The once renowned Indian national airline Air India flew on the verge of bankruptcy. Under leadership of Tata Group, the airline underwent a rigorous transformation.
India’s national airline, Air India, has been struggling for decades since the Indian government took ownership of the airline from Tata under a series of nationalization efforts in 1953. In October 2021, the struggling airline was sold back to the country’s largest conglomerate Tata Group. Under leadership of Tata, the airline has been undergoing major reorganization to bring it back to profitability.
Air India woes
In July 2012, the pilot strike at Air India that lasted a catastrophic 58 days had finally come to an end. The severity of the strike had nearly brought down the airline indefinitely, the India Times noted, triggering massive disruptions across the country’s busiest India-Gulf routes. In the same month, July 2012, the India Times reflected on the seven months of the newly appointed civil aviation minister Ajit Singh and his attempts to resuscitate the Indian aviation industry, with Air India in particular. His first policies had been classified as too soft on the airline operating around the country from outside onlookers.
Despite showing bouts of enthusiasm to revamp the struggling aviation industry, many skeptics questioned whether he would be up to task. But behind the scenes, the news outlet noted, progress was being made. CEO at global airline consultancy firm the Centre for Asia Pacific Aviation (CAPA) South Asia, Kapil Kaul, said many were skeptical seeing the legacy, or lack thereof, from his predecessor, Ravi. Singh meanwhile, started to frantically restructure the nation’s aviation market. Singh opened up fuel imports and removed restrictions for private airlines to operate across international routes.
CEO at Indian low-cost airline SpiceJet, Neil Mills, acknowledged that positive changes have been made, with the company looking forward to further restructuring of the country’s aviation space. Singh showed himself a tough negotiator with the pilots, who had an easy time under Ravi, who recognized the pilot’s union, Indian Commercial Pilots Association (ICPA) and gave into several demands made. Singh meanwhile refused to acknowledge the ICPA for two months. The strike put massive pressure on Air India, nearly driving the carrier into financial ruin. But the tough stance proved fruitful as pilots were ready to move away from all their demands apart from schedule changes.
Praful Patel, who acted as the aviation minister between 2004 and 2010, commented that Singh was doing a good job, signaling that there was no room to fool around and improving the struggling airline should come first. Singh was taking controversial, yet necessary measures to restructure the country’s aviation market. By opening up the bidding for international routes and removing Air India’s priority position to negotiate the terms, a more vibrant climate was created where competitors such as Jet Airways jumped at the opportunity to increase their international operations. IndiGo and SpiceJet requested similar approvals.
Consultant for aviation at KPMG, Amber Dubey, said by opening up the rights to secure international routes, a silent revolution was unleashed, which simultaneously improved and expanded the global presence of Indian carriers. Before the opening up of international routes for Indian carriers, international players served the market beyond India. Now, domestic carriers could compete, not only amongst each other, but also with global carriers. Despite the early fanfare of Signh’s innovative policies, Air India operations remained brittle.
Air India in debt
In 2015, Air India unveiled it would reduce its workforce in an effort to cut costs in a bid to stay competitive with rapid emergence of low-cost airlines. The airline aimed to reduce costs by $227 million by reducing its workforce by 6 percent in the coming financial year. The reductions were set to be achieved by freezing contract renewals and close loss-making routes. The efforts are in response to the Ministry of Civil Aviation demand to reduce costs by 10 percent. Air India had already reduced costs by limiting staff travel and requiring staff to stay at hotels nearby airports to reduce transportation costs.
In June 2017, Minister of Finance, Arun Jaitley, said the Indian government was open to share its stake in Air India, allowing for privatization of the flag carrier. By the time of the announcement the debt burden at the struggling airline had grown to $8 billion. By selling off its stake, the Indian government’s hopes to generate much needed funding that it used to bailout the carrier in 2012, which totalled $5.8 billion, with Air India still relying on taxpayer funding to remain operational. The BBC noted that earlier attempts to privatize the airline have faced much resistance by unions, threatening with massive strikes.
