How Air India is transforming with Tata By Reuters

By Aditi Shah and Tim Hepher

NEW DELHI (Reuters) – Air India, until recently tied to an outdated manual pricing system of setting airfares, is switching to algorithm-based software long used by rivals to help it extract more revenue from every flight.

In another sign of the breakneck transformation of the formerly government-owned airline under its new owner Tata Group, Air India is testing ChatGPT, the popular OpenAI chatbot, to replace paper-based practices.

The drive to modernize underscores the decline left by years of underinvestment as Air India seeks to shed decades-old red tape and win back customers from the Emirates of Dubai and its powerful national rival IndiGo.

“Frankly, the system is so bad it’s good,” CEO Campbell Wilson told Indian airlines executives last week, adding that this offered an opportunity to start from scratch rather than “fix” the existing architecture. .

Air India is not only reworking all aspects of operations, from systems to supply chains, but is integrating four Tata-related airlines, with Air India set to merge with Vistara, while Air India Express and AirAsia India from low cost also converge.

Some areas, such as technology, allow for a clean sheet approach, the 52-year-old New Zealander said, which is why he is putting artificial intelligence (AI) and other tools at the center of Air India’s restart.

Modern “revenue management” software aims to stay one step ahead of demand, continually anticipating where people want to go and how much each individual traveler is willing to pay, rather than the old method of having a fare for each seating block.

The result is increased revenue per flight, making it an easy win-win in business transformation.

FIXING THE FLEET

Wilson faces a tangle of fleets and staff as daunting as Delhi’s switchback traffic, leaving the airline’s path to profit strewn with obstacles.

“Complexity is the curse of airlines,” said Keith McMullan, a partner at UK-based consultancy Aviation Strategy, who has experience in the Indian market.

“What they are saying is absolutely correct: they should go back to a clean sheet of paper, but saying it and doing it are two very different things,” he said. “The danger is that you continue to fight legacy-related fires.”

Air India’s success is critical to Prime Minister Narendra Modi’s government, which wants to harness its scale and reach to turn India into a global aviation force like Dubai or Singapore.

Wilson’s immediate game plan is to tackle pressing issues to get idle planes flying before Air India starts taking delivery of the 470 planes ordered in a record deal last month.

For example, it is working with Tata Technologies to build some plastic components for economy class seats locally instead of waiting for suppliers to deliver obsolete parts.

And it is grabbing whatever planes it can find on lease as it reworks its network strategy to attract Indians abroad.

Any inconsistencies can be worked out as the change gathers momentum, Wilson said in an interview on the sidelines of the CAPA India conference last week.

“This is a transformation as well as a start-up,” said Wilson, who was appointed to lead the turnaround last year by Tata after it regained control of the airline.

“In a startup, you just do what you have to do to get going and then you perfect yourself along the way,” he told Reuters, drawing on this experience of being the founding chief of low-cost carrier Scoot of Singapore Airlines (OTC). ).

But he said a blank slate approach cannot and should not be applied everywhere.

FUSION CHALLENGES

Analysts say Wilson’s phased turnaround plans will be severely tested as Air India executes the twin mergers.

Airline mergers in India have met with little success with Air India continuing to be hampered by the failed integration of Indian Airlines in 2007. Jet Airways’ acquisition of Sahara and Jet Airways Kingfisher (LON:)’s merger with Air Deccan hurt them for years.

Jet and Kingfisher are now bankrupt.

Air India’s planes are already a mix of Airbus and Boeing (NYSE:) aircraft with multiple cabin configurations. This will get even more complicated when you absorb the new carriers.

“Managing mixed fleets is a nightmare and given the choice, no airline would want to do it,” Vinod Kannan, chief executive of the Tata-Singapore Airlines joint venture Vistara, told Reuters.

Once an inspiration to Singapore Airlines, Air India now lags far behind, especially in service and punctuality, areas it must improve quickly if it is to claim share from Gulf airlines, which carry most of India’s international traffic.

There are some early signs of success: Air India’s international traffic rose 28% in the October-December quarter compared to April-June and its domestic share increased to 9% at the end of February from 7.5% in mid-February. 2022, according to the government. data.

Those numbers should rise significantly when Air India is combined with Vistara, but that deal brings new challenges.

“You can do everything right, except the people and the culture…it’s not easy to get it right,” Kannan said during an interview at Vistara’s office near Delhi, where the average age of staff is 29.

At Air India it is more than 50 years.

“The intent is there,” Kannan said of the combination, which is due to be completed by March 2024. “Now it’s just a matter of execution, which is not easy, but we’ll get there.”