Air India’s Transformation: Moving from Manual Pricing to ChatGPT
Air India is replacing its antiquated manual pricing system with more advanced algorithm-based software widely used by competitors. This shift will enable the airline to maximize its revenue per flight. The adoption of technology is part of Tata Group’s plan to modernize the formerly government-owned airline and improve its services to compete with Dubai’s Emirates and domestic rival IndiGo.
Air India is also replacing paper-based practices with OpenAI’s chatbot, ChatGPT, in line with its effort to modernize its operations. CEO Campbell Wilson acknowledged the inadequacy of Air India’s previous system, which offered the opportunity to start from scratch rather than “jury-rig” the existing architecture. By integrating four Tata-related airlines, the company is restructuring every aspect of its operations, from technology to supply chains.
Wilson emphasized the importance of adopting artificial intelligence (AI) and other tools as part of Air India’s reboot. Modern revenue management software utilizes AI to continuously anticipate demand and determine how much each individual customer is willing to pay, enabling airlines to maximize revenue from each seat. This approach is more effective than the old method of having one fare for each block of seats.
The company’s transformation can easily yield higher revenue per flight by focusing on this low-hanging fruit.
FIXING THE FLEET
Air India’s complex fleet and staff structures rival the daunting traffic of Delhi’s streets, littering its path to profit with obstacles. Keith McMullan, a partner at UK-based consultancy Aviation Strategy, acknowledged that the complexity of airlines is a major challenge, and going back to the drawing board would be beneficial for Air India. However, he warned that fighting legacy-related issues can distract from the path to success, making it easier said than done.
Prime Minister Narendra Modi’s government is relying on Air India’s success to elevate India to the status of a global aviation hub akin to Dubai or Singapore. Air India’s newly appointed CEO, Jim Wilson, plans to address pressing issues, such as getting idle planes back in the air and creating a network strategy that attracts Indian passengers overseas. For example, the airline is collaborating with Tata Technologies to manufacture economy-class seat components locally, rather than waiting for outdated parts from suppliers.
In an interview at the recent CAPA India conference, Wilson stated that the turnaround of Air India is both a transformation and a startup. He believes in taking a clean-sheet approach, as he did when he was the founding CEO of Singapore Airlines’ budget carrier, Scoot. However, he acknowledged that this approach is not applicable everywhere. As the transformation gains momentum, Wilson hopes to iron out any inconsistencies along the way.
MERGER CHALLENGES
Analysts predict that Air India’s plans for a staggered turnaround will face severe tests as it executes twin mergers. Previous airline mergers in India have had little success, as evidenced by Air India’s ongoing struggles following the botched integration of Indian Airlines in 2007, and the long-lasting negative impact of Jet Airways’ takeover of Sahara and Kingfisher’s merger with Air Deccan. The bankruptcies of Jet and Kingfisher further highlight the challenges faced by airlines in India.
Air India’s existing fleet already consists of a mix of Airbus and Boeing jets, each with multiple cabin configurations. As it absorbs the new carriers, this complexity will become even more compounded. According to Vinod Kannan, the CEO of Tata-Singapore Airlines’ joint venture Vistara, managing mixed fleets is a nightmare, and no airline would opt for it if given a choice.
Once an inspiration for Singapore Airlines, Air India has fallen far behind, particularly in areas such as service and punctuality. If Air India wants to reclaim its share from Gulf carriers, which currently handle most of India’s international traffic, it must swiftly improve these areas. There have been some positive early signs, such as a 28% increase in Air India’s international traffic during the Oct-Dec quarter compared to April-June, and a rise in its domestic share from 7.5% in mid-2022 to 9% by the end of February 2023, according to government data.
However, Air India’s merger with Vistara is expected to increase these figures significantly, presenting new challenges. As Kannan pointed out during an interview at Vistara’s Delhi office, getting everything right, including the people and the culture, is not easy, especially given the young average age of Vistara’s staff.
At Air India, the age requirement for their employees is 50 years or older.
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