A month later, in July 2017, Manavi Kapur for the website Rediff, reflected on the turmoil within the troubled airline, in part made possible not only by its enormous debt burden, but also by the toxic work culture ingrained across all layers of the organization. The airline’s outdated customer experience, symbolized by slow moving check-in counters at New Delhi’s international airport, act as a metaphor for the poor productivity that has been plaguing Air India for decades.
A frequent traveler told the news outlet he recalls an incident where he had to queue for 45 minutes, only to be redirected to another queue for having too much baggage. Meanwhile, the airline’s debt burden had reached over $6 billion, with staff unwilling to roll up their sleeves to improve Air India’s fortunes through a pleasant and efficient customer experience. In October 2021, the Indian government announced it had sold its loss-making airline Air India to Tata Group for $2.4 billion.
Since its creation by Tata in 1932, the airline had returned to its original once again. The Modi government was eager to sell its stake in the airline, which could shed the debt burden of Air India, which made a daily loss of an upward of $2.6 million since its merger with Indian Airlines in 2007. The troubled airline was kept afloat by taxpayers, who saw little improvement, as Air India’s cash position kept deteriorating, crumbling under the weight of high fuel prices, high airport fees, interest rates and increased competition from low-cost carriers, the BBC noted.
Former executive director at Air India, Jitender Bhargava, explained that the airline has delivered an inconsistent service, including eye watering on-time performance, leaving many of its planes underutilized with executives unable to find new revenue opportunities, partly fueled by outdated productivity standards.
Tata Group acquires Air India
In January 2020, several years after the Indian government was still hoping to privatize its national airline, however a suitable buyer was yet to be found. The Modi-government was eager to sell its stake in the airline to unlock much necessary funding. However, by only offering a stake of 76 percent in the airline during the initial announcement back in 2018, few parties were interested in taking the lead at Air India. Meanwhile, Air India had become infamous for its lack of innovation, blaming high fuel prices, competition from low-cost carriers and a high debt burden for its inability to turn a profit, the BBC commented.
As years progressed the Indian government caved in and allowed for a full take-over, with the buyer receiving a 100 percent stake in the airline. In return, the asking price is $3.2 billion, including the carrier’s debt and its remaining liabilities. Former Executive Director of Air India, Jitendra Bhargava, told the news outlet that increasing the share to 100 percent was a welcome announcement to private players who want to add the airline to their portfolio. At the time, Air India owned 56 percent of its 146 aircraft, with a strong network of international and domestic slots.
The offer is very tempting, but the piling debt can throw up barriers for potential buyers who will want to turn a quick return on their investment. In hindsight we know that the COVID pandemic would wreak havoc across the aviation industry, with the timing of Air India potential acquisition being more than unfortunate. But, a little over 1.5 years later, in October 2021, Tata Group announced its acquisition of Air India. This would mark a new era, where the flag carrier airline would undergo massive restructuring to pave the way toward profitability.
Wilson to lead Air India
In May 2022, Tata announced that Campbell Wilson would become the Chief Executive Officer (CEO) & Managing Director (MD) of Air India. Wilson has extensive knowledge of the aviation industry through a 26 year long career in both full service and low-cost airlines, Tata Group noted in its press release. At the time, Wilson acted as CEO at Singaporean low-cost airline Scoot, a full subsidiary of Singapore Airlines. Wilson would bring much needed knowledge and experience into the struggling airline.
Independent aviation analyst Brendan Sobie commented to Reuters that Wilson would deliver a rare combination of operating a full-service carrier and a low-cost carrier. Adding that while the position would be challenging, he was best suited for the job. In the press release Wilson thanked for the opportunity, saying that Air India was just at the beginning of a new and exciting journey to become the best airline in the world. In the months and years that followed, we will see how rigorous the transformation at Air India would become.
