Air India Ltd.’s incoming CEO Tewolde Gebremariam is considering folding the no-frills Air India Express unit into the group as he tries to cut costs to counter record loss, according to people familiar with the matter.
In multiple meetings across departments, Tewolde quizzed managers about the need to run two airline companies with separate operating permits, said the people, who asked not to be identified as the talks were private. The CEO-designate argues that having a single airline group would lower regulatory requirements and reduce the need for two sets of managers, engineers, and administrative staff, the people said.
The idea of combining Air India and Air India Express is at an early stage, and realising it would require approval from the supervisory board, the people said. Air India Express would keep its brand name in a combination, they added.
An Air India spokesperson did not respond to an email seeking comments.
An Air India merger amid record loss
The deliberations show Tewolde’s eagerness to weed out inefficiencies after in the year through March. Reducing loss is also key for the carrier as its parent Tata Sons Pvt. Ltd. over Tata chairman’s and . The 61-year-old was chosen largely due to his track record of turning the Ethiopian Airlines Group into Africa’s largest and most profitable carriers.
Tewolde needs to tackle a myriad of challenges, including the closing of Pakistani airspace to Indian carriers and the Middle East conflict that’s disrupted travel and driven up fuel costs. Air India is also facing a probe after a pilot of a flight involved in a sudden altitude drop tested positive for illegal drugs.
Air India merger: Not the first time
Air India is not new to mergers, having gone through one with Indian Airlines in 2007. It then went through more portfolio changes after the , with four brands combining into two, resulting in the current structure of Air India and Air India Express.
In his earlier meetings, the CEO-designate had raised concerns over Air India’s low cargo load use, a sector that bolstered business at Ethiopian Airlines. He also urged the staff to work on a plan to reduce maintenance issues. While Tewolde officially joined the company this month, he still needs to be approved by local regulators as CEO because he’s a foreign national.
The new executive streamlining Air India would be welcome news for Tata Group and its equity partner Singapore Airlines Ltd., which is facing political backlash for backstopping Air India’s loss-making operations.