By Aditi Shah and Jamie Freed
NEW DELHI/SYDNEY (Reuters) – Two years after Tata Group took control of Air India in a $2.4 billion deal, retooling an aging fleet amid parts shortages and persistent flight delays is the former’s intention hinders the state-owned airline’s ability to become ‘a world-class airline’.
Global shortages are damaging the plans of most airlines, but the problem is “more pressing” for Air India, says CEO Campbell Wilson. India’s national carrier is approaching the halfway point of a five-year turnaround plan, but is starting to lag a generation behind rivals like Dubai. Emirates and Qatar Airways.
“Obviously our product is much older. These aircraft haven’t had a product refresh since they were delivered in 2010 or 2011. And so it’s more of an acute need for us,” CEO Wilson said in an interview in Sydney. .
“When we have older seats and older entertainment systems on board, we operate with one arm tied behind our back,” he said.
The challenges are greatest at the higher end of the plane as Air India seeks to lure travelers with big spends, said Wilson, a former Singapore Airlines (OTC:) executive.
Air India has already placed huge orders to upgrade its fleet and this month launched a $400 million plan to convert old planes to fuel the transformation.
The airline’s restructuring, after decades of decline under state ownership, is being watched by manufacturers and lessors, as well as investors in Singapore Airlines – which will own a 25% stake in the Indian carrier from November and has committed to invest another up to 25% extra. $600 million in turnaround.
“Air India still has a long way to go before it gets closer to international standards, which will require it to complete the process of re-equipping with new and upgraded aircraft,” said Singapore-based independent aviation analyst Brendan Sobie.
NEED FOR SEATS
Restoring Air India’s reputation depends on getting planes in the air as quickly as possible with first-class premium seats and service to lure flyers reluctant to book the airline even as it offers non-stop flights on major international routes due to poor product and risk of delays.
Of the 470 new aircraft ordered by the airline, 70 are widebody jets. The company has already taken delivery of six Airbus A350s and leased eleven Boeing (NYSE:) 777s.
The company is rebuilding about 67 aircraft, starting with 27 narrowbody aircraft to be completed by mid-2025, helping it better compete with domestic rival IndiGo’s larger and more modern fleet.
The start of the 40 widebody refits, originally planned for this year, has been postponed until early 2025 due to delays in obtaining bespoke business and first class seats.
Seat manufacturers have said they are struggling with a shortage of skilled labor and capacity, Wilson said.
Once the refit begins, it will take about two years for the widebody fleet to meet international standards, he added.
Older aircraft have led to lower load factors averaging about an hour per day across Air India’s fleet, and even more for planes flying long-haul routes to the US, Wilson said.
As a workaround, Air India is shielding some of its most profitable long-haul flights, such as Mumbai to San Francisco and Delhi to London, by guaranteeing modern aircraft.
In the year ended March, Air India increased its capacity by 21% from a year ago and increased its passenger load factor, or percentage of occupied seats, reducing net losses by 60% to $532 million and revenues by 24, Up 5% to $6.15. billion.
“If we can command the prices the product deserves and people have a good idea of the reliability and service offering, we can fly more high-yield routes and bring back the high-yield customer,” Wilson said.
He did not give a target date for achieving profitability.
‘STABILIZE THE SHIP’
Founded in 1932 by JRD Tata, the late chairman of the Tata Group, Air India was once among the world’s top airlines. Since nationalization in 1953, the country has entered a prolonged decline, mainly due to a lack of investment.
When Tata regained control in 2022, the airline’s systems were outdated, its offices were scattered and 30 planes were on the ground due to a lack of spare parts.
“It was just a mess. We really had to spend the first six months trying to stabilize the ship,” Wilson said.
On October 1, Air India will have completed the merger of low-cost carriers Air India Express and AirAsia India, and on November 12 it will add Vistara to the group, which Tata currently owns jointly with Singapore Airlines.
Flight delays are still a problem, with only 18% of Air India’s flights to Europe and 48% to North America arriving within 15 minutes of their scheduled time in August, according to aviation data provider Cirium.
A shift to Air India’s own maintenance and repair facility should help reduce maintenance-related delays, Wilson said.
The facility, which is being built with help from Singapore Airlines subsidiary SIA Engineering, will be completed in 2026. Air India is contractually obliged to use state-owned Air India Engineering Services Ltd until the end of 2024.
“Two years from now, I think we’ll be in a good place,” Wilson said.
