In a landmark order for global aviation, Air India four days ago confirmed an order for 470 aircraft for a total value of $80 billion at list price, with options for another 370 aircraft, the composition and pricing as yet unknown.

Besides creating a flurry of excitement in India’s aviation sector, the news created a wave of shock (at the sheer boldness and size), awe and led to an outpouring of pride among many Indians. The full order at 840 planes is bigger than the total operating fleet of all Indian carriers combined currently. It also evoked memories of June 2005, when India’s largest private airline IndiGo, virtually unknown at the time, placed an audacious order of 100 Airbus aircraft at the Paris air show.

History has shown us the advantage of thinking big as IndiGo has grown to dominate the Indian skies over the last few years. Buying aircraft in bulk has many advantages: discounts on the price, spares and maintenance support, engineer and pilot training packages, and so on all come cheaper and can give the airline a distinct edge over rivals in keeping costs lower, a deciding factor for success in the Indian LCC dominated environment. Sale and leaseback income can provide a much needed cushion from the vagaries of the business.

Further, buying aircraft from both Airbus and Boeing ensures that the airline gains from the competition that keeps both suppliers on their toes and insulates the airline from the troubles that manufacturers suffer from time to time. Airlines running Boeing aircraft have paid the price for Boeing’s troubles post the two crashes of the B 737 Max in 2018 and 2019. In today’s fraught environment, the aircraft or manufacturer agnostic airline is likely to be the safest.

The order validated the euphoria the Indian aviation industry - akin to the Indian economy - is currently passing through. A February 2023 report by aviation consultancy Centre for Asia Pacific Aviation (CAPA) estimates that Indian carriers are expected to place orders for 1,500-1,700 aircraft over the next 24 months with Air India expected to make the first move, which has now happened.

But even as industry analysts absorbed the big news, many echoed the sentiment: ordering aircraft is the easy part; now comes the harder part. The euphoria following the order could have made some feel that Air India’s future success is a done deal: stamped and sealed. Yet before the airline can show off its order and begin to make good of it, it has an uphill turnaround task before it. 

To sum up, in the one year since Tatas have taken over, it is the airline’s claim that the total operating aircraft increased by 27% to 100 and the number of average daily flights increased by 30%. A recent release issued by the Tatas says that weekly international flights increased by 63% and 16 new international routes have been added or will be launched soon. Domestic routes have seen similar growth. On some international routes, frequencies have been added. As a result, the airline is carrying a far higher number of passengers than before. Based on their claims, what is even more reassuring is that unlike in the past - when added frequencies and routes led to higher losses - average daily revenue for the airline has doubled. On time performance has picked up from 70% to almost 90% from December 2021 to the present. The airline has added 1,200 professionals across key functions to support this growth. It has commenced co-locating employees in NCR, ahead of a new state of the art facility in Gurugram that is expected to open in mid-2023.

Pivoting Tata

This sums up the progress so far but fails to highlight all that is still to be done to effect a real turnaround. Such attempts have been part and parcel of Air India’s history for at least the last two decades, ever since its trajectory began to head south. The October 2021 sale of the national carrier was a clear admission of failure of all past attempts and an acknowledgement by the Indian government that some businesses are best left to private enterprise. Hence the big question is: will Air India or its homegrown transformation plan deliver “where no man has ventured before”? Can the new owners pull off a turnaround on a runway that has so far been littered with failures.

This is where some of the euphoria following the one year progress report and the latest big aircraft order dwindles. Air India has drawn up a transformation plan, cutely named Vihaan.AI to turn around the erstwhile national carrier, a detailed plan to revive, resuscitate and re-energise the airline. Tata sources say the plan was fully homegrown - no consultants can claim credit for this one - and has detailed proposals and plans to turn things around across departments and functions. The plan remains privy to a chosen few and the details of it are to be shared on a “need to know” basis. The charts with this article outline what is publicly available for interested readers.

This is certainly good news but here’s why the industry remains wary and why the plan as outlined was greeted with a fair degree of skepticism:

To begin with, takes only one of the four airlines under the Tata umbrella into consideration and a very valid question the industry is asking is what happens to the rest? At the outset and based on what has been publicly shared, seems “very general and makes some of the right noises” without any mention of the real challenges including a merger with Vistara. Says former Air India COO Gustav Baldauf : “There seems to be a vision and a plan for the Tata airline group with different business models and market considerations  but for the time it is not presented to the public. We hear or read about mergers and transformation plans but a complex system like this needs a good organisation setup to avoid overlapping in the business as well as in the organisation”.

Some are less charitable about the transformation plan, dismissing it altogether. Shakti Lumba, former head of operation, IndiGo, found himself underwhelmed by the pillars of transformation set out in “Pillar 1 is what every airline does and should desire, pillar 2 will only take shape once the fleet is refurbished, pillar 3 already has a conflict between what they want and what they are hiring and pillar 4 will depend on how the other pillars bear the load of the proposed mergers. It’s been one year but we are yet to see a comprehensive mission statement and plan,” says Lumba. Another former Jet top management team member also dismisses the mission statement. A few industry sources, however, express the view and hope that the Air India management was keeping the real cards of the transformation plan “close to their chest” and that it went beyond what was publicly available.

This brings one to an important feature that most transformation plans and strategies need to bear in mind. Any plan or proposal that begins at the top and filters down is in danger of falling through the cracks. “A bottom up approach in such turnarounds usually works better than a top down one” argues a former CMD of the airline, who has witnessed and recalls vividly the failure of such a plan attempted by the government of the day in his tenure. He says that during his tenure, he routinely found the management and the rank and file working against each other and that unless the junior most employee in the carrier is convinced of the turnaround plans and why it is critical to his and the company’s survival, he will work against it. This remains a worry for any new turnaround plan that begins at the top and hopes to filter down.

And last but not the least, in the last few months and more since October, Air India has been on an aggressive expansion spree and new route additions without any discernible improvement in service. It has added new destinations, enhanced frequencies and increased weekly international flights by 60 percent while offering a product that remains far below industry standard and expectations. From mid February, it resumed its non-stop flight service between Mumbai and New York. This, many argue, is more of a double edged sword as more and more passengers board the airline and find the services not up to the mark. Many fliers who are willing to pay for business and first class are outraged at what they finally experience on board. “Complaints multiply and many first time fliers are put off the airline since first impressions can often be the last”, says an aviation industry analyst. The question therefore is: does it make sense to first bring semblance to the service on offer before expanding the way it is.

Despite these red flags, the mood of the aviation industry professionals and stakeholders remains upbeat post the grand announcement. Whatever the legacy issues may be, the order is certainly a step in the right direction. Skeptics and naysayers too express hope that Air India will be the biggest and the best airline in the world in the not too distant future even as the onus fell sharply on Mumbai’s Bombay House. All eyes are squarely on it as expectations ride sky high.

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