Tatas have no choice but to steer Air Asia India's rocky boat

The Tatas are likely to play a more active role in its low fare airline venture – Air Asia India – in the coming months as well as in the selection of a new CEO for the airline. 

In a move that was largely expected, Air Asia India bid goodbye to its second chief executive officer (CEO) Amar Abrol, one and half years before his term ended. For the last several weeks, the operations of the airline have been overseen by Bo Lingam, deputy CEO, Air Asia Berhard, who has been travelling back and forth between Malaysia and Bangalore. 

With the departure of Abrol, the airline will be without a CEO, chief operating officer (COO) and a chief commercial officer (CCO). Kiran Jain who had been hired as CCO from GMR, Delhi has been relieved of the position even before the airline found a replacement and now looks after government relations, sources in the airline said. A spokesperson for the airline said that they were not taking any questions at present.

The Tatas, sources said, have slowly got more and more involved in the carrier. After a not-so-happy innings with the first CEO Mittu Chandiliya and a host of financial irregularities (cases are still pending against him) uncovered, the Tata’s brought in Deepak Mahindra, a CFO from their own stable to manage affairs who is currently there.

It is expected that the Tatas will have a bigger say in the choice of CEO, after the two not so happy experiments. A Tata source involved with the airline said that there is no choice but to get more involved since “they have burnt their fingers twice”. While the Tata’s were quite unhappy with the Chandiliya episode, Abrol as a CEO was “unable to manage for the last several months besides having certain personal problems”. The source said that in his view he should have been sent back earlier. But since there are financial implications of terminating the contract, it was felt better to wait for his resignation. Lingam, according to sources, understands the aviation business and is already bringing some semblance into the operations.

Amar Abrol, a loyalist of Tony Fernandes brought in from Toon Money, was unfamiliar with the aviation business. His term was rocked by a scandal involving him and another member of the staff that resulted in the airline losing its human resource development head. In February 2018, the airline hired Pawan N Setty to head HR matters. 

After four years of operations, aviation industry sources argue that the airline has not made the kind of impact it ought to have given what stood behind it and the opportunity it had. Air Asia India took to the skies at the time when SpiceJet was going through a crisis under its previous management. There was a gap in the market that could have been filled by a nimble and smart player like Air Asia but it didn’t happen.

But Air Asia India got off to a rocky start, failed to expand as promised and burnt cash. It also changed its hub from Chennai to Bangalore before launching. Choice of routes have never seemed to have a clear strategy and the airline has often started and withdrawn flights. Even at present, it has several flights once a day to many destinations like Bangalore-Nagpur, Bangalore-Surat but has not really managed to establish itself on any particular route.

The airline now has 18 aircraft, flies to 19 destinations and has 1900 employees. Vistara – which launched around 6 months later and where the Tata’s have a stake as well – now has 20 aircraft, over 2000 employees and 22 destinations.

Both the ventures continue to make losses. Although several airlines have made their way back into the black – with low oil prices and high traffic and loads – Air Asia India continues to bleed. A top source said that the “losses of both airlines were expected but the losses have been higher than anticipated for Air Asia india”. The expected loss this year is likely to be around Rs 90 crore which is lower than what is expected at Vistara. Vistara posted a loss of Rs 518 crore for the FY 2017.