From Boeing, Airbus deal to new hiring: Air India India CEO reveals big future plans

KEY HIGHLIGHTS

•    Air India group carriers, Air India and Air India Express to offer a highly synergised operation following integration
•    The airline is equally focused on ramping up both international as well as the domestic route network
•    The carrier will develop three main hubs, including one in south India
•    The airline will create training facilities for pilots, cabin crew and ground specialists as well as build maintenance, repair and overhaul (MRO) capabilities to service the carrier’s future scale of operations

National flag carrier Air India’s mega-deal for 470 narrow and widebody Airbus and Boeing aircraft is all set to change the contours of the way people travel and the way goods are transported in the world’s fastest-growing aviation market. The size of the deal would expand considerably if Air India decides to exercise the option of acquiring another 370 aircraft from the world’s leading plane makers, taking the size of the order to a whopping 840 aircraft. A significant number of deliveries are set to commence from mid-2025 over ten years. Following the announcement of the world’s largest order – including 400 narrow and 70 widebody – for passenger aircraft, its main architect Campbell Wilson (52), CEO of Air India exclusively spoke to Business Today’s Manish Pant on what the deal means for the carrier, the direction of its future market strategy, the proposed marketing tie-ups on the horizon and the role it would be playing in developing the country into a world-class aviation hub. A New Zealand national, Wilson took charge at the carrier in June last year from Singapore Airlines, where he was the chief executive of its low-cost arm, Scoot. Under his stewardship, Air India has registered a 27 per cent increase in the number of operating aircraft, added new destinations to its route network, achieved a dramatic reduction in call centre handling time, processed a significant number of outstanding refunds, undertaken large-scale recruitments, and inked lease agreements for 36 new aircraft to fulfill its immediate requirements. Edited excerpts.
 
 

 
Eight months after joining Air India, how well-adjusted are you with the culture at the newly privatised carrier?

One of the questions that I get asked a lot is how the Air India culture has reacted to new people coming in, whether it’s from the Tata group or elsewhere. And it’s important to say that I’ve been pleasantly surprised at how aligned people have become behind what we are trying to do. There are a lot of good people from Air India. Their enthusiasm to elevate this airline to world-class standards excites the rest of us. Having people coming in from outside the airline, mixing with the experience and willingness of the folks that were already here is almost a magical combination. I am really happy to see this cultural meld taking place. I would just like to say that the folks that had been carrying Air India through, have done a fantastic job despite facing very many challenges over the years. It’s nice to be able to recognise and reward their hard work with this new aspiration, the investment in systems, people and aircraft so that after having carried this airline through, they can now see it achieving the heights they always wished for it.
 
Be it a full-service or low-cost, you have a 360-degree perspective on both formats of aviation. How are you looking at leveraging that while reorganising a diversified product offering?

Having had that perspective in the past, having been in senior leadership for a full-service airline [Singapore Airlines] for many years, and then starting and running a low-cost airline [Scoot], and then furthermore, navigating the process of the full-service carrier and the low-cost carrier working in distinct cooperation, it’s very relevant to where we are in Air India today. We’ve got two concurrent integrations, one, that is between the two low-cost airlines and, then, between the two full-service airlines. We will eventually end up with one full-service [Air India] and one low-cost [Air India Express] airline group. But the two should work in synergy. For example, much of the domestic market will be served by the low-cost airline, yet, it’s going to enjoy and support the international network feed coming in from overseas on the full-service brand travelling domestically on the low-cost brand and vice versa. Ultimately, we want the group to operate as one network and one distribution and one sales platform so that we can provide the risk, the best cost structure and the best product for the relevant market by taking advantage of the economies of scale, and the breadth and the reach of the group as a whole.
 
As Air India expands, what is the level of hiring that you are looking at?

