Air India is taking a leaf out of JRD Tata's book

New flights and increased frequencies are just that: a routine affair. But AI’s decision to enhance flights to the US and UK isn’t so. For the sectors selected shed light on the strategy that the Tatas are following for AI. Two things stand out immediately. This is a plan for the long term and is clearly thought out.

The air travel market had bounced back to almost pre-COVID levels by May this year. The post-pandemic pent-up demand has sent fares skyrocketing on these routes. Traffic from India to the UK tends to pick up during the summer break and remains strong through the festive season. AI’s new flights in the winter schedule will allow it to cash in on this demand. Beyond that, 14 additional flights to two destinations, London and Birmingham, will make AI the largest carrier between the UK and India on the route with a total of 48 flights per week, helping it beat closest competitor British Airways which has 42 weekly flights to five destinations in India. If Vistara, another Tata airline, is taken into consideration, the number of weekly flights will reach 55.

The decision to enhance to 16 from 10 the weekly non-stop services from Delhi, Mumbai and Bengaluru to San Francisco will also translate immediately into more revenue for the airline. Being the only Indian carrier to offer non-stop services from India to San Francisco, AI already charges a premium. The new flights on the route will further swell its kitty.

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In many ways, AI is taking a leaf out of the book that JRD Tata scripted when he started international flights for AI in 1948. At that time KLM Dutch Airlines and Imperial Airways were among the two dominant players on the India-UK route. JRD was considered crazy by the aviation community to take on these big daddies. But JRD persisted and launched the AI international flight from Mumbai to London with what then was considered a new aircraft — Lockheed-749. The airline soon became an established name on the route.

What AI is doing now could also have been done when the airline was under the government as India has signed an open sky agreement with both the US and the UK. There was hesitation at that time as there was no system of reward for taking forward-looking decisions. There were always fears in the minds of Air-Indians that if their decision led to monetary losses for the airline, they would have to face inquiries and could be questioned by constitutional authorities like the Comptroller and Auditor General of India.

Both the India-US and India-UK are multi-billion-dollar air travel markets. AI’s attempt to grab more share in these two markets makes solid business sense. In 2020, just around the time when the pandemic brought the global aviation industry on its knees, the India-US air services market was estimated at around $ 7 billion. London and San Francisco in particular are high-yield markets from which demand has held strong.

On the India-UK market, AI offers non-stop connections from seven cities in India to London and Birmingham, which should allow it to offer a slight premium on fares. In 2019, before the pandemic outbreak, India was the UK’s 16th largest market by volume and 11th by spend, a survey by Visit Britain had showed. It also found that the UK was second most-visited market for Indians in that year. More so, Indians visiting the UK had set a new record by spending about 753 million British pounds in the UK. There seems to be no let-up in demand. The British High Commission in Delhi has said this year that India has overtaken China as the largest nationality being issued sponsored study visas in the UK.

Over time, the additional flights will help AI amortize its fixed costs over higher volumes, and leverage its fleet of widebody aircraft including the incoming 777-200 LRs. The higher and longer an aircraft flies, the more chances the flight will make money. The India-UK flight is about nine hours. India-US flights vary from 14 hours non-stop to the east-coast destinations such as New York to nearly 16 hours to San Francisco.

The demand dampener could, of course, come from the UK and the US staring at inflationary environment with the threat of recession looming.

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