Deadly Air India crash puts ambitious turnaround plans at risk

Air India Ltd’s ambitious plans to transform itself from a stale, financially troubled carrier into a profitable world-class airline face their biggest test yet after the deadliest aviation accident in more than a decade, reports Bloomberg.

India’s flag carrier had long languished under government ownership, gaining a reputation among travellers for shabby in-flight services. But its 2022 takeover by Tata Group, which paid 180 billion rupees ($2.1 billion) to buy back the airline it founded in 1932, kickstarted a five-year reinvention aimed at returning Air India to its former glory and take on the world’s biggest and best carriers in international routes.

After more than a decade of losses, the new owners had big aspirations, setting a target for Air India and its budget carrier Air India Express to break even operationally by the end of the financial year ending March 31, 2026, according to people familiar with the matter, who asked not to be identified because the information is private.

Its substantial progress toward that goal -- losses narrowed 61 per cent to 44.4 billion rupees in the 2023-2024 financial year -- is now threatened by the tragedy of flight AI171. The passenger jet bound for London crashed shortly after taking off from the western Indian city of Ahmedabad on Thursday, killing all but one of the 242 passengers and crew on board and causing extensive damage to a residential area.

The incident marks the first-ever complete loss of a 787 and, as investigations get underway, questions are growing over how the jet exploded into a fireball including around the plane’s thrust.

While there’s no evidence to suggest that the airline’s operational management or fleet maintenance had anything to do with the crash, reputational damage to Air India is inevitable.

Air India has been focused on its rebrand, rather than addressing core issues like broken seats and maintenance practices, Mark Martin, founder of Martin Consulting, said in an interview on Bloomberg TV on Friday. Those issues “should have been the priority”, he said.

In the wake of the crash, travellers have taken to social media to recount their negative experiences flying with Air India including broken air conditioning, messy seats and unappetising catering in a sign the airline is still grappling with reputational problems.

A spokesperson for Air India didn’t immediately respond to a Bloomberg News email seeking comment.

The execution of its turnaround plan, which includes refitting its 27 Boeing Co 787-8 Dreamliners by as early as 2027, may also be delayed by the loss of one of these jets.

Still, Air India has made some progress in winning back customers. The Tata Group airlines -- Air India, Vistara and AIX Connect -- had a 27.2 per cent share of the domestic market in April, up from 24.7 per cent in September 2022, when the turnaround plan was announced.

But it lags behind its largest domestic rival, IndiGo, which had 64.1 per cent of the domestic market and has big expansion plans of its own. InterGlobe Aviation Ltd, its operator, has placed orders for the Airbus A350s that will start to come by 2027.

Warned of Headwinds

While its unclear how much of a financial hit will come from the plane crash, Air India has already warned of headwinds to its return to profitability earlier this month.

The continuing ban for Indian airlines using Pakistani airspace is adding flying hours for non-stop flights and will hit the company’s bottomline, Chief Executive Officer Campbell Wilson said in June.

The search for material evidence from the AI171 accident is gathering pace. On Friday morning, one of the two so-called black boxes, which contain critical evidence of a plane’s final minutes, was located, according to the Hindustan Times.

Officials have also warned the death toll could rise as they continue to comb through the wreckage as well as the severely damaged BJ Medical Hostel.

Tata Group said it will pay INR10 million in compensation to families of the victims and contribute in the rebuilding of the hostel.

“I know there are many questions and at this stage, I will not be able to answer all of them,” Air India’s Wilson said in a video posted on X in the aftermath of the crash. “Investigations will take time. But anything we can do now, we are doing.”