Written by Ms. Ashwini Mahakalkar & Melania Delle Volle
Air India – Then and Now!
Part 1: Before Tata took over Air India
Air India, formerly named Tata Airlines, was founded in 1932 by entrepreneur J.R.D. Tata. It was nationalized in 1953 and has been a member of Star Alliance since 2014, allowing the airline to expand abroad at a rapid rate. However, the airline started generating losses in 2007, when it merged with Indian Airlines, another state-owned domestic carrier, and has only remained afloat and operational because of taxpayer-funded bailouts.
The government reported that Air India was incurring losses of about 2.6 million dollars per day and that due to increases in fuel costs, airport fees, and increased competition from low-cost airlines, the interest burden for its poor financial performance had been further weakened.
After 68 years, in January 2022, the company was acquired back by its original owner, TataGroup, from its government ownership. Air India in fact “suffered for its inconsistent service standards, low aircraft utilization, dismal on-time performance, antiquated productivity norms, lack of revenue generation skills and unsatisfactory public perception”, according to Jitender Bhargava, a former executive director of the airline.
Part 2: After Tata took over Air India
Tata has, as predicted, reduced the overall number of employees at Air India through a voluntary retirement scheme (VRS). This was a success, with 4,500 employees leaving the airline out of a total of almost 13,000. This is the airline’s first move to reduce personnel and introduce fresh talent. According to rumors, another wave might be on the way, enabling
them to reduce prices.
The airline is also recruiting mid- and senior-level professionals from competitors for key positions in revenue management, engineering, IT infrastructure, and network planning, as well as from its sister airline Vistara and other companies within the Tata Group.
Part 3: Recent Orders
Tata Group seems to be very confident in the acquisition of Air India and in investing in it. As a matter of fact, the company is ordering around 500 aircraft from Airbus and Boeing, 400 narrowbody and 100 widebody jets that would allow the country’s flag carrier to upgrade service and reliability.
Even though Boeing and Airbus refused to comment for privacy reasons, sources affirm the orders include 70 widebodies long-haul aircraft and up to 40 Airbus A350s, as well as some 20 Boeing 787s and 10 Boeing 777X. This deal would break the records as the biggest order of aircraft for an airline and it makes us raise some questions about the riskiness of such an
investment. Being Tata Group, a strong multinational conglomerate, it has the funds to invest in the aerospace sector. However, given the current economic circumstance, it is still hard to understand if, in the long term, it will produce benefits in terms of profit.
Part 4: Future Strategies of Air India (Areas of growth)
Following are some strategies that Air India is implementing for its growth in the industry. They hope for a faster recovery of the losses from the past. A few of them are:
1. Fleet modernization: Air India has been in the process of modernizing its fleet by replacing older aircraft with newer, more fuel-efficient models.
2. Route expansion: Air India has been expanding its route network in order to connect more destinations and increase its market share.
3. Cost-cutting measures: Air India has been implementing measures to reduce costs, such as outsourcing non-core functions and optimizing its operations.
4. Partnerships and code-sharing agreements: Air India has formed partnerships and code-sharing agreements with other airlines in order to expand its reach and offer more travel options to customers.
5. Focus on in-flight services and customer experience: Air India has been working to improve its in-flight services and the overall customer experience in order to attract and retain customers.
6. Focus on digitalization: Air India is focusing on the digitalization of its operations, sales and marketing which will help the company to increase its efficiency, reduce costs and improve customer experience.
7. Focus on Air Cargo: Air India is focusing on its Air Cargo division and increasing its revenue by expanding its cargo services to more destinations.
Our suggestions for these ongoing strategies are that:
They must increase their use of digital marketing, use of data analytics, focus more on customer services, develop some loyalty programs, increase their marketing and advertisements, offer competitive prices, and also promote deals and discounts. This way there will be a positive change in the growth of Air India.
Part 5: Inspired by courses at TBS
This Press Review was inspired by most of the courses taught at TBS-Education like Issues and Trends in strategy (it gave us the thought that Air India must have implemented a new business model for their growth), Marketing/ Sales (The negotiations made for a pretty long time with Airbus and Boeing by Air India shows their skills of negotiation and also shows
their dedication towards the improvement of the Airlines), and international Business (Shows how Air India is spreading their wings internationally).
Part 6: Conclusion/Summary
We believe that Air India is taking an ultimately high jump by ordering 500 aircraft at once and that could (if not handled properly) might lead to huge losses for the Airline. Also, noteworthy to mention that, since the Airline is confident about such a mega-order, we think they are going to give tough competition to other airlines soon. Due to their extra-baggage scheme that was “in-demand” before covid-19, there is also a need to give thought to other airlines in terms of services they provide to their customers.
We hope to see Air India rising up soon and positively for their customers.