A little over a year in, Andreas Spaeth from Business Traveler spoke with Wilson at the Paris Airshow about the task ahead. The interview came shortly after Air India signed a record order for 470 aircraft to be delivered from Boeing and Airbus. Wilson described the turnaround as the biggest aviation turnaround. The expectations for the new CEO are high, as Tata is well regarded and expects a positive return on its investment. Air India is the embodiment of a long legacy and represents India internationally.
The entire nation is impatient to see Air India return to its former glory once more, Wilson points out. To make the dream happen, the airline had already invested $400 million to upgrade the cabins in its existing wide-body aircrafts, receiving the update over the course of 2023. The anticipated 470 new aircraft will be equipped with a updated, fresh livery, representing the new strategic vision for the commercial airline. Wilson explains the new design will capture a new bold India, marking a transformation and showcase the global aspirations from India.
The urgency to update and expand its fleet had already been expressed over a decade ago by former Civil Aviation Minister, Ajit Singhm, who told Air India to add more airplanes to its fleet in order to compete locally and internationally. In November 2022, Tata announced it would merge Air India with another airline Vistara. By combining the two airlines, Air India would become India’s largest international carrier and the second largest domestic carrier. Air India would welcome 218 aircraft into its fleet, marking an important step into streaming its operations. In the press release, Chairman of Tata Sons, N. Chandrasekaran said the merger was a crucial milestone in transforming Air India into a world class airline, delivering a consistent customer experience.
Reshaping Air India
In July 2024, PriceWaterHouseCoopers (PWC) spoke with CEO of Air India, Campbell Wilson and his tasks to reinvent the airline in one of the most competitive aviation markets. Campbell joined the company shortly after the acquisition by Tata and its subsequent privatization. Campbell isn’t unfamiliar to aviation, having served as the founder of Singaporean low-cost airline Scoot, aiming to carve out market share amongst industry giant Singapore Airlines. The reorganization of Air India was starting to take shape, but with a long road still ahead.
Air India’s workforce was the airline’s primary drawback, seeing massive strikes and poor worker productivity. In an attempt to curb this trend, the airline set out an aggressive hiring program, lowering the average age of non-flying staff by 20 years, whilst keeping existing workers on board, PWC noted. The fleet underwent a renewal, with IT infrastructure finally receiving much necessary upgrades after years of underfunding. The investments were long overdue as the Indian aviation market was rapidly expanding, with Campbell noting that it’s the third-largest in the world.
Air travel, Wilson points out, grows 1.5 times the rate of economic growth in a country, meaning the aviation market in India is expected to experience a compounding growth of 10 percent in the coming decades. However, Air India, under government ownership, prevented the aviation market as a whole from growing in the developing economy. Wilson commented the Indian government operated under the constraints of capital and capability. A privatized airline therefore, will be able to operate more freely in an open, fast growing aviation market.
Before the privatization, Air India was only a throw away from bankruptcy, Wilson explained. Instead of adjusting its operations to become profitable, it was focussed on survival. The airline had become a shadow of its former self. Once standing on top of the world during the 60s and 70s, he continued, Air India couldn’t keep up with the rapidly changing aviation landscape. A landscape where airlines were customer focussed. A strategy not necessary as the national airline had little to lose.
This led to a bloated workforce where little young fresh minds brought new and innovative ideas. Air India had basically put its hiring in the freezer, recruiting its last IT and non-flying aviation staff over 15 years ago, setting the average age of employees at 54. With the Indian retirement age set at 58, a lot of staff would soon be leaving the company, having little incentive to develop ideas and programs for greater efficiency and revenue generation. Executives at Air India saw that the company was in dire need of a rejuvenation of its workforce, which would organically bring culture change.
In order to become a center of employee development, the airline invested heavily in new training facilities, opening a 600,000 square-foot facility to house a training academy, including a new cadet pilot program featuring state-of-the-art technology. Wilson said the company isn’t using the facility to its full potential yet, hence its opening up its academy to other Indian or overseas airlines.
