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A new passage to India

AI figurine

The iconic Maharajah. Photo courtesy of Mayur “Mac” Patel.

Now that Johnny Depp has been cleared, it’s time to turn our focus back to the aviation industry again.

Quite a number of the world’s most valuable companies (Google, Microsoft, Twitter) are run by Indians.

Very clever Indians.

And when the new owners of India’s national airline chose a foreigner – a white man, no less – as the airline’s chief, many Indians were understandably and naturally miffed.

India has over a billion people, the world’s second most populated nation after China.

The logic then, is this: if Indians can control Silicon Valley, home to many of the world’s most creative enterprises, why not an Indian to helm Air India?

In reality, however, it’s a tad more complicated than that.

While many Indians have a natural predisposition towards mathematics and science, the best have chosen information technology over other jobs.

It’s not difficult to see why.

There are plenty of job opportunities in software, coding and other segments of the IT eco-system and it pays handsomely.

There is no shortage of role models, too.

Satya Nadella (Microsoft) and Sunder Pichai (Alphabet, parent company of Google) each earns in excess of USD50 million a year.

Parag Agrawal, Twitter’s CEO, had a compensation package of just over USD30 million in 2021.

No airline CEO makes even half that much.

And for a very good reason.

The airline industry, despite its glamour and full of high-tech sophistication, has largely been operating at heavy losses over the past three, four decades.

The sector, therefore, is not attractive enough to lure top Indian minds, who view the risk:reward ratio of the aviation industry unappetising.

There have been lots of criticisms (some bordering on hysteria) following the Tatas choice of Campbell Wilson as the boss of Air India last month.

Conspiracy theorists would have us believe he is a Trojan horse, planted by his erstwhile employer (Singapore Airlines) in a bid to facilitate a merger between Air India and Vistara, where SIA and the Tatas have a respective 49%:51% shareholding in the latter.

Nothing could be further from the truth.

It is more likely that the 50-year-old Wilson, a New Zealander who has spent 26 years with SIA, is merely jumping aboard the Indian juggernaut, with China still shut and India the fastest growing aviation market.

He craftily avoided sensitive topics in his statement during the announcement of his appointment.

“Air India,” Wilson said, “is at the cusp of an exciting journey to become one of the best airlines in the world… I am excited to join Air India and Tata colleagues in the mission of realising that ambition.”

In a note to Scoot (the low-cost airline that SIA owns and which he heads) staff, he described the “honour and pleasure” he’s had in transforming the airline from a “mere spreadsheet” to being one of the world’s top carriers.

“But there are other mountains to climb,” he added, as he spoke of the humility and opportunity to have been appointed as Air India’s new CEO.

India’s media gave ample coverage to Wilson, while cross-referencing to the Tatas’ initial (misguided) anointment of Ilker Ayci, ex-chairman of Turkish Airlines, as managing director of the Maharajah.

To be fair, the Tatas got their act right the second time round.

Wilson has a unique track record, one of a very few select foreigners who was able to deftly navigate his way around SIA Airline House and managed to found an LCC along the way.

A Scoot alumni who left after a short stint because he felt stifled by the SIA Group, remembers Wilson being very welcoming to “unorthodox ideas.”

“There weren’t many like him within the organisation,” he recalls.

“He understood the limitations of SIA yet he was open to pushing the boundaries. I really hope he succeeds with Air India but then India is a completely different beast!”

The middle class holds the key

India’s 100-million odd middle class (defined as consumers with incomes of between USD10 and USD20 a day pre-Covid) is probably the most economically dynamic group in the world.

However, a Pew Research Center report at the end of 2020 found the middle class to have shrunk by a third in India, or roughly 32 million due to the pandemic.

This is worrying because the middle class supports (directly and indirectly) the airlines.

Most Indians fall into the low-income bracket in 2020.

Some 1.2 billion Indians were thought to be in this tier pre-Covid, accounting for 30% of the world’s low-income population.

What does all this mean to the new CEO of Air India?

Clearly there is vast inequality across the country.

Not too long ago a study found that only 1% of households in India take 45% of flights.

By comparison, in the UK 70% of flights are taken by the wealthy 15% of the population.

Data from India’s DGCA suggest recovery in both domestic and international traffic remain slow.

Nevertheless, the competition is intense.

There are at least 12 airlines currently operating, big and small, and includes the four owned by the Tatas (AI, AI Express, AirAsia India and Vistara), SpiceJet, IndiGo and Go Air.

Majority of the carriers are budget airlines, thereby putting pressure on airfares.

Like many airlines in other parts of the world, India’s aviation sector is facing tough times, compounded by one of the world’s most expensive jet fuel costs (up to 15% of these include excise duty, VAT and state taxes).

Another challenge the Tatas will also face is how to integrate all four of its airline businesses.

It is possible Wilson may oversee the world’s biggest airline consolidation during his tenure at Air India.

All things being equal, the Indian aviation industry has plenty of upside.

In 2010 some 80 million flew to or from or within India.

Less than a decade later, in 2017, the figure was almost double, to 158 million. Before 2040 the number is expected to be close to 550 million.

Meanwhile India’s total fleet size as of end-2020 was just under 720 aircraft.

Now compare that with American (almost 1,000) and United (over 900).

Beyond its long and tense border with China, India falls short, too.

China Southern has about 640 planes, Air China 450 and China Eastern 570.

As for airports, only 29 out of 130 Indian airports cater to international flights. The government has plans to invest some USD2 billion in airport development before 2030.

As India prepares to celebrate its 75th independence on 15 August 2022 there is – as epitomised by its immense aviation potential – much to be optimistic and to be excited about what’s to come.

Air India (and India for that matter) is looking to the future, not to the past.

And if the Tatas, the media and the public in general can be more realistic about where Air India is now – not where or what it was before – we could well see Wilson reach the summit of his Indian mountain.

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