Air India's incoming CEO weighs merging budget arm AI Express to rein in swelling costs: Report

In a bid to trim swelling operational costs and stem record financial losses, Air India Ltd.’s incoming Chief Executive Officer Tewolde Gebremariam is weighing a proposal to merge low-cost carrier Air India Express into the main group, Bloomberg reported.

Across a series of departmental briefings, the CEO-designate questioned executives on the rationale behind operating two distinct airline entities with separate operational licenses. Gebremariam pointed out that consolidating into a single airline enterprise would significantly lessen regulatory requirements while eliminating redundant administrative, engineering, and managerial positions, the report added citing sources.

The internal discussions remain preliminary, and any final decision on combining the operations would require approval from Air India's supervisory board. If the consolidation moves forward, Air India Express is expected to retain its brand identity within the unified structure, as per the Bloomberg report.

The cost-cutting planning comes after a difficult 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 critical for Tata Sons Pvt., which is currently managing internal corporate governance debates alongside regulatory pressures surrounding a potential public listing.

The 61-year-old executive was brought in following his successful tenure at Ethiopian Airlines Group, where he transformed the carrier into Africa's largest and most profitable airline.

At Air India, Gebremariam faces an array of external pressures, including the ongoing closure of Pakistani airspace to Indian carriers and lingering regional conflicts in the Middle East that 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.

This would not be the carrier's first structural shift. Air India previously merged with Indian Airlines in 2007 before undergoing further integration after Tata Group acquired the state-owned airline in 2022, consolidating four distinct brands down to two: Air India and Air India Express.

In initial strategy sessions, Gebremariam also raised concerns regarding low freight load factors — a sector that served as a key revenue driver during his time at Ethiopian Airlines — and urged engineering teams to draw up immediate plans to reduce fleet maintenance issues, according to the Bloomberg report.

Although he joined the company this month, Gebremariam's formal appointment remains subject to final regulatory clearance given his foreign nationality.