IndiGo, Air India losses show what happens when airlines ignore customers

Air India’s projected $1.6 billion loss and IndiGo’s 78% profit plunge prove what management research has documented for decades: what’s good for customers is good for business. In this case, hurt the customer and maim yourself.

India’s two big airlines appear to have forgotten this.

IndiGo’s December 2025 crisis, which led to flight cancellations, stranding lakhs of passengers, resulted from the company’s failure (or refusal) to hire enough pilots for new pilot roster rules, which had been in place long before. It is no surprise that Skytrax’s 2025 World Airline Awards, widely considered the industry’s most authoritative benchmark, ranked IndiGo 39th globally based on in-flight products, cabin service, and ground operations. AirHelp, the EU-based claims management company, in its customer satisfaction survey for 2024, placed IndiGo at 103 out of 109 airlines globally. IndiGo questioned the methodology, but there’s no gainsaying that the airline which revolutionised Indian aviation through operational discipline now exemplifies the disconnect between expansion and service quality.

This wasn’t the IndiGo that Rakesh Gangwal and Rahul Bhatia started in 2006 and built on relentless operational excellence focusing on affordable fares, on-time departures and hassle-free service at a time when the incumbents Jet Airways and Kingfisher Airlines were obsessing about gold-plated services. By 2012, IndiGo became India’s largest carrier through a formula that made air travel accessible without compromising basics and earned customer loyalty through consistency.

What changed? Rampant expansion at the cost of customer focus. Last December’s meltdown exposed an airline prioritising fleet orders over operational capacity.

Air India’s downward trajectory carries deeper irony. In the 1950s and 1960s, when it was owned by the Tata group, its chairman JRD Tata walked cabin aisles checking whether passengers were content, pulled up crews for cold meals, and personally cleaned dirty counters. His obsession with microscopic detail made Air India the gold standard for Asian hospitality. When BOAC (British Overseas Airways Corporation) introduced faster jet service, passengers still chose Air India’s slower propeller planes for superior on-board experience.

Sadly, politics intervened and JRD was removed from Air India in 1978. What followed was bureaucratic interference, declining standards, and institutional decay, turning the nationalised airline into a flying mess. When the Tatas bought back Air India in 2022, passengers hoped for a change in the air. In the euphoria of buying back the airline, the new owner forgot that it had inherited normalised customer dissatisfaction and did little to change that.

In 2025, three years after the airline changed hands, it was ranked 84th globally by Skytrax—a far cry from its historical standing. Consumer reviews, too, paint a consistent picture of baggage mishandling, staff rudeness, broken business class seats and other service failures.

Studies by Harvard Business Review and Bain & Co. clearly show that increasing customer retention rates by just 5% increases profits by 25% to 95%. The world’s best airlines prove quality and profitability are complementary.

Southwest Airlines, which consistently ranks highest in customer satisfaction among low-cost carriers, is also the most profitable US airline over decades. Singapore Airlines, a 25% stakeholder in Air India, operates with some of aviation’s lowest unit costs while winning Conde Nast’s Readers’ Choice Award 27 out of 28 times. Its formula: invest where customers experience the airline, in cabin quality and staff training, while ruthlessly managing invisible costs.

India’s two aviation giants are paying the price for taking their eye off the customer. Both treated passengers as inputs in growth strategies, rather than the reason growth matters.

Harvard Business School’s service-profit chain framework, validated across industries since 1994, establishes the causal link between employee satisfaction, customer loyalty, and profitability. When airlines ignore employee capacity while ordering aircraft, they break the chain at its foundation. December’s crisis at IndiGo, and Air India’s projected losses are consequences. They’re what happens when quarterly earnings calls prioritise expansion announcements over operational readiness.

IndiGo and Air India now face a choice. They can continue treating customers as expendable during periods of aggressive growth, or recognise that sustainable expansion requires investments in people, systems, and redundancy that don’t appear in quarterly reports but prevent catastrophic failures.

The two carriers will survive no doubt; the market is too large and growing to threaten that. But they’ll thrive only by rediscovering what their founders knew: everyday quality is the critical foundation without which you have a house built on sand, impressive until the tide comes in.

In Company Outsider, Sundeep Khanna distills more than three decades of his experience writing on India Inc. into a thousand words of context and insights that few can bring to the table. Want this newsletter delivered in your inbox? Subscribe here.