As Air India shops for planes, a lesson from JRD to keep in mind

But Tata persisted with his vision and AI mounted its first international flight with a Lockheed Constellation L-749 aircraft on the Mumbai-Geneva-London route.

The Air India that the Tatas are running now is a very different airline from the one Tata started with a new aircraft at that time.

The Maharaja was nationalized in 1953 and Tata was allowed to stay on as its chairman till the mid-1970s. Air India kept growing from strength to strength. In 1960, it became the first airline in Asia to enter the jet age when it inducted the Boeing 707, and in the 1970s, it became the only airline in Asia to have an all-jet fleet.

During his time, Tata took personal care and interest in the growth of the airline on the ground and in the skies. It was not uncommon for him to chide company officials wanting to carry his briefcase by asking them to take care instead of a lady passenger who needed help and was flying Air India. No detail was too small, and Tata was known to clean the aircraft toilets if he found them dirty. Yes, that’s right.

Tata was clear that Air India should be a reflection of India on the ground and in the aircraft. So, he made sure that Indian murals, paintings and sculptures were there for all to see at the airline’s offices in India and abroad.

All this did not last. Over the years, the airline lost its sheen. It became known more and more for bad service, jaded aircraft, and not very comfortable in-flight experience. The airline also suffered severe financial losses. Before it was sold to the Tata Group in October last year, between 2014-15 to 2018-19, the central government invested almost 24,306 crore in Air India to turn it around, but without success.

With Air India finally returning to the Tatas after at least three failed attempts by the government to sell its stake, all this may change.

Bloomberg has reported that Air India is considering a fleet expansion and may buy up to 300 aircraft of the narrowbody variety. It has also been reported elsewhere that Air India may buy the widebody Airbus A350.

The recently privatized airline is, as any frequent flyer will tell you, in desperate need of new aircraft. Air India’s planes do not offer great cabin experience to flyers, their entertainment systems notoriously malfunction, and the general feel and upkeep isn’t up to the mark.

It doesn’t help that competition, both foreign airlines flying into and out of India and the domestic carriers, have deployed newer versions of aircraft.

Air India, saddled with accumulated losses and handicapped by the legacy of being state-owned, had last placed an order for buying planes — 43 Airbus and over 100 Boeings — in 2006. The airline had leased about 15 Airbus 320 NEOs between 2013 -15, but even those are now about 7 to 12 years old.

The period between mid-1980s to 2000s was bad for Air India. In the mid-2000s, it planned to get 100 aircraft. The plan, many years in the making, and not without its share of controversies, was split between Airbus and Boeing. The erstwhile Indian Airlines’ Airbus plan to acquire 43 A320 was concluded during the time of Prime Minister Atal Bihari Vajpayee, but never finalized or signed. The AI ​​plan was to acquire fewer than 30 aircraft but was eventually changed to 68 including 23 Boeing 777, 27 Boeing 787 and 18 Boeing 737 aircraft for the newly-created AI Express. The Airbus and Boeing orders were finally signed in 2006. Air India was to receive new aircraft after a gap of close to two decades.

Things have changed dramatically since then. Newer, more fuel efficient and narrowbody aircraft that can fly over longer distances are now available. Many domestic airlines — IndiGo uses the Airbus A321 Long Range — to fly between India and Turkey, a flight of close to six hours for instance — are using them on longer routes.

Narrowbody aircraft like the Boeing 737 MAX will allow Air India to operate from Mumbai to Nairobi and Delhi to Bali. The widebody A350 will allow it to fly from Mumbai to Buenos Aires, Mumbai and Panama City (which, if it is to be mounted, will be the world’s longest flight), Delhi-Auckland or even connecting Thiruvananthapuram to Tel Aviv.

Newer planes will not only let AI close the gap with competition on cabin experience for flyers, they will also, being more fuel-efficient, cut fuel costs. The newer versions of narrowbody aircraft like the Boeing 737 MAX and the NEO consume as much as 25-30% less fuel than the older aircraft in the Air India’s fleet — a major source of savings when crude prices are close to $120 a barrel. Remember aviation fuel is the largest cost head for domestic airlines; it accounts for 35-40% of their operating costs.

Newer aircraft will dramatically improve amenities such as in-flight entertainment in the passenger cabin. In newer planes, at a little extra cost, Air India can offer wi-fi services, a new source of income for the debt-ridden airline.

The gains of the planned acquisition are, thus, obvious. However, there’s a flip side too. Planes are expensive. Air India will have to choose the number of aircraft and the variety it wants to buy with a lot of care. And, it cannot take too long to make these decisions. For, the fast-paced depreciation of the rupee, and rapidly rising costs of metals and other raw materials that go into manufacturing planes, are inflating the bill with every passing day.

Narrowbody aircraft like the Boeing 737 MAX or the Airbus A320 are not readily available off the shelf. It will be a few years before ordered aircraft arrive.

Even if AI decides to lease the planes instead of buying them, the lease price usually covers the supplier’s risk of inflation. The manufacturer or supplier, whatever the case, usually absorbs only a part of this risk.

On widebody planes, AI’s choice may be limited to the European manufacturer Airbus’ A-350 aircraft, as the Boeing 787 is currently facing problems with the US Federal Aviation Authority which has issues with the Boeing production facility. Already, Vistara, another airline owned by the Tatas, is scrambling to expand its international footprint because of delays in deliveries of Boeing 787 it ordered.

JRD Tata’s time-tested mantra — Attention to detail, whether in the cabin or on the financial side, will be key.

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