We are hiring about 100 pilots and 500 cabin crew a month. And then obviously people for the ground staff. More than 1,500 people have joined the organisation and non-flying positions. We’ve taken a little bit of a pause for the moment because whilst we go through this process of merging AirAsia and Air India Express and planning for the merger of Vistara into Air India, we want to ensure that everyone in the group has a position and future. We want to get external people in where we need them but also need to accommodate existing people within the group.
 
Interestingly, you have been focusing a lot on hiring in technology-driven areas such as data analytics. Does that mean the human experience that Air India is known for would be replaced by algorithms?

Not at all… Not at all! There are two key strengths that Air India can hold high against anyone else in the world. The first is technology, because Tata group obviously, and India generally is renowned for its IT and technical capabilities. We have the opportunity to put current generation technology into the new Air India, because the previous technology is outdated, and was due for replacement. We have a golden opportunity to leapfrog everyone else who was reliant on legacy technology. So that’s one part. Technology is exciting, but it’s not emotionally connecting. And Air India has a proud heritage of service. And so that’s why one of the key things in our transformation program is to deliver an airline that has an Indian heart in the way it looks, the way it feels and the emotional connection particularly when it comes to service. Therefore, technology and the human element are first and foremost in our minds.

With your mega-order having become a global talking point, what is the deal’s size in terms of investment?

We will have negotiated long and hard and so what we pay is much less than the headline figure. This new order is for our future. There are three parts of our fleet and network development – and with that comes product development too – because new aircraft come with new products. The first is the short term, which is essentially this year and the first half of next year, which is largely about bringing in leased aircraft. We’ve got 36 aircraft on lease, 16 of which are going to be widebody and they give us an immediate capacity boost. But they also come, particularly in the case of widebodies, they come with a new onboard product. It is a natural uplift from where we are today. Secondly, in the medium term – sort of mid-2024-25 – we will be spending $400 million on completely refitting the entire interior of our widebody fleet with new seats and in-flight entertainment in all classes. And then from mid-2025 onwards, we start receiving new orders, and those will come with a completely new product.
 
Your plans for reconstruction, integration of the four carriers and acquisition of new aircraft and equipment would require huge amounts of capital. How are you looking at funding them?

Well, I’m not going to reveal any figures because we’re a private company. But clearly, it is a capital-intensive business. But bearing in mind, the assets that we will procure, have an operational life of 15-25 years, so they have a long time to earn back the money that it costs to invest in them. Secondly, there are opportunities for financing beyond just equity. Aircraft, for example, there’s a very liquid sale and leaseback market (SLB) and we’ll be exploring all opportunities to fund these aircraft. We’re still ascertaining what is the best mix, and it will change over time.
 
Once the deliveries of the new aircraft start you will be expanding your network at a much faster clip. What are the routes that you may be looking at?

We’ve been very clear that one of the key objectives of Vihaan.AI is an expansion of the network in both domestic as well as international footprint. If you look at what we’ve done over the past year, but really in practice, in the last eight months, we have either inaugurated or improved frequency on more than 16 [international] routes. Expanding the footprint, and expanding frequency, internationally, is very much a priority for us. In the domestic case, we’ve publicly stated that we want to achieve a market share of 30 per cent. By definition, that does mean that we’re going to be injecting capacity into the domestic market as well.
 
With India becoming the world’s fastest-growing aviation market, a new class of passengers is emerging from Tier-II and III cities. How are you looking at ramping up services on those routes, especially, since your competitor IndiGo currently enjoys a lead over you in those sectors by a wide margin?

Air India has historically been constrained by a shortage of aircraft. Even the aircraft that Air India had, you’re well aware that many were long grounded because of [the lack of] access to spare parts and the like. As a consequence, the network had sort of shrunk over the years. Delhi was the main hub and there was a sort of fragmentation of the network. In the early changes we’ve done, we've tried to strengthen the Delhi hub. But we’re also building frequency for Mumbai, both domestic and international, and we will look to a third hub in the southern part of India to accrete around. There will be three key hubs.
 
