Three years after takeover Air India wants to walk without Tata hand holding

Economic Times

2 days ago

Air India, three years post-Tata Sons acquisition, is striving for profitability and reduced reliance on promoter equity. CEO Campbell Wilson highlights initiatives like airline mergers, tech upgrades, and fleet modernization to cut operational costs. Despite narrowed losses in FY24, airspace closures pose challenges, but Air India focuses on service quality and strategic routes to attract premium customers amidst rising competition.
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( Originally published on Jun 01, 2025 )
Three years after salt-to-steel conglomerate Tata Sons acquired Air India, the airline is aiming to be profitable and cut its dependence on equity investment from promoters, the airline's CEO Campbell Wilson said.Wilson, in an interview to ET, didn't put a timeline to become profitable, but outlined multiple initiatives like the merger of four airlines into two, upgrading archaic software systems to modern ones, a strong order book for new aircraft while retrofitting the older ones and a better trained workforce as some of the steps which is reducing the cost of operations.According to an internal presentation reviewed by ET, the airline, late last year, had set a target to become profitable by FY 27. But closure of the Pakistani airspace for Indian carriers is likely to delay that, say experts.'I think the trajectory is very positive. While Air India has got new aircraft and improved standards, the low cost unit Air India Express has gone from 25 to 100 aircraft in a very short period of time and hence, there is some consolidation that needs to be performed,' Wilson said.'So if you, if you take the 2 units, both have slightly different trajectories, but in totality, are in the right place,Referring to the five-year transformation plan 'Vihaan' which was announced in September 2022, Campbell said,The airline significantly narrowed its losses in FY24, reporting a loss of Rs4,444 crore compared with Rs11,387 crore loss in FY23, its first full year after privatisation in 2022.'It'll take still a little bit more time to achieve what we want to achieve, but it was a five year project in the beginning'.The closure of the Pakistan air space has put a spanner in Air India's road to profitability. Due to the closure, which started on April 24, Air India's flights to North America are being forced to take detours and stops at Vienna and Copenhagen, leading to increased expenses.'It's not insignificant, but you know, as long as it covers the cost of operation, we will continue to operate. We don't know the extent to which the bottom line is going to be affected. We will try to minimise the effect,' Wilson said.The airline has taken multiple mitigating steps like reducing the number of seats sold to reduce weight of aircraft such that only four routes are now doing one-stop.The dual strategy of operating a low cost and full service product though is helping to improve the balance sheet, the top executive said, as the low cost unit will be able to have cost parity with rival IndiGo in domestic sectors while Air India is earning a premium due to better product and service standards.'Previously, there weren't any sufficient advantages to overcome brand reputation, product and service that weren't as developed. But as we attain parity or even leadership on those things, those plus non-stop connections are clearly a competitive advantage,' Wilson said.The airline's passenger revenue has more than doubled with a 49% market share on the top five metro routes and revenue from cargo has tripled since privatisation.Transit passengers for the airline has increased four times since acquisition, and is 10% of total traffic as the airline has revamped its flight schedules from neighbouring and South East Asian countries and flights are timed such that passengers connect to destinations in Europe, East Asia and Australia with minimum waiting time.Competition is heating up as rival IndiGo, which has over 60% share of the domestic market, is readying to launch flights to Europe.Wilson though feels that the service standard and product of Air India will be attractive to the high-paying customers while IndiGo attracts the price conscious travellers. 'There's a premium market that is going via somewhere else because the non-stop proposition isn't of sufficient quality. We are catering to a different market segment and just need to be focused on our product quality, loyalty programme, catering, perception and connectivity,' he said.However, the airline's cabin upgrade program has been delayed significantly due to supply chain problems. Passengers flying to Europe and North America regularly complain about the worn out cabin or non-functional seat back screens. 'So there is more consistency to the product than earlier and there will be complete consistency in two years,' Wilson said.Will Tata Sons remain patient? 'You should ask them,' he quipped.