Thursday, December 2, 2021

TATA-Owned Air India Can Change Indian Aviation Landscape

by Jitendra Bhargava

Welcome back, Air India!

This is how Mr Ratan Tata, chairman emeritus, Tata group, welcomed the decision of Air India returning to the Tata’s after 68 years – through the disinvestment process. As there was an emotional connect besides commercial considerations, he rightly added in the welcome message: “it will take considerable effort to rebuild Air India. It will hopefully provide a very strong market opportunity to the Tata group’s presence in the aviation industry.”

As the past of Air India has been one of an iconic airline, the present an unimpressive one, people are looking at the return of the glorious era for Air India under the Tata’s in the near future. Ratan Tata, in fact hinted at this when he said: Tata’s will have the opportunity of regaining the image and reputation it enjoyed in earlier years.

The billion dollar question being asked post the successful culmination of the Air India disinvestment process on 8 October 2021 is: can Tata’s help Air India regain the image and reputation it enjoyed in earlier years, and become profitable once again? While Tata’s can be expected to succeed in achieving the first objective, a categorical response to the second part of the question may be available only after 2-3 years.

Undoubtedly, challenges lie ahead that the new management will have to make some tough calls if the airline was to make a quick turn around. Under government ownership and management, the airline has struggled in the areas of finance, service standards and public perception to name just a few, besides also earning a reputation for unproductive use of men (employees) and machines (aircraft).

As it would be unfair to compare the performance of any airline in two different time spans, it may be desirable to start the restructuring of Air India ab initio since much has changed in the aviation industry since the 1950-70s when Air India was reckoned as one of the finest airlines in the world. Two notable changes: the competitive environment of our times is vastly different from four decades ago. The industry then catered largely to the elite unlike now when air travel has become a fairly common mode of transportation for large portions of the mobile population.

What’s heartening is that an extensive due diligence had been done by teams appointed by the Tata’s before submitting the financial bid. They are thus privy to the current shortcomings of Air India, largely stemming from the present ownership, and have naturally not found them to be insurmountable.

Making Air India Profitable

With Tata’s already having a stake in two airlines – Vistara and Air Asia India, they have the requisite experience and understanding of the industry. Hence one can safely conclude that they wouldn’t over-ambitiously expect Air India to become profitable in the next couple of years. Both Kingfisher and Jet Airways, though excellent airlines, collapsed due sustained losses. Vistara too has been sustaining losses. As Air India’s ownership will be changing hands from government to a private entity, the challenges will be quite different from usual mergers and acquisitions.

The first priority would therefore be to transform Air India into a quality product that can match competing airlines and target substantial reduction in losses.

As a cash-starved airline, investments bolstering the quality of the product and services offered to passengers have suffered. Once capital is injected under the Tata ownership, focus will be on aircraft interiors and customer experience Work practices introduced four decades ago will be rendered redundant to factor in the competitive environment. The manpower problem will not be as acute as is being speculated. Air India employees, who have the requisite experience, have been victims of uninspiring leadership and casual work environment at all levels.

Enhanced productivity of employees and increased use of aircraft besides elimination of wasteful expenditures, which are part and parcel of a government entity, can help reduce losses considerably.

It is also a fact that change in ownership, providing a visionary CEO, a Board that comprises of professionals and a committed managerial team will change public perception leading to more First and Business Class air travellers patronising Air India thus pushing up revenues. Employees morale boosted by inspiring leadership and rewarding performance can be a huge game changer. It needs to be recognised that Air India has admittedly not been as good an airline as it ought to have been, but it is also true that it is not as bad an airline as it is often made out to be – this misplaced public perception has been a major morale dampener for employees.

Changing the Aviation Landscape in India

While it has been universally acknowledged that Air India under Tata’s will undergo a qualitative and quantitative change, the impact of the government’s decision of privatising Air India on the Indian aviation landscape hasn’t really been fully comprehended.

As Air India could not grow during the past decade and more at the pace at which the India-originating market was growing, and other Indian carriers with the exception of now defunct Jet Airways not expanding network to include the USA, Europe, Australia, Far East, etc. foreign airlines from Gulf and South-east Asia began dominating the Indian skies. The loss to India, which has been enormous, has never been quantified. These foreign airlines have been growing their fleet by flying out Indian air traffic through their respective hubs, jobs are being created in their countries.

With Tata’s set to own Air India soon one can expect this aberration to be a thing of the past. Tata’s can be expected to ensure periodic augmentation of fleet to expand global network keeping pace with growing market demand thus making Air India truly a part of Aatmanirbhar Bharat!

About the author: Jitender Bhargava is a former executive director, Air India & author of The Descent of Air India.

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