Tata Sons is understood to have shortlisted a couple of candidates with international aviation experience, including some CEOs of leading global airlines, for the post of Air India CEO. It is quite likely that the group may shortlist an expat CEO, senior officials close to the development told ET.
N Chandrasekaran, chairman of Tata Sons, has also sought the counsel of Ratan Tata in choosing the CEO.
“Tata has great connections in the global aviation sector, too, and his suggestions are expected to lend heft to the CEO-hiring talks,” a senior group official said. Tata Sons did not comment.
Tata Sons had commenced the CEO search early, say insiders. “To steer its aviation business, execution capabilities will be critical,” a group official said.
Vihang Virkar, aviation law expert and partner at PDS Legal, said that as India’s flagship carrier, Air India has a significant presence on international routes with over 900 landing and parking slots in overseas locations.
It is also part of the Star Alliance, which is a global alliance of prominent international airlines. “Many of Air India’s important suppliers are large international companies, such as Boeing, Airbus, CFM, etc. Given this significant global exposure, it is important for the CEO of the company to have international experience.
For the past several years, Air India’s international operations have been more lucrative as compared to its domestic operations,” Virkar said. “Someone with strong international experience could, I am sure, capitalise on these overseas landing rights and expand the remunerative international business even more.”
Many international airlines prefer airline CEOs with a finance background due to the financial complexity and thin profit margins.
Tata Sons is also setting up a short-term advisory team ahead of its takeover of Air India. This will comprise key Tata Group executives, including board members, global aviation specialists and some top Air India officials. The group has taken over Air India through Talace, a wholly-owned subsidiary. Talace will eventually house the two Tata carriers, Vistara and AirAsia India.
Air India operates a fleet of airbus and Boeing aircraft serving 102 domestic and international destinations. It currently has a fleet mix of 128 aircraft, which include 79 narrow bodied and 49 wide-bodied aircraft. Its fleet also includes 25 planes of Air India Express and 19 of Alliance Air with a total fleet size of 172 aircraft.
Experts say the Tatas would probably not want to kill competition by flooding the market with capacity or slashing ticket prices. The Tata Group, which now has close to 25% market share in the domestic aviation industry with the acquisition of Air India, would focus on a sound strategy of controlling its costs and reducing its leverage to attain a certain scale of profitable operations.
It already operates Vistara and Air Asia as joint ventures.
“Air India has predominantly been led by individuals from the administrative services and who have a background of working within the government machinery. As Tatas look to transform Air India into a formidable privately held Indian airline, it is time to relook at its management team with a fresh perspective. This is probably why the search for the new CEO has been extended beyond internal talent,” said Virkar.