Air India Ltd.'s new Chief Executive Officer, Tewolde Gebremariam, is reportedly weighing a proposal to merge the low-cost carrier Air India Express into the main group. This consideration comes as the airline seeks to rein in swelling operational costs and stem record financial losses, according to a Bloomberg report.
Gebremariam, 61, was appointed following a successful tenure at Ethiopian Airlines Group, where he transformed it into Africa's largest and most profitable airline. Upon joining Air India, he initiated departmental briefings, questioning the rationale behind operating two distinct airline entities with separate operational licenses.
Streamlining Operations and Reducing Redundancies
Sources indicate that Gebremariam highlighted how consolidating into a single airline enterprise could significantly lessen regulatory requirements. Furthermore, such a merger would eliminate redundant administrative, engineering, and managerial positions, contributing to substantial cost savings.
The internal discussions regarding this consolidation are still preliminary. Any final decision on combining the operations would require approval from Air India's supervisory board. If the merger proceeds, Air India Express is expected to retain its brand identity within the unified structure, the report added.
Addressing Financial Pressures and External Challenges
This cost-cutting initiative follows a challenging fiscal year for Air India, which posted a consolidated loss of ₹22,000 crore ($2.3 billion) for the year ending March. Stemming these losses is crucial for Tata Sons Pvt., which is currently navigating internal corporate governance debates and regulatory pressures related to a potential public listing.
Gebremariam also faces an array of external pressures impacting the airline's financial health. These include the ongoing closure of Pakistani airspace to Indian carriers and lingering regional conflicts in the Middle East, which have inflated fuel overheads and disrupted international routing. The airline is also managing a regulatory inquiry into a recent flight incident involving a sudden loss of altitude.
"Consolidating into a single airline enterprise would significantly lessen regulatory requirements while eliminating redundant administrative, engineering, and managerial positions."
This would not mark the first structural shift for the carrier. Air India previously merged with Indian Airlines in 2007. After the Tata Group acquired the state-owned airline in 2022, it underwent further integration, consolidating four distinct brands down to two: Air India and Air India Express.
In early strategy sessions, Gebremariam also raised concerns about low freight load factors, a sector that was a key revenue driver during his time at Ethiopian Airlines. He has urged engineering teams to develop immediate plans to reduce fleet maintenance issues. Although he joined Air India this month, Gebremariam's formal appointment remains subject to final regulatory clearance due to his foreign nationality.