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Business News/ Companies / News/  Air India resets as it finishes one year under the Tata fold
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Air India resets as it finishes one year under the Tata fold

The brand umbrella is to have one low-cost platform and one full-service platform by 2023 end
  • Air India has been among the top three airlines in timekeeping in India since August
  • Air India also aims to focus on growing both its network and fleet, revamping its customer proposition, reliability and on-time performance. Premium
    Air India also aims to focus on growing both its network and fleet, revamping its customer proposition, reliability and on-time performance.

    New Delhi: Tata Group took over the operations of Air India a year ago—on 27 January 2022—marking the beginning of a new chapter for the carrier. The takeover has changed public perception of the airline and improved its performance, experts said. “The Tata tag has brought in several tailwinds for the airline," a senior airline executive said.

    The government’s handover of Air India to Tata Group marked the end of the tedious process involved in the sale of the debt-laden airline. Tata submitted the winning bid of 18,000 crore as the enterprise value of Air India against a reserve price of 12,906 crore. The bid comprised a payment of 2,700 crore and retaining a debt of 15,300 crore.

    Under the government-led divestment process, the group bought a 100% stake in full-service carrier Air India and its arm Air India Express. Since then, AirAsia India, formerly a joint venture of AirAsia and Tata Group, has become a 100% subsidiary of Air India. In November, the group also announced that Vistara, a 51:49 joint venture between Tata Sons and Singapore Airlines, will be merged with Air India; Singapore Airlines is to hold 25.1% stake in the merged entity.

    Broadly, the Air India brand umbrella will have a single low-cost platform and a single full-service platform by the end of 2023. The former will be a merged entity between AirAsia India and Air India Express. The full-service carrier will be the merged entity between Air India and Vistara. The company has also implemented a five-year plan called Vihaan to capture a 30% share in the domestic and international markets. As part of the plan, the carrier also aims to focus on growing both its network and fleet, revamping its customer proposition, reliability and on-time performance, technology, sustainability, and innovation and wants to invest in the best talent in the industry.

    “It is a long haul. It will take some time. I would think it will take three-five years. The benefits will start coming from FY24. FY23 will be more about setting the ground, process-related issues, getting fleet, and marketing. Integration is complex for one airline, two airlines getting integrated with Air India itself, then there are competitive factors," said Kapil Kaul, chief executive and director of Centre for Aviation CAPA India.

    Air India, which has been among the least punctual airlines in India over the years, has been among the top three airlines in timekeeping in India since August. It was also crowned with the most punctual title for October. While the airline is still in the process of revamping its fleet, the utilization levels for aircraft have gone up. The market share of Air India stood at 9.2% in December 2022 from 10.2% in January 2022, but the flight departures for the airline went up by 8% at 7,761 flight departures in November 2022 from 7,187 flight departures in January 2022.

    “The cash flows have improved on account of better on-time performance and improved load factors. There have been no delays in making statutory payments. Banks also enjoy giving capital to an airline at cheaper rates if the promoter has a reputation and image like the Tatas," said a senior industry executive.

    The airline is also working on improving the work culture. It plans to reward employees based on merit instead of seniority, the executive said, and added that the recently announced employee stock option scheme is an attempt to improve productivity, loyalty and morale of employees.

    Under this, Air India has offered around 980 million shares of the company to its permanent employees as part of a stock option scheme. The shares are also being offered to the permanent staff of Air India Express as part of the Employees’ Share Benefit (ESB) Scheme 2022 and are expected to benefit around 8,000 staff.

    Some industry experts, though, expressed concern that the recent flurry of unruly passenger incidents and violation of norms by the airline in reporting the same may damage brand image. In two such cases, Air India was fined 30 lakh and 10 lakh, respectively, by the regulator.

    “The carrier might not have lived up to the great expectations of the public as the recent unfortunate incidents have dented the image of Tata-run Air India, and it needs to be rebuilt. They need to take some steps, else they may suffer due to erosion of brand value," a senior government official said.

    The airline is also in the process of placing a mega aircraft order for about 500 jets—both wide-body and narrow-body planes—and an announcement on the same is expected next month, a person aware of the development said.

    “If there is anyone who can do it, it is [Tata Group]. They have cash, and the right team; it is a question of putting the structure together," Kaul said.

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    Published: 26 Jan 2023, 11:17 PM IST
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