition to rebuilding the airline, we've actually got to rebuild the ecosystem system. And, and so that was a necessary investment that is already putting through about 2,200 people a day through either ab initio or upgradation training. The MRO is also very strategic because when Air India was divested, the engineering arm of Air India was not. It remains under government ownership. And so we are still contractually obligated to use that entity until the end of this year. But thereafter, we want to have a lot more control in our own hands. We want to have our people under our processes, to our standards, maintaining and keeping the aircraft presentable and airworthy. And so that's why we are investing in this facility, which, as I say, we've broken ground. It should be operational by the end of 2025. And that really brings us to a level where we've got full confidence in what, what, what we can do to keep ourselves at the standard we want to be.
Adrian Schofield:Right. And I know that developing the local MRO industry has been a government priority as well.
Campbell Wilson:Well, yes, I mean, it's also a priority for us too. The more players, international players that have a physical presence in India, the more parts exist in India, the faster the repair cycle. the stronger the supply chain. And then, of course, Tata has a very large manufacturing presence in a number of businesses, and so, you know, they can contribute to the supply chain as well, not just for Air India's benefit but also for international aviation's benefit. So Air India is not just, as I say, transforming an airline, it is catalyzing an ecosystem to support aviation, but potentially global aviation as well.
Adrian Schofield:Right, okay. Um, I wonder if you could also talk about some of the challenges, um, that you're experiencing for Air India's transformation effort and, and also for the, for the Indian aviation industry more broadly. What are the, what are the remaining challenges, like thinking about, um, things from like visas, infrastructure, workforce, all that sort of thing?
Campbell Wilson:Well, workforce is, is the raw material is there. A lot of very, very smart, well-educated, ambitious capable people, and that's also true for the old Air India too. Despite all the challenges that I cited, they always attracted good talent. But the problem is there isn't a very large ecosystem because there was this just cycle of airlines coming and going, and there wasn't any really large domestic airline churning out a pool of capable, talented, experienced people in the broader ecosystem. So we're having to start— having to create that. Second thing is with respect to infrastructure. I think the, the perception is that Indian infrastructure is, is not where it should be, and anyone that has visited India recently would probably realize that that's no longer the case. Every major airport, every major city in India has undergone some quite significant airport upgradation, whether it's completely new greenfield airports such as being built in Delhi and Mumbai and elsewhere, huge terminal expansion that we see also in Delhi, in Bangalore, in Chennai, else— pretty much every major airport in India is undergoing a 2x, 3x type expansion program. Air traffic control remains a challenge just with the sheer scale and, and pace of the domestic market, as well as the fragmentation of airspace between military and commercial. That needs further modernization, but that's a a challenge that is known and accepted, and there are plans afoot to address it. I think internationally, I think, you know, clearly the challenge we have is one of reputation, and that's within our remit to resolve as we improve the product, improve the reliability, the brand, the reputation. But visas, of course, are a challenge. It's a bit of a bureaucratic process, certainly for Indians to get visas to go overseas, but equally for certain travellers to to come into India. Uh, there's an electronic process which is quite smooth, but the form you need to fill in is unnecessarily long in my view.
Adrian Schofield:Right.
Campbell Wilson:So those are opportunities to improve.
Adrian Schofield:Right, okay. And what about, um, something that's affecting the whole industry, but supply chain delivery delays, um, aircraft on the ground through engine issues, all that sort of thing? Is that— is that— I know it's impacting some of your competitors in India. Is it impacting Air India very much?
Campbell Wilson:Different challenges are affecting all of us.
Adrian Schofield:Yeah.
Campbell Wilson:Our particular challenge is, is the, the speed at which particularly the wide-body aircraft can be delivered. We would take all— we've ordered 70, we would take all 70 as quickly as we could get them, but there are obviously some supply chain challenges with the airframes. Probably the one that is most acute and painful for us in the short term is the seats. The retrofit program for our legacy wide-body fleet was supposed to have started in fact with the first aircraft already being in service already, but the seat suppliers, 2 different seat suppliers for the 777 and the 787, both have been delayed by more than 12 months just because they've oversold the programs, they've underestimated the complexity of design, you know, their own supply chain and labour issues, and we're not the only airline affected. I think Qantas is also affected with its 350 Sunrise product. But it's painful, it's painful, especially when you're in this process of dramatic transformation and a key element of that transformation is the customer experience and a key element of the customer experience is the seat they sit on and the in-flight entertainment that they experience.
Adrian Schofield:Right, right, so engine overhaul hasn't been a huge problem for you as it has been for others?
Campbell Wilson:Touch wood, it hasn't been as bad as some, but it hasn't been as good as we'd Right, okay, right.
Adrian Schofield:Just changing tack a little bit, we're here in Australia, so what— how important is Australia in the Air India network? Could you tell us a little bit about what your service looks like here and also what perhaps you think that the growth potential is for the Australian market?
Campbell Wilson:We've doubled our frequency in the last 2 years, but having said that, we only operate to Sydney and Melbourne and only 17 times a week. Clearly there's a huge amount of opportunity to grow, not just in terms of frequency but certainly in respect of city coverage. But look, again, it's driven by the pace of aircraft deliveries, and you can imagine that given the opportunity I described before, there are many competing markets for these aircraft, whether it be North America, Europe, Asia, Australasia. As soon as we get aircraft, we would like to put more into Australia, absolutely. We see a significant opportunity. As I say, there's a million people in the diaspora. Australia is ranked, I think, in the top 3 of the markets that Indians want to travel to. There is plenty of untapped potential from a nonstop perspective, and so we, we can't wait to put more capacity in here.
