Tata Group's New Road Map For Air India Is Still Foggy

Air India’s goal to capture higher market share faces several hurdles.

<div class="paragraphs"><p>(Source: Air India website)</p></div>
(Source: Air India website)

It's been nine months since the Tata Group took over Air India, bringing the carrier back into its fold about seven decades after it was nationalised. Yet, barring lofty goals, it's still unclear how the conglomerate plans to turn the struggling airline around.

The new plan, called Vihaan.AI, imagines a completely transformed world-class airline with an improved network, fleet, manpower and punctuality. It's was, however, short on details.

It's Sept. 15 press release said the company “has put into place a detailed roadmap with clear milestones focusing on dramatically growing both its network and fleet, developing a completely revamped customer proposition, improving reliability and on-time performance, and taking a leadership position in technology, sustainability, and innovation, while aggressively investing behind the best industry talent”.

The only measurable target given was capturing 30% domestic market share. Even that gets complicated considering the airline brands that the Tata Group operates.

Air India is in the process of acquiring AirAsia India, in which it holds 83.6% stake. Vistara, the full-service carrier, is a joint venture between Tata Group (51%) and Singapore Airlines (49%).

Ever since the Tata Group took over the national carrier in January, murmurs of bringing all the brands under one umbrella have only grown stronger.

Vistara’s Chief Executive Officer Vinod Kannan has also said that all possibilities are being discussed.

However, the airline hasn’t clarified whether the domestic market share goal is for a combined entity housing all the brands or just for Air India, after completion of the AirAsia India acquisition.

Air India is yet to respond to BQ Prime's emailed queries.

In August, the combined market share of AirAsia India and Air India was 14.3%, while Vistara carried 9.7% of total passengers in that month, taking the total to 24%, according to data from the Directorate General of Civil Aviation.  

“If the target is for all three entities combined, then it is a ridiculously low figure, and even if we take 14% combined market share of Air India and AirAsia India, that itself is a very pessimistic approach,” said Harsh Vardhan, chairman of the New Delhi-based Starair Consulting and former head of Vayudoot—a now-defunct Indian regional carrier that was merged with Indian Airlines in the 1990s.

Either way, they should first clarify whether the target is for a potential combined entity or for Air India only, he said.

Incoming Turbulence

Industry experts said that Air India’s goal to capture higher market share entails several challenges.

“For achieving the goal of 30% domestic market share, you need to have that much additional slots at the airports, primarily in the metro cities or tier-1 cities and then at tier-2 cities,” Nripendra Singh, global director of aviation at Frost & Sullivan, told BQ Prime.

“You can’t just drop the prices and increase the market share.”

A slot is the permission to either take-off or land at a particular airport, on a particular day, and during a specified time period.

It takes 1-1.5 years in just getting the slots and another six months to include it in the schedule, Singh said.

“While it is achievable, it is not very easy in the current scenario where we have an airline which has successfully defended its market share in the last 10 years,” he said, referring to IndiGo (InterGlobe Aviation Ltd).

However, Satyendra Pandey, managing partner at the aviation advisory firm AT-TV, doesn’t perceive getting slots to be a huge challenge.

With the new airport at Jewar and additional runways coming up at Delhi and Bengaluru, getting the slots will not be an issue barring places like Mumbai, he said.

According to him, the problem will be eased after the airport at Navi Mumbai becomes operational.

Industry experts also expect the airline to decide whether it will be a full-service carrier or a low-cost airline. If it focuses heavily on services, capturing a large market share will be difficult in a country like India, where low-ticket prices are the highest priority for a majority of travelers, they said.

With Or Without Vistara

While it is not yet clear whether Air India plans to fly with Vistara or without it, there are a couple of ways to do it.

“One is you bring them all under the same umbrella, so everything becomes Air India,” Pandey said.  

“Second is what you call a 'house of brand' strategy, which Singapore Airlines has adopted in the past, where you still have a separate brand but coordinate the schedule and the offerings.”

The history of mergers in the Indian aviation industry is replete with failures.

“No merger has been successful till date in the Indian aviation industry, whether you take Sahara, Air Deccan or Kingfisher,” Vardhan said. “I believe they should have given these organisations a chance to stand on their own feet."

So, now, you’re merging three loss-making companies and hoping to turn it around, he said.

According to Frost & Sullivan’s Singh, it has been largely accepted in the market that Vistara offers better service than any other carrier, but it is exactly the opposite for Air India. Therefore, merging those two is more likely to hamper the brand than offer some advantage, he said.

The Maharaja of the Indian skies may not be eyeing the crown just yet, with IndiGo maintaining a strong grip on the throne for several years now. But, even to become the second biggest, in terms of market share, the airline will have to pass through some difficult times.

Even the revival plan Vihaan—which means dawn in Sanskrit—suggests it will be darkest before the airline can see the first rays of light.

(Corrects an earlier version that misstated Vistara is a JV between Air India and Singapore Airlines.)