To ask. There is concern among flyers over Vistara’s merger with Air India as the latter still has a long way to go in terms of overall improvement. Will we see the merger in March 2024?
Ant. Vistara will continue to operate as Vistara, an independent entity, until we believe that Air India has reached the appropriate level for us to consider a merger. I never said March (2024) is the deadline. These two airlines will continue separately. The final name for the full-service airlines is Air India. When we reach that point depends on when we think Air India is ready. There is a lot of work we are doing to improve India’s air.
It is useful to have permission from the Indian authorities. We can start sharing best practices. Vistara can help accelerate this journey. The cultural part will be important. We need to ensure that AI people accept Vistara’s inputs and we also need to ensure that Vistara people are enthusiastic and enthusiastic about the national mission to revive AI.
The ongoing consolidation (Vistara-AI and AI Express-AirAsia India) is unprecedented in global aviation: four, previously five airlines (because Indian Airlines and Air India never got off the ground before) have now become two. I don’t think this has happened before and not just for airlines, but for five groups of staff. The future AI Express, the merger of two airlines, will operate as a low-cost airline.
To ask. What are the key processes for the merger?
Ant. Broadly speaking, the regulatory process consists of three elements. One of these is competitive approval. And CCI India is obviously part of that, but there are also Singapore and a few other jurisdictions that have to give permission.
Then there is NCLT, the regulatory approval that allows the transaction to actually close. And then there is the aviation regulatory process (DGCA and BCAS). The process of merging airline licenses would take place after the legal closure.
And then there’s the third part, which is non-regulation. That’s when you actually bring the two brands together and operate as one consolidated company. And that is a matter of our discretion.
To ask. The first of the 470 ordered aircraft that were supposed to be delivered are experiencing delays. Does this have consequences for your plans?
Ant. This week we take ownership of the first Boeing 737 MAX. The number of MAX we expect to receive by the end of this fiscal year (10-12) is slightly lower than we expected (15) due to an issue faced by Boeing that adds a few weeks to each aircraft.
As for Airbus A350s, we should get five, if not (as expected), six in March. There is some delay on the first one as some additional testing was required on some seats by the seat manufacturer. This calendar year we expect at least one A350 and possibly two.
While (these delays) are obviously not welcome, it is not the end of the world. It’s not that everything has slowed down enormously, there is a slight slippage on the B737 MAX and A350s. We will lease 25 A320s over the next twelve months to expand the AI fleet. This is more than the 470 aircraft ordered.
To ask. The DGCA has suspended AI’s flight safety chief twice in the last four months and the airline has been criticized by the regulator several times in the recent past. Your reactions.
Ant. It is clearly not welcome if there is publicity about practices that are not fully adhered to. We have invested and will continue to invest heavily in improving the overall safety culture, whether it be people, practices, training and systems implemented to tighten reporting, monitoring and tracking data. No effort is spared.
But we need to recognize (AI) in an organization that has a deep-rooted culture in many ways, not just security. (We) change that culture, take responsibility and change the understanding of what is acceptable now versus what could have been acceptable (in the past). It’s not about checking boxes, it’s about actually understanding the intent and spirit. It takes time. It just has to be a concerted, consistent and long-term effort. It’s clear we’re not there yet. And it’s disappointing that we have these findings, which we fully accept. It’s another reminder that there is work to be done. We will continue with it.
To ask. The Tatas acquired AI and AI Express in late January 2022. Is the revival program on schedule?
Ant. We were under no illusions that this Everest of corporate upheavals would take time. When we launched our Vihan (revival) program a year ago, we said it would last five years. And that the first six months would really be all about cleaning up. A lot of work has now been done in terms of ordering aircraft, hiring people, acquiring aircraft, increasing the number of flights and setting up systems. So based on that plan, I think we’re a little bit ahead of schedule. But that does not mean that we have achieved all their ambitions.
There are some mechanical things that take time. We committed $400 million to refurbishing aircraft, which wouldn’t happen until mid-2024. So there’s a lot going on underground. It may not be physically visible to the consumer, but that’s all it takes to stay somewhat ahead of expectations.
We have unlocked the supply chain. Suppliers did not give parts to AI because AI did not pay. We pay all those bills. Tens of thousands of parts are now back in the pool. We have a warehouse at Delhi Airport as most of our spare parts were in Mumbai while most of our operations were in Delhi.
The company had not hired any employees for fifteen years. So there was a lack of exposure to modern practices, modern thinking and succession planning. We have hired a large number of employees and are building talent in the organization.
To ask. So when will your winnings come in?
Ant. We are a private company and have our own internal objectives. We are comfortable with where we are now. We won’t put a timeline on it (becoming profitable). Tatas did extensive due diligence and knew how much work, investment and time this would require. No one is under any illusions about the magnitude of the task and the time it will take. AI has not been a profitable business for years. And it would be strange if you became a dramatically profitable company overnight. It takes time.
To ask. What is the status of the proposed training academy?
Ant. The lease for our new training academy, which will be spread over 6 million square feet in Gurugram, has been finalized. It will meet the training needs of pilots, cabin crew, engineers and airport operations staff, security, commercial staff and more. It will have a dedicated security center through which every Air Indian, now and in the future, will have to pass. We are making good progress with the two joint ventures for simulator training. We will spend more than $200 million in the coming years.
To ask. AI has spoken with Lufthansa Technik and KLM for an MRO here. What is the progress in the technical field?
Ant. We have spoken with a number of potential partners for MRO facilities. We had published an invitation to express interest to 9 to 10 global players. We’ve narrowed it down to a few that we want to dive deeper with. It is not necessarily about (bidding for) AI Engineering Services Ltd or AIESL (when the government divests it). That is a partnership to develop capabilities. AI must support its fleet and product standard. And there can be many ways to get to that result. One of them could be ESL.
Question Do you see the Indian aviation market like the Indian telecom market with two major players?
Ant. The Indian aviation market was not healthy for a long time – if only because of the frequency of new entrants and subsequent failures. Something wasn’t right. In my opinion, there was a very important player in Air India, which was not really operated for commercial purposes (before 2022). Then you had new entrants to the market who were promoter driven and not necessarily well capitalized, always chasing cash flows. And it just wasn’t stable and that couldn’t continue.
Now there are two major, well-funded, professionally oriented players. That can bring some stability and health to the ecosystem. Then there is a profit pool that other people can come in and want to participate in.
