The sale of the collapsing government-owned Air India to the Tata Group on 27 January 2022 was greeted with some fanfare. Though there was grumbling at the under pricing of Air India’s massive assets at just Rs 18,000 crore, the Tata acquisition had popular support. The group is known for efficiency and good consumer ethics, and there was guarded hope Air India will emerge as a good, competitive airline.
More than 3 years after the Tata takeover, Air India is struggling. It has not been able to shed its poor, sarkari record. Passenger services attract a litany of complaints, losses have mounted and all those promised ramp-ups in the form of new and refurbished aircraft can hardly be seen.
The crisis is evident. A Friday, 31 October report of Bloomberg says Air India is seeking a minimum of Rs 10,000 crore in financial support from its owners Tata Sons, which owns 74.9% in the airline, and minority owner Singapore Airlines (SIA). This infusion will fund overhauling Air India’s systems and services.
Though Air India’s revenue increased 15% to Rs. 78,636 crore for the year ended 31 March, 2025, (combining revenues of Air India, Tata SIA Airlines and other subsidiaries), its losses widened by 48% to Rs 10,859 crore from Rs 7,356 crore in the previous year. This is significant as Air India now is among the largest contributors to the Tatas’ topline.
Three years into flying Air India, and the Tatas have not been able to dent Indigo Airlines dominance. For FY2025, Interglobe Aviation, Indigo’s parent company, turned in a marginally higher revenue compared to Air India of Rs.80,802 crore, but notched up a net profit of Rs 7,258 crore. In market share, IndiGo is strides ahead at 64%, followed by the Air India at around 27%.In volume, the total number of passengers Air India carried declined 11% year-on-year in July and 8% year-on-year in August.
Strong headwinds
We have to consider headwinds in the form of external factors have been buffeting the airline. In recent days, Air India executives have been going public on why the turnaround has been proving to be difficult. A couple of days ago, speaking at a conclave, AI’s chief executive Campbell Wilson said the closure of Pakistan’s airspace had cost the airline Rs 4,000 in extra jet fuel.
“We were hit by a few …. almost Black Swan events. Aside from the A171 accident, there was the war with Pakistan, closure of Middle East airspace, 50% tariff on India by Mr Trump, and constraints on H-1B visas. All of these are quite unprecedented shocks,” conceded Campbell Wilson.
But it is recovering from the tragic 12 June Dreamliner crash that killed 260 passengers that is the airline’s biggest challenge. The toll it has taken on Air India is not just compensation costs, credibility and reduction in the number of international routes. The crash was not an external factor as Campbell Wilson suggests. Though the causes are still being investigated, the needle of suspicion is limited to pilot error or aircraft maintenance issues. Endemic faults in the Boeing Dreamliner is an outlier. Recovering from this blow -- the loss of lives and credibility -- may take years.
Though details are still hazy, the airline seems to beset with operational stress, maintenance and training issues. The Directorate General of Civil Aviation (DGCA) has warned AI over issues such as pilot duty timings and fatigue management. Nine show-cause notices related to 5 safety violations have been issued in recent months. In July itself, DGCA found 51 safety lapses involving inadequate training for pilots.
Air India is also struggling to upgrade its fleet. Stuck with fraying 67 legacy planes from the government days, the much touted USD 400 million refurbishment plan is going slow. The airline claims it is hampered by global supply chain issues. Overall, the airline has committed a massive USD 70 billion investment which includes buying 570 new aircraft from both Airbus and Boeing.
After the 2022 takeover, AI’s chief Campbell Wilson had announced an ambitious five-year turnaround plan. From all the anecdotal evidence, it is clear, the airline’s targets are far behind plan. After the first two year’s of ‘taxi’ and ‘take-off’ phases, the third year was to be the ‘climb’ phase. This was to include operational break-even, fleet expansion and improving passenger experience. As we have seen all these parameters are in reverse gear.
The merger of Vistara with the flagship Air India brand in 2024 was also a logistical mistake the Tatas might have to rue. Vistara Airlines represented everything Air India is not. It was the preferred carrier of business flyers, its new aircraft, good customer service, and livery -- introduced and trained by Singapore Airlines -- made it a ‘luxury’ brand, a cut above the others. Keeping it flying as a premium airline rather than pulling it down to the Air India’s level did not make business sense.
Tata Sons and minority partner Singapore Airlines, have reportedly pumped in fresh capital of Rs 9,558 crore last fiscal with SIA providing the lion’s share of Rs 6,333 crore. This represents the largest single-year capital infusion in the history of Indian aviation. But analysts say the airline will need much more, an injection of Rs 20,000-25,000 crore every year for the next few years.
Decades of airline collapses have proven it is a difficult business. Turning around a legacy airline carrying huge losses is a herculean task. Add to that an air disaster at the time Air India is at an inflection point, and we have an unenviable business proposition.