The Vihaan program
The changes were part of the ‘Vihaan’ program, Wilson explained during a Q&A at Skift. The program spans a period of 5 years, where the company would undergo a major reorganization to turn Air India into a world class airline once again. In the first six months of the program, an intensive triage was launched to identify and fix the company’s most pressing issues and fix them before moving forward. The following 12 months, which was set to finish at the time of interview in March 2024, organizational operations were streamlined, from processes to premises.
This resurgence re-investment into the company has resulted in the creation of a start-up culture, Wilson pointed out. Air India was running on outdated software, with employees using Gmail for communication as its email system was so lacking in functionality. Furthermore, Air India was the last airline in the world who used an old passenger service reservation system, a software suite the owner had already shut down, leaving the airline without support. Every part of the company’s IT infrastructure was running on outdated, legacy enterprise software.
To facilitate the growth and rejuvenate the flare, Air India welcomed a new aircraft every six days in the last six months, with Wilson expecting to maintain this rate for the following 12 months. A foundation had to be built to support this influx of new technology and capacity. Without restructuring the core foundations of the company, Air India would be left with planes sitting idle on the runway or have them up in the air under unsafe conditions.
Wilson believes that Air India has a competitive advantage through its scale. By purchasing a vast quantity of new planes, it will be the airline that’ll be able to connect large urban centers across the nation. Continuing that many Indian airlines are just starting their operations and trying to carve out a market for themselves. Meanwhile Air India has a strong network with hundreds of planes waiting to be delivered, the recently privatized airline has a headstart to connect people throughout the country.
However, this doesn’t mean that Air India can sit idle. In the past the airline has greatly sabotaged its Gulf connections. Now, airlines from this busy region are eagerly trying to tap in the market themselves. Wilson says that in order to compete with Middle Eastern carriers, who are trying to gain market share in India, the airline has to build a strong brand. Air India won’t be able to transform into a solid brand without streamlining its operations on the ground. Wilson said the airline has to work together with private airports, state regulators and border agents to deliver a memorable customer experience.
Flight times will have to become convenient, including offering long-haul direct flights to Europe, parting ways with inconvenient transfers. Air India will have to deliver on these basic principles, aiming to attract the premium travelers. Domestically, India will be home to low-cost carriers, but internationally, there is a market for premium airlines, who have largely remained absent in this lucrative market, Wilson commented.
The biggest turnaround
Air India was once the marble of Indian ingenuity. The carrier set the aviation benchmark during the 50 and 60s. However, as competition grew and investments into the airline evaporated, the flag carrier quickly fell into disrepair. The national airline became known for its lackluster service, deplorable on-time performance and poor worker output. Over the course of the 2000s, the carrier stared into the abyss, with a bankruptcy cloud casting a deep shadow behind it. A lot needed to be done to lift Air India back into its glory days.
A lot of the groundwork that allowed the Indian aviation market to thrive before Tata Group acquired Air India in 2021, was former civil aviation minister’s Singh’s restructuring efforts to make the country’s aviation industry more competitive. By allowing Indian carriers to compete for international routes, a vibrant market emerged with large Indian players such SpiceJet and IndiGo able to open international routes formerly reserved to international carriers and Air India. This privileged position turned Air India complacent, with operations turning inefficient, with operations so outdated that the original software vendors had abandoned their own products.
The aging Air India fleet was no longer able to compete with the efficient modern aircrafts from competitors, domestic and international. The undersized fleet only exacerbated the problems, with Air India being able to meet the demand in the developing Indian economy. Air India was in need of a drastic restructuring that would place on a trajectory of sustainable growth. The initial salvation came through Tata Group’s acquisition of Air India, who put former CEO of Singaporian low-cost carrier Scoot, Campbell Wilson in charge of the struggling airline.
Wilson knew the going would get tough, but took drastic measures to restructure the airline starting by bringing new, young people into the company to reignite the flame of passion and boost productivity. Air India started to invest and expand its aging fleet to ensure it could compete with its competitors. Processes were streamlined to improve on-time performance to deliver reliable and pleasant customer service.
