Air India's Airbus deal set to revive airline's fortunes

When Asian airline expert and journalist Vasuki Shastry took an Air India flight in January this year, he found India's re-privatized flag carrier to be "exactly the opposite of what many passengers have come to expect in recent years."

The flight took off ahead of time and the crew performed "with a quiet confidence evident in more established global carriers," the journalist wrote in an article for the US magazine Forbes, adding: "It wasn't so much surprising as it was shocking."

Finding any positive news about Air India had been a rare phenomenon in recent decades. Mismanagement, huge debts, and unreliable and often erratic handling of passengers under a tight bureaucratic and financial grip of the government owners were the norm.

Once a national and global icon and member of the creme-de-la-creme of the international airline business, Air India is now aspiring to reconnect with its glorious past.

A major step forward is the world's largest-ever aircraft order by the now re-privatized Air India, once again owned by Tata Group since January 2022. More than 500 brand-new  Airbus and Boeing aircraft are supposed to propel the group to new heights, enabling it to firmly leave its mark on the domestic and global aviation market.

On Tuesday, Air India agreed to buy 250 jets from Airbus. The deal includes 210 narrowbody aircraft and 40 widebody planes. Just hours after the agreement, the White House in Washington announced that the airline will also purchase 220 planes from Boeing, with options for an additional 70 aircraft.

Renewing and enlarging the aging fleet is only one of the many herculean tasks the charismatic CEO Campbell Wilson faces in the job he took in July last year. He is now free to act as CEO of a private enterprise, solely driven by economics rather than politics, and with ample funds available. The roots of Air India's long-lasting misery up until now lie deep in history.

A white elephant of Indian industrial policy

In 1932, JRD Tata, chairman of India's largest multinational conglomerate, Tata Group, founded Air India. In 1953 the government took over and nationalized the airline. In later decades, the carrier became a white elephant and was seen as symbolizing everything that was wrong in the Indian economy with government interference even in the day-to-day operations of companies.

The last ill-fated decision was the merger of Air India with domestic sibling Indian Airlines in 2007 — a combination then boasting twice the number of employees per aircraft versus the global average.

At the same time, more and more private airlines entered the lucrative Indian market, mostly in the low-cost segment, further eroding the business of the flag carrier, which was bleeding cash and amassing billions of US dollars in debt. Air India's domestic market share of 8.7% in 2022 put it only in fourth rank, and even adding market shares of all four current Tata airlines amounts to just about 26% overall.

By comparison, leading low-cost carrier IndiGo now accounts for 56%, and ordered 300 Airbus A320neo in India's largest aircraft order so far in 2019.

Air India's big spending plans

Paramount in putting Air India back on the map is a major restructuring of the Tata Group's aviation interests — owning 100% of Air India as well as all of the low-cost carriers Air India Express and Air Asia India plus a 51% stake in India's currently only other long-haul carrier Vistara, a joint venture with Singapore Airlines.

CEO Campbell Wilson had spent most of his career with Singapore's flag carrier, before founding and heading its low-cost offspring Scoot from July 2011-2016 and again from April 2020 until mid-2022.

"Leaving aside the different airlines and different brands that sit under the Tata portfolio, what I see from an Air India perspective is the need for a full service and low-cost proposition," the New Zealand-born airline chief told Indian media in October. "So, our ambition is to build both a world-class full-service carrier and a world-class low-cost carrier under the Air India Group and operate them synergistically."

Merging four airline brands into two running under the same roof is a very challenging undertaking even under the best of circumstances. In September, management launched its five-year transformation plan called Vihaan.AI.

Since then, "we've been firing on all cylinders ever since," the CEO told staff in a year-end note in December. Currently, there are no less than 22 initiatives on the transformation agenda, and "it will take us a few years before we attain the world-class heights to which we aspire," Wilson said.

To present the "new" Air India in a refreshed look to the traveling public, one upcoming milestone will be the unveiling of a new brand strategy, currently reportedly being worked on by UK-based consultancy Futurebrand.

Growth momentum in India as passenger numbers explode

India is one of the world's fastest-growing aviation markets mainly fueled by a growing middle class that can afford to fly. The domestic market is bouncing back quickly after the pandemic, counting 123 million domestic passengers in 2022 — a 47% increase versus 2021. That's where Air India's huge narrow-body aircraft orders from Airbus and Boeing will mostly play out and help regain market share.

At the moment, Air India has just 114 aircraft in its fleet, many of which had been deactivated due to a lack of funds for spare parts, and were only recently swiftly reactivated. 70 aircraft are Airbus narrow-bodies and 44 Boeing 777 and 787 long-haul jets. Tata SIA Airlines, operating as Vistara, owns three 787s as the only other Indian airline capable of intercontinental flying.

No wonder the country's airlines have lost huge market share to big Gulf carriers such as Emirates —  just 39% of international traffic to and from India was operated by airlines from the country recently, and this even comprises regional routes within Asia and the Gulf.

As an interim measure for short-term growth, Air India is adding a total of 42 extra aircraft in the first half of this year, with 31 of them being A320 mainstay jets and the remaining being wide bodies.

Meanwhile, as much as Air India raves about its future plans, it seems it has a long way to go to erase the dreaded attitudes of the past. As was drastically illustrated at the end of 2022 with the so-called Pee Gates — two incidents when drunken passengers urinated on others during flights, while the crews and initially the airline's management didn't react in the proper way, deeply damaging all efforts to show a new face. When the cases became public weeks after the incidents, Tata Group chairman N. Chandrasekaran expressed "personal anguish" and pledged to "review and repair" internal processes.