Does that mean that you might be open to acquiring smaller jets and turboprops at a later stage?

Let time run its course. Adding yet another aircraft type at this time is may pose a level of difficulty that is not wise to take on. But that’s not to say that it is something that we won’t be looking at in the future.
 
Are you also considering developing the upcoming airports in Greater Noida and Navi Mumbai as hubs?

We’re keeping all of our options open at the moment. The most important consideration is for the future size, shape and requirements of the new Air India over the next 10-20 years on how best to support that growth and the shape of the organisation. We haven’t reached any decisions, but we’re talking to all of the players, because it’s important for India, that the ecosystem works, that there’s enough capacity from airlines, there’s enough capacity from airports, and that the industry works in sync to realise this opportunity that is in front of us all.
 
Aviation minister Jyotiraditya Scindia had recently spoken about his talks with two Indian carriers and one airport for developing an international hub in India. Are you one of the two carriers?

Of course! We are the principal hub carrier in India already. And with the growth that we’re embarking on and the ambitions we have to expand the international footprint as well as connectivity to domestic points in India, we are absolutely part of that discussion.
 
Are you examining the potential of generating cash through non-aviation businesses?

We’ve got our hands full with aviation businesses. In addition to Air India and the concurrent integrations, we also need to build a training ecosystem. Because the number of crew cabin crew, pilots and ground specialists that we will need is beyond the current capacity of Indian institutions to deliver. We are going to be building a training academy for all of these specialties during the course of this year. Likewise, we’ll also be developing maintenance capabilities. There is a maintenance capability in India, but it’s not designed for the future scale of the new Air India. So, we need to put a lot of work into that. Of course, we are interested in earning ancillary revenues, but then there’s a lot on our plate already.
 
As a Star Alliance member are you looking to further expand your frequent flier programme?

Absolutely! In the same way, in which Air India’s technology platform had not been invested over the course of years, the loyalty progamme also needs a lot of work. We are currently in the process of designing what the future stake looks like and how it can be best supported. Over the course of this year, we will start rolling out further changes towards a significant upgrade of the frequent flier proposition but also the capabilities of the people to interact with it. As regards the network, given the investments we are making in the product and services and the aspirations we have for Air India and, of course, the fundamentals of the Indian aviation sector that I spoke about, we are receiving a lot of interest from carriers around the world to partner with us. But we are taking our time to develop our strategy, but international relationships are important to Air India as they are to every other airline.
 
Would you be building linkages with some of the newly launched regional carriers that are operating to underserved or unserved airports, where even narrowbodies can’t operate, with much smaller aircraft?

Just as with international, whether it’s codeshare or interline or alliance relationships, the reason you do them is that you expect to expand your distribution reach and network, making it easier for customers to travel to places where you either serve or don’t serve. And that same logic applies domestically or in the short-haul market. So, of course!
 
But what about the high cost of fares across airlines, today? Are you also looking at becoming a price-competitive airline?

Well, we already are a price-competitive airline. The market will determine what people will pay for our product. That is a product of competition, but it is also a function of the product, services and what people expect. And as we improve our seats, improve our reliability and make sure our services are world-class, people would be comfortable paying for what we offer. Of course, as we improve our scale, as we improve our efficiency, there are cost savings that we might be able to enjoy that we can then pass on to customers. That can potentially be a win-win for both.
 
An area where Air India has been a pioneer is cargo. Now, as the last-mile delivery of goods improves in India, how much of an area of focus will that be for you?

It’s a very important area of focus, especially as we expand our widebody international network there is a lot of belly hold capacity that will come with that. The growth in cargo is going to be as significant as the growth in passenger traffic. Our internal capabilities from sales, support, revenue management, pricing and the physical infrastructure to support transshipment as well as domestic cargo, are all very important streams. We have teams working on them as well. Suffice it to say that Air India has not fully tapped that opportunity previously, so it’s an area that has a lot of potential.