Air India targets a 30% market share; 5 year transformation goal.

Air India targets 30% market share
Air India targets 30% market share

Indian Market
by 5paisa Research Team Last Updated: 2022-09-16T18:46:27+05:30

When Tata Sons took over Air India almost a year ago, there was a lot of nostalgia about Air India returning to its original owners. But then, big business decisions are rarely made less on such emotions and more on hard numbers. At that point of time, the big bet of the Tata group was that the combination of Air India, Vistara and Air Asia would help the Tatas compete with Indigo, which is the market leader with over 56% market share of the domestic aviation market. Now the actual plan is become clearer from the Tatas.


During the week, Air India outlined a 5-year comprehensive and meticulous roadmap aimed at re-establishing the airline as a world–class carrier. In terms of numbers, the target is take Air India to 30% market share in the next five years. Now that is no small growth because Air India currently has a market share of just about 8% and we are talking about nearly growing the market share four-fold. All this, in a market that would be growing at a rapid clip and where other competitors like Akasa and Jet will be breathing down their neck.


This and a lot more has been laid out in detail in a draft document that is interestingly called the Vihaan.AI. The genesis of this name is equally interesting. In the Sanskrit language, Vihaan means the dawn of a new era. In a sense, that is what Tatas are trying to do with Air India as they look to redefine the contours of the aviation market in India. Towards this end, Air India will predominantly focus on expanding the fleet of aircraft aggressively, adding key arterial routes to its flying map and revamping customer proposition to world class levels.


As of July 2022, Air India had reported domestic market share of 8.4%. Remember the market size is expanding rapidly. For instance, in the next 7 years, the passenger numbers will grow by 10% annualized and take the annual flyers from 200 million to 400 million. We are now talking about an enhanced market share in this vastly expanded market. That makes the market share game all the more complicated. As part of Vihaan.AI, Tatas will look to gain 30% market share of the enhanced market in the next 5 years by fixing the basics.


It is not just the domestic market that Air India will target, but will also substantially grow its international routes. For Air India to get back on the path of sustained profitability, the first thing to achieve is market share and then to achieve market leadership. As part of the plan, Air India has not only laid out the macro roadmap, but has also set clear milestones to improve its network and fleet dramatically. Additionally, it will also focus on enhancing reliability and on-time performance and taking a leadership role in innovation and sustainability.


To quote the new MD and CEO of Air India, Campbell Wilson, “Vihaan.AI is the big transformation plan to make Air India the world class airline it once was, and that it deserves to be again”. Not much is known about the plans to merge Vistara and Air India, but that will also need buy-in from Singapore Airlines which owns a stake in Vistara. One thing is clear that at some point the synergies of their business would force closer collaboration. Whether it takes the form of an alliance of merger, remains to be seen.


For now, Air India is trying to get the basics right. It is adding 30 aircraft to Air India’s hangars and plans to boost its fleet by 25%. It will also offer a better flying experience via premium economy long haul flights. Air India will be leasing 21 Airbus A320neos, 4 Airbus A321neos and 5 Boeing B777-200LRs. Currently, Air India has 70 aircraft narrow-bodies aircraft and 43 wide-body aircraft. To get market share, Air India first needs to match the Indigo fleet of 276 aircraft. First things first; Air India has started on the long haul.
 


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