How is Club Vistara Redefining Airline Loyalty Programs in Asia Pacific?

Air India, once a symbol of Indian aviation excellence, has been undergoing a massive transformation since the Tata Group reclaimed it in a $2.4 billion deal two years ago. However, re-kitting its ageing fleet amidst parts shortages and managing persistent flight delays pose significant challenges for the airline’s ambition to become “a world-class airline.”

The Challenges of Rebuilding an Ageing Fleet

The global shortage of aircraft parts is affecting airlines worldwide, but Air India’s situation is particularly acute. CEO Campbell Wilson points out that the carrier is facing a unique challenge in updating a fleet that hasn’t been refreshed since 2010. As the airline reaches the halfway mark of its five-year turnaround plan, it is already behind competitors like Emirates and Qatar Airways, who have long embraced modern aircraft and amenities.

“Our product is obviously a lot more dated,” said Wilson, highlighting the outdated seats and in-flight entertainment systems. This makes it harder for Air India to compete, especially in the premium travel market, where travelers expect cutting-edge comfort and service.

Upgrading the Fleet: A $400 Million Commitment

In an effort to catch up with global standards, Air India has placed massive orders for 470 new planes, including 70 widebody jets, which are crucial for its long-haul international routes. The airline has already taken delivery of six Airbus A350s and leased 11 Boeing 777s.

Additionally, Air India has committed $400 million to retrofit its existing aircraft. This process will see 67 planes upgraded, including 27 narrowbody jets that should be ready by mid-2025. However, delays in securing customized business and first-class seats have pushed the start of refits on the widebody planes to early 2025, extending the overall timeline by two years.

These delays, compounded by a global shortage of skilled labor in seat manufacturing, are slowing Air India’s efforts to quickly elevate its service to international standards.

Focus on Premium Travelers

The airline’s reputation depends heavily on the experience it offers to premium customers, particularly those who are willing to pay for luxury travel. Attracting these high-spending flyers is critical to Air India’s turnaround. Unfortunately, outdated planes and services make it difficult for the airline to lure premium customers, despite offering direct flights on popular international routes.

In a bid to counter this, Air India is focusing its newer aircraft on its most profitable long-haul routes, such as Mumbai-San Francisco and Delhi-London. These routes are crucial for boosting profitability, and by deploying modern planes, the airline hopes to regain customer confidence.

Financial Improvements: A Path to Profitability?

Despite the hurdles, Air India has shown promising financial improvements. In the year ending March 2024, the airline increased its capacity by 21% compared to the previous year, raised its revenue by 24.5% to $6.15 billion, and managed to reduce its net losses by 60%, to $532 million. However, CEO Wilson has refrained from setting a specific target date for reaching profitability, given the ongoing challenges.

Flight Delays and Operational Issues

Air India’s performance on punctuality still leaves much to be desired. In August, only 18% of its flights to Europe and 48% to North America arrived on time. These delays, many of which are due to maintenance-related issues, continue to plague the airline.

However, there is hope on the horizon. Air India plans to shift its maintenance to a new facility being developed in partnership with SIA Engineering, a subsidiary of Singapore Airlines. This facility, expected to be ready by 2026, is designed to reduce maintenance delays significantly, but until then, Air India remains contractually obligated to use government-owned Air India Engineering Services Ltd.

Strategic Partnerships and Mergers: Strengthening the Airline’s Future

To strengthen its position in the Indian aviation market, Air India is consolidating its low-cost and premium brands. The merger of Air India Express and AirAsia India is set to be completed by October 2024, while the integration of Vistara, a joint venture with Singapore Airlines, is scheduled for November. Singapore Airlines will own a 25% stake in the new Air India, and has agreed to invest up to $600 million in the turnaround plan.

Conclusion: The Road Ahead for Air India

As Air India embarks on this journey of revival, it faces numerous challenges, from fleet upgrades to operational inefficiencies. However, under Tata Group’s leadership and with its strategic alliances, the airline is laying the groundwork for a stronger, more competitive future.

Two years in, Campbell Wilson believes the airline is in a “good place,” but the road to becoming a world-class airline is still long and filled with obstacles. With fleet refits underway, operational improvements in the pipeline, and a focus on premium services, Air India is positioning itself to once again become a global leader in aviation.

With Inputs from Reuters