Air India Is Turning The Clock Back, Not Turning It Around

Air India, despite being privatized, continues to grapple with the challenges of its former status as a public sector unit (PSU). The airline's recent moves, including the appointment of a new CEO and an extended turnaround timeline, indicate that its new owners, Tata Sons, are inclined to follow a government-like approach in handling the crisis.

The new CEO, Tewolde Gebremariam, who previously turned around Ethiopian Airlines, is currently awaiting security clearance to take up his position at Air India. This situation mirrors a previous instance when Ilker Ayci, appointed as CEO after Air India's privatization, declined the role due to uncertainty surrounding security clearance.

Tata Sons, Air India's new owners, have opted to extend the timeline for achieving a turnaround from the initial five-year plan to as long as 10 years. This decision, akin to moving the goalpost, suggests that the owners acknowledge the magnitude of the challenges they have inherited.

Air India's predicament is not helped by the airline's inability to effectively leverage its numerous hubs. The market in which the airline operates is highly competitive, with one player controlling two-thirds of the market. Additionally, taxation rates in India are relatively high compared to other countries, further complicating Air India's operations.

The new CEO's strategy, Vihaan.AI, aimed at achieving a turnaround by 2027, failed to materialize despite setting ambitious goals. Instead of identifying and addressing the root cause of Air India's struggles, Tata Sons has opted to provide the new CEO with an extended timeline, effectively admitting that they underestimated the scale of the problem they acquired.