Privatisation on the horizon for debt-laden Air India?

During the heydays of privatisation, in Thatcher’s Britain, our national carrier was turned around. Like many nationalised companies in Britain, our national carrier had its focus on their demoralised staff rather than customers, operating without an ounce of consideration for making a profit and wallowing in its losses. Privatisation gave British Airways a new start – shifting its focus, resetting the agenda and ensuring the airline made $284 million in profit within the first year of new management.

With privatisation, BA was given a new lease of life. Could Air India do the same?

Around the world, airlines such as South African, who are owned fully or partly by their respective governments are flailing. Nationalised airlines are forced to operate politically motivated “prestige” routes which don’t make economic sense and simply don’t have the fresh ideas and logical leadership to take them forward.

Since their bailout in 2012, Air India has relied on taxpayer funds to stay afloat. However, in mid-2017, the Indian cabinet agreed that the process to privatise Air India should begin. Whilst Air India remains the largest international carrier in India, they have suffered a collapse in their market share due to the rise of low-cost airlines and the competition from other full-service airlines such as Jet Airways and Vistara whom have more economic competence. They only occupy 14.6% of the domestic travel market and, internationally, competition has come from the Middle Eastern airlines who have attracted customers through their Gulf hubs, travelling to Europe & North America. The bottom line is: under government ownership, Air India has failed to evolve and adapt around the changing dynamics of the aviation industry.

Middle Eastern airlines have adapted much more quickly, and taken much of the international market share from Air India.

Recently, further developments have been made and it is now expected that the Indian government and advisers are to analyse the shareholders’ agreement and other details to ensure that the board and key management personnel are appointed by an Indian entity. The government has also taken steps to ensure that the majority shareholder remains an Indian entity (with a 49% stake being offered to a foreign investor). The decision to allow foreign companies to invest is a marked change of tone from the Indian government, presumably to allow sufficient changes to be carried out in order to turnaround the troubled carrier. It has been reported airlines such as Vistara and SpiceJet (some of Air India’s main competitors) are interested in purchasing, and the former’s parent company Singapore Airlines may also be interested.

Air India does have a more modern flight than airlines such as Jet Airways, with A320NEO and B787 Dreamliner aircraft becoming increasingly prominent. Photo by: FlightGlobal

Ultimately, privatisation looks like the best option for Air India. Its a chance for the national carrier to shred their reputations, put their debt behind them and truly take-off. But with the process already attempted before in 2001, and constant obstacles such as parliamentary panels advising that Air India should be given five years to revive under government ownership and the unions’ holding of anti-privatisation rallies, the process is likely to be pain-staking and drawn out.

What do you think? Will privatisation help Air India rectify its problems? Get in touch with us, we’ll be happy to hear your opinions.

November 2017: Route Review

route launches

Thai Airways – Thai Airways added another destination to their European portfolio: Vienna. The service will operate not with Thai’s new Airbus A350 or Boeing 787 aircraft, but with the trusty B777-300ER instead. Thai now flies from Bangkok to Copenhagen, Oslo, Brussels, Paris, Frankfurt, Munich, Zurich, Stockholm, London, Rome, Milan and Moscow.

Thai Airways launched daily flights from Bangkok to Vienna, making their debut in Austria, working with fellow Star Alliance carrier Austrian. Image: Anna.Aero

El Al – El Al – the national airline of Israel – returned to Miami this month, after a hiatus since 2008, offering flights to Tel Aviv, with Boeing 777-200ER equipment. Miami is the airlines fifth route in the US.

KLM – In Late October, after launching flights to Mauritius and Mumbai, KLM inaugurated flights to its third Central American destination – San Jose, Costa Rica. The flight will be served twice-weekly, onboard Boeing 787-9 Dreamliner aircraft. Boet Kreiken, EVP of KLM Customer Experience commented on the launch,

“In recent years, Costa Rica has developed as a very attractive tourist destination for many Dutch and European tourists. We are happy to start operations to Costa Rica and of course, we also welcome Costa Ricans to travel with KLM to Amsterdam or one of our many destinations in Europe.”

Boeing 787-9 Dreamliner ‘Jasmine’ did the honours of the inaugural service to San Jose. Image: Anna.Aero

Thomas Cook – Thomas Cook and Fred Olsen worked together to launch a new bi-weekly Manchester-Mauritius service, operated by the airline’s Airbus A330-200 aircraft. It faces no direct competition, after TUI left the route last April, and over 250 passengers were given a tropical farewell as they embarked on their journey.

