Merging of Air India Express and AIX Connect to Drive Long-term Profitability: MD

Tata Group's low-cost carrier, Air India Express, has finalized its merger with AIX Connect (formerly AirAsia India), a strategic decision to create a unified budget airline under Air India with a focus on attaining long-term profitability without straining its finances, according to a top business executive.

Air India Express managing director Aloke Singh dismissed worries over the merger of AIX Connect, a loss-making firm, telling PTI that "the merger process was completed in October." The integration of AIX Connect will speed up our route to profitability by reaching significant scale, lowering expenses, and better utilizing our resources. The goal is to create a strong, scalable network that can support long-term growth.

Air India Express recorded a net loss of Rs 163 crore in FY24, down from a profit of Rs 117 crore in FY23. This was despite a strong 33% year-on-year (Y-o-Y) growth in revenue to Rs 7,600 crore, owing to higher passenger volumes and improved operational capacity. 

AIX Connect reduced its net loss to Rs 1,149 crore in FY24, down from Rs 2,750 crore in FY23, demonstrating early advantages of integration and efficiency gains.

The restructuring has created two independent organizations inside the Tata Group: Air India Express, a low-cost carrier (LCC), and Air India, a full-service airline that merged with Vistara. Singh elaborated: "This alignment has given us clarity to focus on different business models and markets."

Singh acknowledged that the airline's expansion phase may have a temporary impact on profitability, but underlined the importance of measured and sustainable growth. "When you launch a new route, you have to develop the market with offers, incentives, and promotional fares," he added.

Singh highlighted Air India Express' ambitious intentions to increase its fleet to 175 aircraft in the next two to three years, as well as extend its presence in both domestic and foreign markets. He stated that 50% of the airline's capacity is dedicated to domestic operations, with a special emphasis on connecting Tier 2 and Tier 3 cities to Metro centers.

"These routes form two-thirds of the market and are the fastest-growing segment," Singh said.

Regarding airfare patterns, Singh stated that rates have remained lower than inflation despite significant cost pressures. He went on: "When I say rational,' I mean fares that allow the airline to earn a reasonable return on investments while remaining attractive and competitive for customers."

Fuel costs, which account for 40% of airline expenses, have not been offset by fare increases. Singh highlighted that the dynamic nature of passenger demand makes it impossible to implement a set tariff approach, as opposed to stable consumer sectors such as electricity.

"With airline market consolidation, we're seeing more logical pricing. This benefits the industry, its players, and the overall ecosystem, allowing for continued expansion and investment. We are seeing a positive shift in the Indian market now, with serious players taking a long-term view of the business," Singh stated.