Air India is apparently trying to fly out of the current turbulence and enhance its market share. It may not be an easy job
A year after Air India (AI) reported a first-in-a-decade operating profit of Rs 105 crore during 2015-16, it looks like flying back in time. The management of the government-run airline plans to expand its subsidiary, Alliance Air, and give it wings to take on low-cost carriers such as IndiGo, GoAir and SpiceJet. The plan is to let Air India focus on long-haul routes while Air India Express continues to operate low-cost flights on preferred international routes.
This would mean that Air India is going back to the pre-merger era when the airline and Indian Airlines (IA) were operating separately in international and domestic markets. The Air India management plans to acquire more short-haul aircraft to expand Alliance Air's network of 36 destinations, currently connected with a fleet of 8 ATR 72-600 (70-seater) and 2 ATR 42-320 (48-seater) aircraft. It is also taking on lease 10 ATR 72-600 from Dubai Aerospace Enterprise. This will definitely help AI support the government's regional connectivity plans.
When it posted an operational profit in 2015-16, its net loss stood at Rs 3,587 crore, making it a daily loss of Rs 10 crore. Air India's woes however slackened as fuel prices dropped.
Will the move to expand the subsidiary negate the operational efficiency theory that the merger of AI and IA had apparently targeted? As of February 2016, Air India is the third largest carrier in India, after IndiGo and Jet Airways with a market share of 15.4%. In a highly competitive market today, AI is apparently trying to fly out of the current turbulence and enhance its market share. It may not be an easy job.
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