Campbell Wilson has had a hectic year. As the CEO and managing director of Air India, Wilson is overseeing a transformation never attempted before in Indian aviation. On one hand, he has to turn around Air India, the 91-year-old airline which has suffered due to decades of under-investment from the government, before the Tata Group bought it out last year. On the other, he is looking after the merger of four Tata Group-owned airlines into two, with a plan to create a full-service and low-cost carrier within the group. This year, Air India placed the biggest order in global aviation when it announced the purchase of 470 aircraft from Boeing and Airbus.
It's been a fun experience, but certainly busy. What we're trying to do is quite unprecedented. Merging four airlines into two, taking a government-owned airline private, growing it significantly, and trying to take it to the top leagues in terms of performance and experience. To do all of those concurrently has not been done before.
So it's going to take a while. We've said even in our transformation plan that it's a five-year project. What we've done in the first year is a very healthy start. A lot of the foundational items have been addressed, But it's still a work in progress and we've made a good start.
Q: Are you now in the next phase of the transformation programme?
The first six months of the transformation programme, which encompassed the first year of privatisation, were spent trying to address some of the accumulated issues that had built up. Things as basic as refunds not having been paid, seats not being fixed, or the implementation of IT systems and measurement systems so that we could at least quantify issues and prioritise where to put the effort.
But, in parallel, we also negotiated the largest aircraft order in aviation history as a very clear signal of intent. Now we've moved from taxi to take-off.
Q: You are merging four airlines into two to make it into one full-service carrier under Air India and a low-cost arm under Air India Express. Is that on track?
For the low-cost carriers, the approval was received last year. At the beginning of January, we put the two low-cost carriers under one head (Aloke Singh), and then in early April-May, they migrated into the same reservations systems, adopted a common website and customer servicing tools with a view of going under a single Air India Express brand sometime in October-November. At some point, perhaps towards the end of the calendar year or early in 2024, the two air operator certificates will merge into one. At which point, the merger is effectively complete.
The full-service is much earlier in that progression and the clearance is still being considered. We are planning for what the organisation and the roles would be on the presumption that it would be approved. If it's approved, we could start putting people into their future positions and aligning the organisations more operationally. The merger of the two air operating certificates would likely not happen until the middle or early second half of next year.
In parallel to the mergers, there are also four sets of operating procedures and operating manuals approved by the regulator. And we are taking the opportunity to harmonise and extract the best practices from those into the future operating manuals of the Air India group. That's quite a significant process that requires the involvement of the regulator as well.
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Q: There are some concerns that the different work cultures across the four organisations could create concerns. How are you dealing with that?
I think a lot of these are trepidation. And it's often in anticipation. It may be reflective of history, not the present, and certainly not the future. We are building a culture by, with, and for anyone that joins the business. I have to say very clearly that our erstwhile Air Indians have undergone a significant culture change over the past 15 months and have embraced it and contributing fantastically. The Air India of today is not the end of yesterday and the Air India of today is certainly not the Air India of tomorrow.
Q: The massive 470 aircraft order needs a serious ramping up of your workforce, and you have been on a hiring spree. Do you see hiccups?
We're recruiting between 550-600 cabin crew each month and, we're training 50 pilots each month. There are also some people that we're recruiting from outside, particularly pilots. That will continue for a while given the number of aircraft that we have in place, and we're building a training facility so that we can train and groom even more of our talent.
For the non-flying staff, there was a big gap in the Air India organisation. There were about 15 years in which the company didn't recruit non-flying staff. From a people perspective, from a succession plan perspective, from awareness of today's technology and business practices, there was a gap. We've been recruiting quite significantly to fill that.
Many things have changed in 15 years, particularly in the area of technology. So there's a need to build knowledge and capabilities and competencies that weren't there before. To be honest, the merger of the airlines is also helpful, as AirAsia and Vistara in particular were younger airlines using more modern technology platforms. There's quite a lot of synergy in people from those organisations coming into Air India because of a complementary fit.
Q: When you look at the past year and the work that’s underway, what’s your assessment of the positives and the challenges for the Air India group?
I'd have to say there are many positives. The Air India brand name is a positive and is loved by Indians, both in India and in the diaspora. The historical connection with the Tata Group and the way they conduct business is a strong positive.
