Air India's loss of direction

Unlike its competitors, India’s flag carrier Air India (AI) has never had a definitive long-term business plan. This has only worsened with the government’s divestment process of the loss-making airline, which has been in the works for the last 12 months. “The carrier has inevitably experienced a loss of direction, with no major strategic decisions being taken pending a new owner taking over,” cites aviation consultancy firm Capa India in its June report.

With every passing day, the airline is losing its hold on the aviation market which could further dampen its prospects of finding a suitor. Capa India estimates that Air India’s domestic market share, which currently stands at 13.3 percent, will drop below 10 percent in the near term. Reason: Other domestic carriers are expanding at a fast clip.

 

According to Capa India, Indian airlines will take delivery of an “unprecedented” 120 to 125 aircraft in the ongoing financial year; the figure will balloon to over 500 in the next five years. “Most of these deliveries will be deployed in the domestic market. Air India has plans to induct just nine aircraft, on lease, primarily for replacement rather than expansion,” the report states.

 
Moreover, Capa India believes that Air India would lose its mantle as the largest Indian operator of international passenger traffic. In the January to March period this year, Jet Airways had a 13.86 percent share of international traffic compared with Air India’s 16.55 percent share (this includes the share of Air India’s subsidiary Air India Express). Three years ago, Air India and AI Express had a 17 percent-plus market share.

While Jet Airways continues to expand its overseas operations, including forging alliances with international carriers, Vistara, which is backed by Singapore Airlines, is readying for its overseas foray. Budget airlines like IndiGo and SpiceJet are also looking to offer long-haul international flights. In all, turbulent times ahead for Air India.

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