Home / Companies / News /  Will Ayci's Turkish lessons save Air India?

By 1 April, former Turkish Airlines boss M. Ilker Ayci will take over as chief executive officer at Air India in its new avatar under the Tata Group. When he embarks on turning around the formerly government airline, he will inevitably draw from his previous seven-year stint. Equally, Turkish Airlines holds useful cues from its strategy in the decade before he took over as chairperson in 2015, when it added international destinations prolifically. Under Ayci, it consolidated that positioning and became financially stronger.

For Air India, too, the path to growth and profitability flows through flying abroad. International flights yield higher revenues and margins, and open up new markets. Given its aircraft fleet, airport slots and bilateral rights, Air India was the best equipped to make this journey from India, until that promise was belied by business ennui and poor finances.

Between 2008-09 and 2019-20, Air India’s revenues grew at an average of 8% per year, and the share of the international segment stagnated at around one-third. During this period, Turkish’s revenues grew at an average of 30% per year, and the contribution of the international segment increased from 80% to 90%.

Turkish leveraged its central location in the world flight map with ‘sixth-freedom flows’: passengers who start and end their journeys in foreign countries, with a stopover in the airline’s home country. Turkish brings passengers to its Istanbul hub, and puts them on connecting flights. Between 2005 and 2015, Turkish expanded from servicing 56 countries to 113 countries. Under Ayci, it went to 122 countries—the most by any airline. In 2020, it was servicing thrice as many destinations as 2005.

International Right

Ayci will step into an Air India that is about one-third of Turkish on 2019-20 revenues and which accounted for just 12% of India’s international passengers in the December 2019 quarter (pre-pandemic). Unlike Turkish, it lacks a central location, a hub airport, and thus the inherent bounce of sixth-freedom rights. Still, it has the wherewithal to compete in the Indian international segment against the sixth-freedom brigade—Turkish, Emirates, Etihad and Qatar Airways—with direct flights. For example, Delhi-Helsinki, rather than Delhi-Istanbul-Helsinki.

Air India’s inability to expand internationally has seen foreign airlines come to India, and wrest traffic under sixth-freedom rights. A report by the government auditor pointed out that in 2015-16, nearly 60% of passengers in foreign airlines plying from/to India flew beyond that airline’s hub. The leg from an Indian airport to an overseas hub airport, and vice-versa, should have been Air India’s domain. Ayci will look to change this.

Profitable Tenure

Ayci’s tenure as Turkish chairperson was eventful. A year after he took over, 48 people died in a terrorist attack at Atatürk Airport in Istanbul, depressing aviation demand in the hub. Meanwhile, tensions between Turkey and Russia rose. And, a drop in global fuel prices, the main cost head for airlines, increased competitive pressures, slipping Turkish into a loss in 2016. The airline not only recovered, but also posted three straight years of rising profits.

Under Ayci, Turkish Airlines’ biggest challenge, as was the case with every other airline across the world, was the coronavirus pandemic. It plunged Turkish, with its overwhelming dependence on international travel, to a loss of $836 million in 2020, from a profit of $788 million in 2019. It has recovered since, posting a handsome profit of $722 million in the third quarter of 2021. A key part of Ayci’s new mandate will be to turn around Air India, which lost 7,983 crore on revenues of 28,524 crore in 2019-20.

Private Touch

The parallels between Air India and Turkish Airlines are many. Air India too has a government connection, a fleet of various aircraft sizes and makers, and formidable aviation assets. While 49% of Turkish is held by the Turkey Wealth Fund, owned by the government, its shares were floated in 1990. About 51% of the shareholding is in public hands.

The airline has been a business priority. The international push is one illustration of this. Another is how it reconfigured to boost cargo operations during the pandemic. Revenues of Turkish Airlines from cargo in 2021 are on course to double over 2019 levels. Moves like this have helped the Turkish Airlines stock deliver a compounded annual growth rate of 25% in the last 15 years. At Air India, the challenge before Ayci is to use lessons from Turkish, and learn new ones, as he leads the mammoth transformation of the company.

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