With tragic plane crash, Air India's revamp to take longer
BENGALURU, (India): The crash of the London-bound Air India flight in Ahmedabad on Thursday (June 12) that left more than 265 dead could slow the erstwhile national carrier's plans to expand and revive its reputation and profitability.
This is because it must turn its attention now to restoring internal morale and consumer confidence after the tragic accident.
Officials are still investigating why AI171 crashed, but it is the airline's first wide-body aircraft accident in 40 years.
The Tata Group bought the carrier from the Indian government in 2022.
For Air India, which posted an operational profit in early June after decades of losses and hoped to reach full profitability by 2027, the crash changes many plans.
The incident could result in significant losses for Air India not only because all except one of the 242 passengers were killed, but also because the airline may be held liable for the plane's plunge onto a medical hostel in a residential area.
After the accident, Tata Sons chairman N. Chandrasekaran announced compensation of 10 million rupees (S$148,900) to the families of each person who lost their life.
He also promised to cover the medical expenses of those injured and help reconstruct the B.J. Medical hostel the plane fell on.
The airline is suffused with nostalgia with its turbaned Maharaja mascot and delicious Indian meals, and unsmiling but efficient crew.
In recent years, however, it has become a butt of passenger ridicule for persistent delays, poorly maintained planes and years of losses.
Under Tata ownership, Air India's chief executive Campbell Wilson is helming a five-year intensive transformation plan beginning in 2022 to revamp an ageing and outdated fleet, upskill staff, upgrade IT systems, and create a world-class airline on a par with rivals like Emirates.
Air India's losses had been reduced by more than 40 per cent since the privatisation in January 2022 as it aimed to break even. It flew a total of 43.5 million passengers during the financial year April 2024 to March 2025.
In April 2025, Air India announced a US$400 million (S$513.5 million) fleet upgrade programme for 106 of its 198 aircraft. This involved refurbishing seats, carpets, curtains and lavatories.
The full-service carrier, which started making money in 2025, had made financial gains reportedly from cost cutting and streamlining operations, aided by lower fuel costs and a surge in passenger numbers.
Sources close to the company said the airline was eyeing full profitability by 2027 once the low-cost arm of the group, Air India Express, which has been expanding its fleet, also increases its revenue.
Wilson, a former CEO of Scoot, had reportedly informed employees during a townhall in June that Air India was advancing towards becoming 'a self-sustaining company'.
The crash changes, if not all the well-laid plans, many of them.
'We are devastated. All of us are wondering what went wrong,' an Air India pilot, who has worked at the company for over 15 years, told ST, requesting anonymity.
Aviation expert Sanjay Lazar, chief executive of Availalaz Consultants in Mumbai, said: 'A tragedy like this strikes at the heart of an airline. It will set the company back tremendously, as crashes do.
'The morale of personnel and external consumer trust will have to be rebuilt.'
This is the first accident of an Air India wide-body aircraft since 1985, said Mr Lazar.
The last Air India hull loss – which means an aviation accident that damages the aircraft beyond repair – was on June 23, 1985, when a London/Mumbai-bound flight from Montreal exploded due to a bomb planted by a Canadian Sikh terror group.
Just 17 years old at the time, Lazar had lost his entire family in the 1985 crash, after which he trained to be a pilot and worked at Air India for 38 years.
'From 1985 to 2025, there has been no hull loss for Air India. Strong companies bounce back. Air India has a good safety record and robust systems that must be reinforced like in the past,' he told ST.
Beyond the aftermath of the crash, headwinds in the form of trade tariffs imposed by the US, tensions on the India-Pakistan border and airspace closures from conflicts in other parts of the world such as the ongoing bombing of Iran by Israel remain concerns for the airline.
Wilson told The Hindu in May that Air India has requested a subsidy worth US$600 million annually from the government to tide it over the financial hit from the closure of Pakistan's airspace and the resultant re-routings undertaken by the airline for its westbound flights.
Relatives and hospital staff carry the body of a victim who died in an airplane crash in Ahmedabad, Gujarat, western India. - Photo: EPA-EFE
The airspace closure in Iran worsens this situation.
While the reason for the crash is yet unknown, it could also affect the aviation sector temporarily, as passengers put off travel, fearing the worst.
The crash of the 12-year-old 787 Dreamliner has refuelled scrutiny of Boeing, whose safety reputation began to unravel in October 2018 when a Lion Air flight operating a 737 Max crashed due to a malfunction, killing 189 people.
Just months later, in March 2019, an Ethiopian Airlines flight using the same aircraft model crashed for the same reason, killing all 157 people aboard.
But until now, the 787 Dreamliner aircraft had maintained a relatively strong safety record, said aviation professional Hemanth D.P.
Boeing's 787 was launched in 2011, and there are around 1,100 in the world. Air India owns an estimated 35 of them, not including the one that crashed.
Some Indian media reports said the Ministry of Civil Aviation was considering grounding 787s for a safety review.
Shortly after the crash, shares of Tata Group's companies saw an increase in selling pressure on June 12. However, analysts said it was sentiment-driven and that the long-term impact of the crash may be limited only to the Tata-owned airline business, and not extend to other entities.
Air India operates as a standalone entity, and any liabilities arising from the crash, be it aircraft damage, compensation or lawsuits, are expected to be covered through aviation insurance, analysts who track aviation finance and safety told ST.
Shares of Singapore Airlines, which holds a 25.1 per cent stake in Air India, dropped by 1.7 per cent on the Singapore Exchange. - The Straits Times/ANN
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