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Challenges abound as Tata draws up a flight plan for Air India By Reuters

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© Reuters. FILEPHOTO: Air India flight number 185 leaves New Delhi after Canada temporarily banned passenger flights from India, Pakistan, and Canada for 30 days at Vancouver International Airport.

Aditi Sharma

NEW DELHI (Reuters), Tata Sons’ $2.4 billion acquisition of the debt-ridden government-owned Air India gives it immediate access to flying rights and landing spots that will help it regain market share.

Industry executives caution that any industry success could be difficult and costly. It will need to fix many problems including its old fleet and poor service, and lack of charismatic leaders.

Air India was famous for its extravagantly decorated aircraft and the stellar service provided by JRD Tata (India’s first commercial pilot).

However, the company’s reputation fell as it faced financial difficulties since mid 2000s. The airline flew large-bodied planes carrying business class passengers in poor condition and ground some new Boeing (NYSE?:) Co 787 Dreamliners for parts. Executives stated that customers faced delays, and employees and suppliers weren’t always paid on schedule.

A veteran executive in the aviation industry said, “If your airplanes are not reliable or newer, then you will have problems.”

It is anticipated that the ownership transfer of Tata from the government will take place by the end the year. This will give the company until the summer of 2022 when there is a post-COVID surge in demand to address the problems.

This does not include leasing or purchasing new aircraft.

Tata and Air India refused to comment.

POINT TO POST

Air India has a unique competitive advantage in that it can fly non-stop from India to places like Europe and the United States. This allows them to enjoy lucrative landing rights. Only one-stop services are available from foreign hub airlines like Emirates or Etihad Airways.

Experts in the industry predict that, after the pandemic will, non-stop flying will increase in popularity, especially for wealthy business travellers.

Robert Martin from BOC Aviation, the chief executive said that “I believe if a passengers has a choice it is to fly point-to-point”. He spoke at an event hosted by CAPA Centre for Aviation last week.

Before the pandemic, international travel to India was dominated by foreign carriers. Air India held a 19.3% market share (including its low-cost subsidiary Air India Express) in the last quarter of 2019.

The industry executive stated that if Air India could win even 20% back from global carriers, it would make a huge impact on the company’s bottom line.

TAJ LEVELS – SERVICE

Experts said that Air India needs an experienced and charismatic leader like Richard Branson or JRD Tata to rebuild its service culture.

Dilip Cherian, an imaging consultant, stated that Tata has the experience in India of creating the largest hotel chain. Taj Hotels was the flagbearer. Tata also owns Jaguar, a luxury automobile brand.

The hospitality business will greatly assist them in creating the image they desire. According to Cherian, the Taj fits very well into Air India’s early-years culture.”

Tata holds majority shares in Vistara (OTC:), a joint venture premium with Singapore Airlines, and AirAsia India (a low-cost carrier operated by AirAsia Group). Tata has enjoyed the partnership’s expertise, however neither venture is financially profitable.

Analysts believe that Tata’s three airlines will give it a competitive advantage over engine manufacturers and lessors as well as suppliers and fuel companies.

Air India had $2.1 billion in unpaid bills that the government assumed before it was sold to Tata.

Anuj Trivedi (partner at Link Legal), said that the carrier has a good reputation in international markets because of its heritage. Link Legal assisted Air India with the deal.

He said, “It will not be easy. There will be difficulties. But with Tata, the hope is that Air India will take flight again.”

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