Air India: Of Mergers, Revival, & Reality Check

Beyond mergers, however, structural issues remain at the core of Air India's challenges.

On July 27 this year, Tata Sons Chairman N. Chandrasekaran told shareholders that building a global airline takes 5-10 years of effort. But industry voices point out the most obvious: Air India is already a global airline; all it requires is a new orientation. “If you announce a long-term exercise of 5-10 years, nobody will feel the urgency and the need for moving out of the comfort zone. As a result, the project is dead before it's born,” says Captain Gustav Baldauf, consultant and former first Operating Officer of Air India.

Financial Reality

“After four years of restructuring and turning around, the airline faces the most challenging financial year since the Tata takeover. Air India is showing a degrading financial performance as a result of disrupted operations, route closures and slow progress in the turnaround. Big surprise after reality kicks in? If a turnaround plan only works out in fair weather, something is completely wrong. This is not proactive management; this is administrative reacting and blaming the real world for its uncertainties,” the Captain argues.

According to Ishka Airfinance (provider of aviation market data and advisory services), Air India's transformation "from a loss-making state-owned airline" to a "profitable airline" was "going to be challenging, given its legacy issues". "While meaningful operational progress has been achieved, the overhaul has also been negatively impacted by exogenous factors and generally difficult market conditions, including industry-wide supply chain constraints, fuel and currency volatility, and geopolitical issues. The fatal incident involving an Air India Boeing 787-8 in June 2025, which is still under investigation, has been an additional challenge and will require time to rebuild trust," says Ishka Airfinance.

The reality check, however, has already begun.

Beyond Numbers

Merely placing a large order for aircraft will not suffice. Air India, under private management, ordered 570 aircraft from both Boeing and Airbus in 2023 and 2024, respectively.

Back in 2006, Air India (under the government) also placed an order for 68 new Boeing aircraft – the same year that Indian Airlines ordered 43 Airbus aircraft. 

Despite the course of time, the lessons remain the same: the issues remained structural; new aircraft, inflight entertainment with Bose Headphones; and designer night-dresses for premium class passengers on ultra-long-haul flights didn't solve them. 

Though Air India needed new aircraft, service quality and the price charged for premium class trips were to be prioritised, the Head of a foreign airline in India pointed out. “The fleet strategy illustrates the point. Ordering more than 570 aircraft across multiple Airbus and Boeing families significantly increases complexity in training, maintenance, engineering, crew planning and inventory. Historically, fleet commonality has been one of the strongest drivers of operational efficiency,” he says.

The Policy Imperative

The government has come up with policies, including those meant to ease the pressure from the West Asia crisis. Steps are also being taken to address structural issues (reforms related to tax, financing and Cape Town Convention coverage, and building more airports, among other things) and improve the airline cost structure.

The Cape Town Convention is a global register of aircraft. Acceding to this Convention helps the airline of a country to get better rates for financing its aircraft. In India, a majority of the fleet operated by the airlines is on a "sale-leaseback model".

Nonetheless, the reform process remains a "work in progress", and more can be done as it is all coming from a relatively low base. With Air India, it may be too early to draw any broad conclusions in terms of the overhaul and its implications on the wider market.

Satyendra Pandey, Managing Partner, Aairavat Technology & Transport Ventures Pvt Ltd, highlights that India’s skies are effectively a duopoly, with 80% of the domestic market served by only two airlines. “The result is seen in pricing, capacity, and complacency. Couple this with legal timelines and consumer protection (or lack thereof), and policy interventions inevitably come to the forefront. There is an argument that barriers to entry in slots, aircraft financing, fuel taxation, and airport charges make it structurally unviable for a third or fourth competitor to reach scale, no matter how efficient its management. These have to be addressed by the government,” Pandey underscores.

Precision Policy Measures

He further points out that while "broad policy measures" have been spoken about ad nauseum, it's time to implement "precision policy measures" that address current issues within the sector. For instance, liberalisation of wet-leasing and import clearances for new airlines may incentivise new players. “Similarly, while the airport infrastructure has been built, investigating why airlines are not flying to these airports may offer interesting insights,” Pandey says. 

“Safety and quality control, especially in maintenance, shall keep the standards high and incident rates low. The regulator defines the legal frame accordingly and controls the implementation and execution,” he points out.

Meanwhile, Captain P.P. Singh, the last Accountable Manager of Jet Airways, opines that the government can look into controlling taxes levied on air tickets and monopoly charges at Indian airports.

Industry voices have also raised the possibility of the government, considering its ties with countries in West Asia, securing better altitude for Indian aircraft, as this will reduce fuel burn and improve operating costs. They cite the recent example of a business jet from India flying to London: since the airspace from the central Middle East to the outskirts of Europe was shut, the aircraft was forced to fly close to 1,000 nautical miles more, diverting towards Africa before heading up towards Eastern Europe.

Is Revival A Far Cry Or A Work In Progress?

Industry voices have renewed hope that Air India will return to its glory days, for it is not a matter solely of reinvention, but rather following the path of other market leaders (in the aviation sector), including Emirates and Airbus.

According to the Head of a foreign airline, “Success will depend on how effectively management executes its strategy, and whether the Tata Group remains willing to fund what could be a much longer and more expensive transformation [phase] than originally envisaged.”

(The writer is a senior civil aviation journalist. Views expressed are personal.)