The existing international network that Air India has is a good base. The fact that we have a strong service culture in India, and a warm sense of hospitality when you're looking to build a service-oriented full-service carrier is a great strength. With two relatively young, modern, well-regarded airlines in the group in Vistara and AirAsia India, there’s a great accelerant and capability-building device. Obviously, India with its geography, population, and growth, is fantastic for an airline.
With respect to challenges, I think it's probably the number of things that we're doing concurrently and the pace and the scale, that are presenting challenges. Also, I think the level of expectation. It's quite understandable why people have such high expectations of Air India and the Tata Group. That is a challenge we're trying to meet as fast as we possibly can, given the real-world constraints of seat production, seat certification, seat installation, aircraft, maintenance, hangers, and slots.
There’s been a 15-year gap in the talent pipeline. There had not been investment in IT systems and there was no revenue management system. The email infrastructure was such that most corporate businesses were done on private Gmail accounts. We were the last company in the world on the SAP mainframe. So those are impediments that you need to overcome.
When Air India, the airline, was divested, Air India Engineering Services were retained by the government. It's not a common situation for an airline to not have its engineering competence in-house. So, we had to build a whole engineering division and capability in-house.
All this while immediately commencing on the acquisition of AirAsia and then the merger with Air India Express alongside embarking on the world's largest aircraft order. The negotiations for that were very complex and time-consuming. That would be a big job for any airline that was operating at a normal steady state.
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Q: What prompted the 470 order?
It is a confidence born of what is the India story. We see economic growth, supply chain re-adjustment, a population travelling more by air, and a very strong diaspora. Geographically, India is in a very strong position as an air connectivity centre. We also see that much of India's air traffic doesn't travel on Indian airlines, in part, because these airlines weren't providing them with the product or the network, or the quality that they wanted. All the ingredients are there in theory to make a sizeable airline work in this very large growing, dynamic, geographically well-positioned market. The order simply reflects that.
Q: And how are you financing the purchase?
We’ve publicly stated and, indeed, we've put RFPs out for sale and leaseback of at least the narrow-body aircraft, and that will happen progressively. And then, as time goes forward, we'll make a call on how we finance other aircraft.
Q: What are your thoughts on the Indian skies now that another airline has gone down?
In one respect, the skies are busy. Because, like many markets, we've seen demand recover quite strongly. And certainly more strongly than most expected. People flooded back to travel quite quickly, and with more money in their pockets because many people had saved during the pandemic.
Supply took a while to come back, whether it was aircraft that had been grounded or engines. It will normalise. It always does.
When it comes to India, if we look at it from an international and historical lens, other markets have been through this sort of evolution too. India has seen a fairly regular cycle of some airlines not making it. But, in decades past, that was also true of the US and Europe. So, perhaps some form of consolidation is required for the industry to become healthy and stable and have the platform to grow. I don't know how it will pan out in India, but maybe it's part of that process.
Q: What sort of investments have you been making into the company to make all the fixes you need in the first year?
In terms of the fleet, we're in the process of leasing 11 Boeing 777s and 25 A320s. That's additional to the 470 that was taken trying to address the immediate capacity shortfall. But it also has a product benefit, because these aircraft come with new seats and new products.
In the medium term, we are investing $400 million in completely new interiors for our existing wide-body aircraft, including new seats, and new in-flight entertainment, to effectively replace interiors. In IT, there's about $200 million in investments over the last year and this year in re-platforming, moving from old architecture to new architecture, and building and adopting new capabilities.
Q: Is that leading to improved revenues?
Yes. Our load factors are at record levels. The yields are strong, and the punctuality is strong, which means that people are more inclined to consider travelling with us because they're more confident in our product. So yes, we have seen an improvement in the financial performance.
Q: So where does Air India go from here?
This year is the take-off phase. We now have a lot of work, to roll out new seats, new products, new IT systems, new destinations, and new fleet. This year is when people start seeing a real material lift in Air India. Now, there is a journey to go. We have never shied away from the fact that this will be a multi-year journey and it might not keep pace with people's expectations in the early phase. But I hope during this year we give people the confidence and excitement they may have hoped for and make what we talked about a reality.