Air India has been witnessing sweeping operational changes since Tata Group took control of the airline in January. For the first time in a decade-and-a-half, hiring has been opened for non-flying positions and the airline is firming up a fleet enhancement programme, which includes getting grounded aircraft back in the air as well as fresh leasing, which will result in fleet expansion by 25%. Several new international destinations have been opened up and there is a brand new menu for passengers on board.
An airline spokesperson said 20 additional flights have been started every week to Birmingham, London and San Francisco, and 20 new flights per week to Qatar from Mumbai, Hyderabad and Chennai to cater to passenger demand for the football extravaganza there. The operational focus is already beginning to show results. CEO Campbell Wilson said earlier this month that AI became the most punctual airline for the first time since 2014, beating market leader IndiGo and others in September.
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A Tata Group veteran, who declined to be identified, pointed out that the earlier decline in load factors (percentage of occupied seats on an aircraft) across the airline has been arrested; Air India is now able to fill up more of its aircraft on domestic routes. On October 22, the first day of the busy Diwali weekend, AI is believed to have reported a load factor of over 90%, the highest among all domestic airlines.But despite all this operational cheer, challenges continue to plague the new owners. It was never going to be an easy acquisition for the Tata Group despite a significant debt write-off and other deal sweeteners given by the government during the transfer of the airline into private hands late last year. Another Tata Group executive said there are challenges abound, particularly on the employee front and because of the proposed merger of AI with another Tata Group airline, Vistara. Singapore Airlines holds a 49% stake in Vistara and has recently acknowledged that talks are on with the Tatas with merger being one of the possibilities.
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The executive quoted above said that concerns of older Air India employees over accommodation, change in health benefits’ terms and a voluntary retirement scheme also need to be dealt with. Nearly 2,000 employees are faced with eviction from company accommodation in Delhi and Mumbai. “Employees are also worried about the possible merger of Vistara and Air India (also Air India Express with AirAsia India). What happens to seniors, since many positions may be duplicated in the merged airline? What about duplicate routes? The management has assured employees that they will be taken care of, but concerns are unlikely to go away till the merger actually happens. Ditto with duplicate routes,” this person said.
The group veteran quoted earlier said Tata Group may want a single brand with full-service and low-cost offerings. At present, there are four airlines — Air India, Vistara, AirAsia India and Air India Express. This talk of airline mergers has brought back memories of another mega merger — the erstwhile Air India and Indian Airlines were merged to form a single entity in 2007. This mega merger resulted in myriad manpower and integration issues and the merged airline never reported a profit.
Meanwhile, the squeezed cash flows of AI are also causing some concern for the new owners. “The airline, despite all its operational improvements, continues to be a bottomless pit and the new owners continue to struggle with return on investments in AI. Recently, a revival plan was placed before the board of directors at Tata Sons, which laid out a five-year roadmap. It has outlined measures needed on several fronts: people, hardware, finance and technology,” the group veteran said.
The AI spokesperson said under the five-year transformation plan Vihaan.AI (new dawn), the airline has launched a major initiative to improve services and enhance passenger experience in every area of functioning and that various resources within the Tata Group are being accessed — like Tata Technologies, the Taj group, TCS etc — and their expertise utilised through collaborations to bring in overall perceptible change. Queries on specific challenges before the owners were not answered.
AI needs a massive fleet retirement and leasing initiative which means a sizable investment. There is talk of a 100 aircraft order and for now, lease agreements have already been signed for 30 aircraft which will enter service from year end. The aircraft being leased include 21 Airbus A320neos, four Airbus A321neos and five Boeing B777-200LRs. An aviation expert said AI is planning a mega aircraft order with deliveries beginning in 2024-25 and two new aircraft are expected to arrive every three months thereafter. The leased B777-200LRs will come with premium economy seating, making it the first time that AI will offer this class of booking for international flights. So, while the operational part of AI’s transformation appears to be well on track, the hardest part — mega investment in fleet enhancement and dealing with niggling manpower issues — lies ahead.