When private is not always better: The Air India Story

For decades, Air India under government ownership was a byword for inefficiency. Delayed flights, ageing aircraft, overstaffed terminals, and bailout after bailout paid for by the Indian taxpayer. Yet for all that, it never lost $2.8 billion in a single year. Its new owner, Tata Group managed to do that in 2025-26. This single fact underlines the uncomfortable truth behind the much-hyped privatisation of Air India.

The crash of Air India Flight AI-171 last June brought much of this into sharp focus.

Air India Flight AI-171, a Boeing 787-8 Dreamliner, bound for London from Ahmedabad, crashed seconds after takeoff, killing 241 of the 242 people on board and 19 on the ground, last June. The preliminary report released a month after the crash, gave an indication of how the crash happened.

The report also published snatches of a conversation between the pilots leading to speculation about the involvement of one of the pilots responsible for the crash. The final report from India’s Aircraft Accident Investigation Bureau is expected next month, according to the civil aviation minister K. Rammohan Naidu. Its findings will land on an airline already struggling to explain itself. To understand how Air India arrived at this point, it is necessary to go back to the moment of the sale.

The maths

On January 27, 2022, the Government of India transferred 100% of Air India’s shares to Tata Sons’ fully-owned subsidiary Talace Pvt Ltd. The Tatas paid Rs 2,700 crore ($358 million) upfront in cash and took over Rs 15,300 crore of debt — for a total bid of Rs 18,000 crore (approximately $2.39 billion). At the point of handover, Air India was losing Rs 20 crore every single day and it had around 12,000 employees on its rolls.

Post-sale, the airline has gone from roughly 12,000 employees and $9.5 billion in accumulated losses at acquisition, to 30,000-plus employees and a fresh $2.8 billion loss in a single year under private ownership. It is the kind of loss which has continued to mount at a pace the government era never quite matched in a single financial year.

Soon after takeover of the airline, its management under the leadership of a Singapore Airlines veteran, Campbell Wilson, unveiled Vihaan.AI, a five-year transformation plan. The plan was built on five key pillars: exceptional customer experience, robust operations, industry-best talent, industry leadership, and commercial efficiency and profitability.

While the acquisition of new aircraft has been rolled out at a faster pace — 600 new aircraft with a list price of around $70-80 billion — and is quite laudable, the airline has been found wanting in terms of the goals it set out to achieve. For example, the country’s aviation regulator, the Directorate General of Civil Aviation identified 51 specific safety lapses at Air India — seven classified as critical safety risks requiring immediate correction, and 44 categorised as serious systemic failures in its audit report, soon after the crash. The findings spanned systemic neglect of safety management, inadequate monitoring of flight operations, maintenance record forgery, crew fatigue mismanagement, and the operation of aircraft without proper emergency equipment checks.

There have been other instances too: A Chicago to Delhi flight was forced to turn back after five hours because eight of its twelve lavatories had become unusable. A Delhi to Vancouver service flew for nearly eight hours before returning because nobody had verified the aircraft had regulatory approval to enter Canadian airspace. If one adds a litany of complaints from the pilots, ranging from claims that they were treated as bonded labour to regular threats from the HR department, it is clear that a key part of the workforce is in open conflict with the management.

Assumptions

The transformation plan had always assumed that the hardware was the difficult problem — that if you ordered enough new aircraft, hired enough new people, and rebranded aggressively enough, the culture would follow. It hasn’t.

The main reason for the privatisation of Air India was that if it remained in the public sector, inefficiencies and losses would spiral out of control, forcing the Government to shut it down. Its sale to a private sector company was based on the logic that it would remove all these challenges and India would get a highly-efficient airline. The downside to that is that if one assumes that the private sector is automatically more capable than the state, one fails to provide enough scrutiny whenever the private sector fails.

This perhaps has led to Air India’s underperformance. The management poured enormous amounts of money into ordering more aircraft, merging four airlines, hiring about 9,000 employees, and expanding routes, all at the same time: the pace of what the management wanted to achieve ran far ahead of the pace of what the organisation was actually capable of achieving.

(The writer is a senior aviation journalist based in Bengaluru)