What's next for Air India ?

Currently owned by the Indian Government, Air India seems to be at a very bad state at the moment as the carrier is still flying on debt. However, there is now a glimmer of hope for the airline as they are finally getting their business model changed.

In preparation for privatisation, the Indian Government announced that they were to sell over 51 % of the airline to other private investors. Airlines across the world have announced plans to purchase a take in the airline. In India, it's not new for an airline to continue operating on debt and take "Large Loans". A similar issue was faced by Mr Vijay Mallya's bankrupt Kingfisher Airlines. Their debt is still not paid and Mallya is still to be caught making this case one of the most trending controvies in the world today.

A fleet renewal plan has been announced and, since early 2017, the airline started introducing A320neo planes on lease from a Kuwait-based leasing company. By next year, the Indian flag carrier should have 44 NEO-type aircraft used to further strengthen their domestic operations.

The airline will also take delivery of a widebody Boeing 777-300 Extended Range plane by the end of February, increasing the fleet of such aircraft to 16. They plan to launch ultra-long flights which were previously operated by the airline but closed due to rising fuel prices and low demand. These such services include flights to Seattle, San Francisco and Los Angeles.

Air India have been taking advantage of the monpoly status to provide little capacity and high fare flights between hubs. Despite being the only Indian airline to fly to Australia, the high prices for direct flights make passengers opt for other carriers such as Cathay Pacific, Singapore Airlines or Air Asia.

(AirAsia and Air India are both Skytrax 3 airlines with similar service ratings. However, Air India flights are over 50 percent higher than its competitior by listed prices)

From government statistics, Australia receives more visitors from India than from Hong Kong, Indonesia & New Zealand. Those three countries have 666 flights to Australia between them per week — India has 7.

However, with the introduction of Boeing 787s, the airline is now trying to boost frequencies and raise capacity on key routes. The airline is planning a 50% increase in capacity to San Francisso while boosting flights to Sydney and Melbourne. Unfortunately, they will not be launching the Los Angeles route in this moment as it ‘involves large expense and there is enough demand in San Francisso’.

Air India's financial system is in a difficult state and it is difficult to say what will happen to Air India in the coming years. Looking at Government-owned profitable airlines such as Emirates and Qatar, based in the middle east, the Indian government has not paid much attention to the financial position of their national carrier. The airline is suffering from unpaid fuel bills and airport charges with an estimated debt figure of around Rs 50,000 crore (6,255,000,000€).

Air India currently operates a fleet of 118 aircraft including 48 widebody and 70 narrowbody jets. In 2006, Air India placed an order for another 68 aircraft to accompany its existing fleet.

(From the graph, we know that the Boeing 787 Dreamliners are Air India's major long haul fleet)

With the new Boeing planes including the 787 and 777, Air India has the ability to increase frequencies to its existing destinations in the U.S. and Australia, and in some cases, create new routes which have been previously operated but then cancelled due to various problems.

In addition to the debt problems, the national carrier is facing route issues. Plans to create a new direct flight to Tel Aviv in Israel have been delayed. The Saudi Arabian government have denied access to the airline to fly over its airspace. This delayes the flight from a normal five hour flight to an entire 7 hour flight. El Al Israel, The flag carrier of Israel, is flying this service, which uses a route diverting around Saudi Arabia and taking a 7 hour leg to complete. The flight departs from Tel Aviv and arrives at Mumbai Airport 7 hours later.

The Chief of Air India stated that the airline and its units continue to improve their performance with more than 10% growth in revenue each month. An important issue remains the cost of fuel prices, which dominates around 1/3 of the general costs. He did not reveal whether the airline will post a profit the next month but it is clear that the turn around plan will have some good impact on the airline in the coming months.

Privatizing national airlines sounds like a logical step, but many privatizations end in failure, giving governments reason to hesitate. But there are also successes, for example Kenya Airways, which was privatized over 20 years ago, and Samoa’s Polynesian Blue. Both airlines have been profitable for years and contributed to growth in their respective tourism sectors. The government should find a right sector to privatise its carrier and allow more competition into India. And hopefully, we will be able to see Air India again becoming ‘the Pride of India’ in the foreseeable future.