Adrian Schofield:So perhaps more points in Australia as well as more frequencies?
Campbell Wilson:Absolutely more points as well as more frequencies.
Adrian Schofield:Yeah, which points might be of interest to you?
Campbell Wilson:Well, I think you can name it. It would be no secret.
Adrian Schofield:Right, okay. I mean, we're both New Zealanders, so I feel compelled to ask you about the New Zealand market. I know you've been asked about this before, but anything on the radar at all for New Zealand?
Campbell Wilson:I don't think there is a significant country in the world, and I include New Zealand in significant. I don't think there's a significant country in the world that Air India couldn't put capacity into.
Adrian Schofield:Right.
Campbell Wilson:You know, such is the, the huge size of the market, usually it has a significant diaspora, usually that diaspora is very affluent, as I say there's a geographical opportunity for international to international, so I think Australia, New Zealand, whatever large city you're talking about, It's probably more a matter of when, not if, there'll be an Air India presence. Initially, it will probably be through partnership. We're talking to a number of partners to serve the market better, but in due course, you know, really the sky's the limit.
Adrian Schofield:Yeah, and you did mention the international-to-international component, and from this part of the world, you know, connecting to Europe and places like that is a, is, you know, there's quite a few airline players in that. Do you Do you see Air India having perhaps a big role in those, like the kangaroo routes and the connecting to Western Europe sort of flights?
Campbell Wilson:Well, I think we covered that before. It's always for us going to be an add-on rather than the core means of existence. You know, there's going to be so much traffic to and from India that 20%, 25%, whatever the number is, is going to be targeted for international, international. But clearly, you know, if it's there, we'll try and take it.
Adrian Schofield:Great, okay. Um, you, you, you're one of many airlines that have a multi-model approach within the group, full-service carrier and low-cost carrier. Could you talk a little bit about the, the advantages of doing that, and particularly with your background coming from an— another airline group that was pretty big in the multi-model approach?
Campbell Wilson:Well, I think you've got 2 choices when, when you operate an airline. You've got a market that is price sensitive, you've got a market that is very product and quality sensitive, and, and do you try and address both of those markets with the same aircraft, or do you try and— or do you segment it such that you're offering a product that is more attuned and a business model that is more attuned to the segment you're addressing? Most airlines that have a high-quality proposition to address the upper end of the market feel that using that same aircraft to address the more price-sensitive end of the market is going to dilute the product experience, complexify the operation, impose higher costs than you can then charge on the lower end of the market. So try to separate the two and operate two business models that are attuned to the purpose. So from my perspective, having the dedicated low-cost airline and a dedicated full-service airline allows us to serve the needs of both of those market extremes effectively. In India particularly, you know, we have a huge up-and-coming population that is experiencing air travel for the first time, and in many respects the competition is not airlines, it is the train, or to a lesser extent the bus. And so we need to offer a price point that is as low as humanly possible to help people bridge that gap into becoming aviation consumers. And then once you're in that market space, as people grow into middle class, they'll take a more full-service product. But in the Indian domestic context, the majority of our capacity will be low cost simply because of the nature of the market and the evolution of the market. On the metro-metro business travel routes, it'll be a higher proportion of full service.
Adrian Schofield:Right, okay, and, and the low-cost carrier domestic market in India is, is pretty tough. You got some, um, one in particular very large competitor. Um, despite that, do you see a lot of growth potential for Air India Express?
Campbell Wilson:Huge. I mean, they are the ones that are taking most of the deliveries at the moment. Uh, they've gone from Air India Express's 25 aircraft at the point of privatisation, uh, it's It's now touching 100, and, and we can see it doubling in size in the next 18 months.
Adrian Schofield:Okay.
Campbell Wilson:Is it, you know, don't, never underestimate a large market growing at 10% compound annual growth.
Adrian Schofield:Right, yeah, the domestic, domestic market you mean, right, okay. That's, that's almost all the time we have, but just to finish, I'd be interested in hearing from you what your ideas of what does success look like for Air India? Like maybe for a 5-year timeframe, you know, what's your vision of where Air India is going to get to by then?
Campbell Wilson:So 5 years is a relatively short time in the context of aviation, especially when you're talking about refitting aircraft and replacing fleets and the like. But when we finish our 5-year transformation program, which is another 3 years or so away, you know, the whole fleet will have been upgraded, the whole customer experience will have been upgraded, both to world-class standards, you know, punctuality, reliability, reputation, all of those things we expect to be considered on par with any of the top-tier airlines in the world. Thereafter, it's really a matter of execution and scale, and if you look at India's statistics, there is no reason why an Indian carrier shouldn't be the equal in terms of size and reputation and and connectivity as a big airline in North America or Europe or China.
Adrian Schofield:Right.
Campbell Wilson:You know, India sits in that same category of countries and the aviation market will sit in that same category of aviation markets, and so it follows that an airline, and that airline in my view will and should be Air India, will fall into that same category amongst airlines.
Adrian Schofield:Great, okay. Well, that is all the time we have, so please join me in thanking Campbell for some really interesting insights into what is probably the world's hottest market right now. Thank you very much.
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