The Tata group airline has held internal discussions on a potential regional expansion, two people aware of the matter said. Regional aviation includes flights from metros to smaller cities, as well as between smaller cities.
“Discussions were held on the matter. These are internal discussions and there will be further rounds of assessment on this before a final decision is taken. The opportunity in the regional space is staring us in the face and the intent is to provide a complete travel solution to Indian travellers,” one of the officials cited above said on condition of anonymity.
An Air India spokesperson did not respond to a request for comment sent on Wednesday.
Benefits of connectivity
India’s regional aviation has benefited from a government-funded regional connectivity scheme called UDAN, and an increase in airport infrastructure in smaller towns. According to industry estimates, Indian airlines operated close to 200,000 regional flights during 2023, the bulk of which were flown by IndiGoandSpiceJet. As per data from global aviation data company OAG, India, along with Central and West Africa have been outliers in regional flight operations, clocking an increase of 4-5% in regional jet frequencies since 2019, in contrast to the global scenario where the regional jet frequencies have decreased 33.5%.
While Air India was under government control, its subsidiary Alliance Air operated in the regional space. However, Alliance Air was not part of the Air India divestment, and continues to operate as a government-run airline.
“For now, the group is exploring an organic growth opportunity for the regional aviation segment. Hence, there are no plans for now regarding any stake acquisition opportunity for Alliance Air. Currently, it looks like that product (Alliance Air) does not align with the new Air India vision,” the second executive aware of the discussions said.
Air India’s ambitions come at a time IndiGo is planning to bulk up its fleet of ATRs, a favourite of regional airlines. IndiGo is also the country’s largest regional aircraft operator with 45 ATR-72 and five more on order. ATR-72 is a regional aircraft produced by Franco-Italian manufacturer ATR, which can seat around 78 passengers.
The Tata group now operates four airlines—Air India, Vistara, Air India Express, and AIX Connect (formerly AirAsia India). Beginning 2025, they will be merged into two—Air India and Air India Express, once the integration is completed by the end of the current year.
“ATR is one of the options that the Air India group is looking at with a lot of interest,” the first person added. It is, however, not yet clear whether the low-cost AI Express or full-service Air India will house the regional expansion.
The Tata group won Air India in January 2022, bidding ₹18,000 crore as the airline’s enterprise value. As a result, it acquired 100% stake in Air India, its subsidiary Air India Express and the entire 50% stake in ground and cargo handling joint venture Air India SATS.
Among India’s regional aircraft, SpiceJet has 21 De Havilland Canada Dash 8-400s, Alliance Air has a mix of 21 ATRs and one Dornier, and Indore-based Flybig has three de Havilland Canada DHC-6 Twin Otter aircraft.
Star Air operates nine Embraers, Indiaone Air two Cessnas and FLY91 — the latest entrant in the regional space – two ATRs.
Looking at a comprehensive package
With an air travel penetration rate of 3-7% in India, rising income levels, and the growing propensity to travel by air in smaller towns and cities, Air India is looking to offer a comprehensive package to travellers, not just from metros, but also those who want to travel from the interiors of the country to faraway destinations, the first person added.
Ameya Joshi, founder of aviation research platform Network Thoughts said that with SpiceJet reducing its presence, there remains scope for regional turboprop operations.
“With the government likely to extend the UDAN scheme, any airline which invests in regional network is likely to benefit for the next five years, if not more. From a volume perspective, the numbers are low; however, many have seasonal variations and yields which are higher than many metro routes at times,” Joshi said.
A regional aircraft is often called a turboprop jet as the airplane uses a turbo-prop engine to turn the propellers. These are typically used for last-mile connectivity, but these jets have also found a spot in India to connect short to medium-haul destinations. The seating capacity of such jets can range anywhere between 2 to around 80-90 passengers.
India currently has 108 regional aircraft including ATRs, up nearly 12.5% from 88 aircraft at the end of 2023, data from aircraft tracking website Flightradar24 showed.