Unraveling the future of Air India under Tata (and the resurgence of the iconic ‘Maharaja’)
Air India has finally found a buyer in Tata, one of the largest Indian conglomerates. Tata is akin to Unilever in the US or Siemens in Europe – it is well diversified and known for excellence in execution. While a lot of attention is on the $2 billion in debt the airline owes, this acquisition is possibly the best hope for Air India, its employees and its customers. Tata knows how to deal with the lumbering Indian bureaucracy and build profitable companies with a sharp focus on driving revenues, lowering costs and building global Indian brands.
Driving post-pandemic revenue at Air India
The pandemic has dramatically shifted travel patterns. SimpliFlying’s research shows that post-pandemic travellers would be willing to pay a premium for a non-stop flight over another via a hub. Bypassing an additional airport means avoiding many situations where viruses may spread, like congested security lines when everyone touches the same bins. Non-stop flights also benefit from dealing with vaccination, testing and quarantine requirements of only the destination country, not the transiting country. This is a significant opportunity for Air India and Tata.
The airline can continue building its non-stop network from India to the rest of the world. Air India will have an edge against the Gulf carriers and others in the Asia Pacific like Singapore Airlines and Cathay Pacific since it can bypass their hubs.
Amritsar to Birmingham? Check. Delhi to Melbourne? Check. Bangalore to San Francisco? Check.
So while other airlines can throw in the bells and whistles, Air India can fly non-stop from India, leveraging air rights negotiated over decades. This will also help Air India maintain a competitive advantage against local Indian competitors since direct international routes tend to be higher yielding than regional and domestic short-haul routes.
Reducing Costs at Air India
Tata has the distinction of having two airlines in its existing portfolio – Vistara and AirAsia India. There is an opportunity for Tata to be strategic about consolidating the assets of the multiple airlines to eke out cost and revenue opportunities. Air India can be the full-service international airline of India, operating all widebodies including Vistara’s Boeing 787s. Given that Vistara is a young brand, it can either be consolidated within Air India, or it can be the full service regional and domestic airline in the group, operating an-all Airbus A320 fleet. Air India Express can take over all low cost domestic and regional flying, taking over AirAsia India’s operations, and fly all Boeing 737s. Such consolidation, while complex, can reap significant cost benefits over the long term for the Tata group.
The in-flight product can benefit from a stable of airlines too. For example, Air India currently lacks a Premium Economy cabin, But Vistara pioneered Premium Economy in India. Tata can use the seats and the expertise (and lessons) from Vistara to introduce a Premium Economy product for Air India’s international operations. This can prove highly profitable post-pandemic, given the rise of premium leisure travellers.
While there are concerns about the bloated employee ranks of Air India, the good news for Tata is that over 5000 Air India employees will be retiring in the next five years.
That means the cost base will automatically reduce, and the employee ranks can be refreshed without being at loggerheads with the unions.
Rebuilding the Air India brand
If there’s one thing Tata knows how to do, it is to build lasting brands. The Indian conglomerate owns consumer brands like Jaguar Land Rover and Tata Tea. Growing up in Delhi, I remember watching the endearing Tata tea ads on Doordarshan, the national broadcaster. They stick in my mind to date.
Tata has an opportunity to bring back the glory days of the Maharaja – the iconic Air India brand mascot. A focus on improving the quality of the in-flight product, the bringing in the service culture of Taj Hotels (owned by Tata) and even simple things like a strong focus on food can reap enormous rewards for the brand.
The Air India Maharaja is as iconic as the Singapore Girl or Richard Branson at Virgin – it cannot be replicated by any other airline. Therein lies the X-factor for the Air India brand that Tata can rejuvenate.
India already has the world’s largest population. Yet, a tiny fraction of Indians have travelled by air. That’s the growth potential. Tata is a brand that Indians trust. Tata running the national airline will inspire trust. It’s a brand that Air India’s employees will trust to take care of them as well. Tata has built brands that have lasted decades. It’s possibly the best outcome of the privatisation of Air India that Indians could have hoped for.