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Three years after its privatization, Air India is actively pursuing its ambitious goals of achieving profitability and evolving into a world-class airline, despite facing significant external headwinds. CEO Campbell Wilson, in an interview with ET, emphasized that the carrier has made substantial progress in reducing its losses and decreasing its reliance on equity infusions from its new owner, Tata Sons. While he refrained from providing a precise timeline for achieving profitability, Wilson expressed optimism, stating that the trajectory is highly positive. He attributed the positive developments to several strategic initiatives, including the merger of four airlines into two streamlined entities, the modernization of archaic software systems, a robust order book for new aircraft alongside the retrofitting of older ones, and the implementation of enhanced workforce training programs. These efforts have collectively contributed to a reduction in operational costs and improved overall efficiency.
According to an internal presentation reviewed by ET, Air India had set a target to become profitable by FY27 late last year. However, the prolonged closure of Pakistani airspace to Indian carriers has introduced unforeseen challenges that are likely to delay the achievement of this target. Experts suggest that the airspace closure necessitates longer flight routes, increased fuel consumption, and potential stopovers, all of which negatively impact the airline's financial performance. Wilson acknowledged the potential delay but emphasized that the company remains committed to its long-term transformation plan, known as 'Vihaan,' which was announced in September 2022 and envisions a five-year journey. He highlighted the significant reduction in losses, from ₹11,387 crore in FY23, the first full year after privatization, to ₹4,444 crore in FY24. Air India has yet to officially announce its FY25 financial results.
Wilson addressed the integration of the low-cost unit, Air India Express, into the broader Air India ecosystem. He noted that while Air India has benefited from new aircraft and improved service standards, Air India Express has experienced rapid growth, increasing its fleet from 25 to 100 aircraft in a relatively short period of time. This rapid expansion necessitates a period of consolidation to ensure efficient operations and optimal resource allocation. Wilson emphasized that both Air India and Air India Express are progressing on different trajectories, but that the overall direction of the combined entity is positive. The closure of Pakistani airspace since April 24 has forced Air India flights to North America to take circuitous routes and make stopovers in Vienna or Copenhagen for refueling, leading to increased expenses. While acknowledging the financial impact, Wilson stated that the airline will continue to operate as long as the routes cover the cost of operation. He added that the airline is actively working to minimize the effect of the airspace closure on its bottom line.
To mitigate the impact of the airspace closure, Air India has implemented measures such as limiting the number of seats sold on certain long-haul flights to reduce aircraft weight and enable non-stop operations. Currently, only four Air India flights to North America require a stopover. Another challenge the airline faces is a significant delay in its cabin upgrade program, primarily due to supply chain disruptions. Passengers flying to Europe and North America have expressed concerns regarding the condition of the cabins and the functionality of seat-back screens. The airline is actively working to address these issues and improve the passenger experience.
Wilson emphasized the strategic importance of operating a low-cost airline alongside a full-service product. He stated that Air India Express will be able to achieve cost parity with competitor IndiGo in domestic sectors, while Air India is earning a premium due to its superior product and service standards. He noted that brand reputation was previously less important when the product and service were not as developed. However, as Air India achieves parity or even leadership in these areas, the non-stop connections offered by the airline become a significant competitive advantage.
Air India's passenger revenue has more than doubled since privatization, and the airline now holds a 49% market share on the top five metro routes. Furthermore, its revenue from cargo has tripled during the same period. The number of transit passengers has increased fourfold, now constituting 10% of total traffic. This growth is attributed to the airline's revamped flight schedules from neighboring and Southeast Asian countries, which are timed to facilitate connections to destinations in Europe, East Asia, and Australia with minimal waiting times.
Wilson addressed the intensifying competition from rival IndiGo, which holds over 60% of the domestic market and is preparing to launch flights to Europe. He expressed confidence that Air India's service standard and product will appeal to high-paying customers, while IndiGo will continue to attract price-conscious travelers. He stated that a segment of the premium market is currently traveling via other airlines due to the perceived lack of quality in non-stop options. Air India is focused on catering to this market segment by prioritizing product quality, loyalty programs, catering, perception, and connectivity. Wilson concluded by emphasizing the importance of maintaining a customer-centric approach and continually improving the overall passenger experience to solidify Air India's position as a leading global airline. Air India's strategy involves catering to a different market segment than its competitors, focusing on non-stop flights and superior product quality to attract high-paying customers. The airline is also emphasizing its loyalty program, catering services, overall brand perception, and extensive connectivity to enhance its competitive advantage. By focusing on these key areas, Air India aims to solidify its position as a leading player in the aviation industry and provide a premium travel experience for its discerning customers.
Air India's comprehensive transformation plan involves not only financial restructuring and operational improvements but also a significant investment in its human capital. The airline is implementing enhanced training programs for its workforce to improve service delivery, enhance safety standards, and foster a culture of excellence. These training programs cover a wide range of topics, including customer service, flight operations, maintenance, and safety protocols. By investing in its employees, Air India aims to create a highly skilled and motivated workforce that is capable of delivering a world-class travel experience.
The airline is also leveraging technology to enhance its operational efficiency and improve the passenger experience. Air India is investing in new software systems and digital platforms to streamline its operations, optimize its flight schedules, and provide passengers with real-time information and personalized services. The airline is also exploring the use of artificial intelligence and machine learning to improve its decision-making processes and enhance its overall performance. Air India's commitment to innovation and technology is crucial for its long-term success in the highly competitive aviation industry. By embracing new technologies, the airline can improve its operational efficiency, reduce its costs, and provide passengers with a more seamless and enjoyable travel experience.
Furthermore, Air India is actively engaged in sustainability initiatives to reduce its environmental impact. The airline is investing in fuel-efficient aircraft, implementing sustainable operating practices, and exploring the use of alternative fuels. Air India is committed to reducing its carbon emissions and promoting environmental sustainability in the aviation industry. By embracing sustainable practices, the airline can reduce its environmental footprint and contribute to a more sustainable future for the aviation industry. Air India's commitment to sustainability is an important aspect of its overall transformation plan and reflects its commitment to responsible corporate citizenship.
Source: Three years post-privatisation, Air India charts profitable flight path amid turbulence