Beijing Capital Airlines – BCA has become the fourth Chinese airline to serve London Heathrow airport, offering twice-weekly services to Qingdao, aboard 212 seat Airbus A330-200 aircraft. It adds to Heathrow’s current flights to Guangzhou, Shanghai & Beijing in China. As a result of this expansion, Hainan Group now offer three destinations in the UK: Qingdao-Heathrow with Beijing Capital Airlines, Tianjin-Chongqing-Gatwick with Tianjin Airlines and Beijing-Manchester with Hainan Airlines.

Heathrow celebrated the launch of flights to Qingdao – the only flights from Qingdao to the UK. Image: Anna.Aero
route announcements this november

Etihad Airways – One of the Middle Eastern ‘Big Three’ continued to cut back this month, with the announcement it was to drop its Dallas-Abu Dhabi route. Whilst Etihad currently codeshare with American Airlines (who operates a hub in Dallas-Fort Worth), this will terminate on the 25th March 2018, at which point Etihad will render the route ‘will become commercially unsustainable’.

Middle Eastern airlines’ growth has been slowing recently. Have they started to plateau?

WOW Air – The low-cost, vibrant Icelandic airline continue their expansion plans into the winter, with the announcement of adding flights to a second New York gateway: JFK. Daily flights will launch on 26th April, when flights also launch to a second London gateway of Stansted.

Alitalia – Despite the Italian airline’s ubiquitous financial woes, it continues to expand, this month launching its African adventure. Beginning in Spring 2018, Alitalia will add flights from Rome to Nairobi and Johannesburg, with Airbus A330-200 aircraft. Both flights will be offered four times each week, with Alitalia offering three classes of service.

British Airways Cityflyer – In Late November, British Airways continued to raise furore among those based in the regions, with the announcement of expanding its summer flying programme from Manchester, Birmingham & Bristol. New routes include a once-weekly Embraer 190 services from Manchester to Florence, Tuscany. The announcement comes as they prepare to inaugurate new ski flights from Manchester to Salzburg and Innsbruck.

British Airways continues expanding in the regions – but only in the form of ‘Cityflyer’.

Air India – Air India offers two UK gateways: Birmingham & London Heathrow. Both have been expanded recently, with the addition of a daily Birmingham-Delhi service and a new Ahmedabad-Heathrow-Newark service (both operated by Boeing 787 Dreamliner equipment).

Over 135,000 Sikhs live in the West Midlands, making Birmingham the perfect destination for the UK’s only non-stop link to Amritsar – home of the Golden Temple. After intervention from politicians such as Andy Street (Mayor of West Midlands) and inner-city MPs, Air India announced this new Amritsar-Birmingham link, to operate non-stop twice-weekly. Air India’s plan is not yet clear, on whether they are to continue their current daily Delhi-Birmingham flights.

Aer Lingus – In an effort to continue their steady but consistent expansion to the US, the Irish flag carrier will add the first ever direct link between Dublin and Seattle, operating four-times a week from 18th May 2018. This means Aer Lingus now serve 13 US destinations (New York JFK, Hartford, Newark, Boston, Washington, Chicago, San Francisco, Los Angeles, Orlando, Miami, Toronto, Philadelphia & Seattle) and connections will be available from 12 UK cities – including the newly inaugurated Southend route, and other regional cities such as Leeds. 

Aer Lingus partners with Stobart Air to allow connections to UK cities such as Leeds or Newquay, conveniently allowed to make use of Dublin’s US Border Pre-Clearance system.

LOT Polish Airlines – Poland’s national carrier – LOT – will be introducing Warsaw’s first ever link to Singapore. The carrier’s first scheduled and regular service to Southeast Asia will commence in May 2018, initially operating thrice-weekly, with the airline’s long-haul backbone: the 787 Dreamliner. Following LOT’s successful expansion of flights to Los Angeles, and plans to start transatlantic services from Budapest – it seems the airline has a clear focus on intercontinental expansion and connecting the Polish capital to major Business centres around the world.

That’s a wrap, but I’ll be back next month, writing about all of December’s highlights in the aviation industry.