Air India Express Turns Into Tata’s Costly Merger Execution Lesson
Air India Express airlines (Image X.com)
Analysis traces the merger missteps, operational challenges, and accounting shocks that have transformed Air India Express from a profitable government-owned carrier into the Air India Group’s biggest loss contributor.
By P SESH KUMAR
New Delhi, October 22, 2025 — In FY 2025, the Air India Group bled heavily—but the shock was how much of the red ink came from its low-cost arm. Against a group pre-tax loss of ₹9,568.4 crore, Air India Express—the budget airline formed by folding AIX Connect (erstwhile AirAsia India) into the Kochi-born carrier—accounted for roughly ₹5,700–₹5,800 crore. The numbers triggered a blunt question: how did Air India Express, a once-profitable, government-owned workhorse, become the group’s biggest problem child under Tata stewardship, even as IndiGo tightened its domination of India’s skies?
From a Modest Success Story to a Merger-Mired Struggle
For years, Air India Express had quietly served as the profitable sibling in the state-owned Air India family. Its lean fleet of Boeing 737s, crewed efficiently and targeted at high-yield GCC (Gulf Cooperation Council) routes, delivered steady surpluses even as the parent airline drowned in debt. In FY 2023, the airline posted a net profit of about ₹117 crore-its fifth consecutive year in the black—powered by strong Gulf demand and disciplined cost control.
That record began to unravel after the Tata takeover in January 2022 and the launch of Vihaan.AI, a five-year blueprint to unify four airlines into two: a full-service champion (Air India plus Vistara) and a powerful low-cost platform (Air India Express plus AIX Connect). The low-cost consolidation cleared its regulatory hurdle only on 1 October 2024 -when the DGCA approved AIX Connect’s merger into Air India Express and moved its aircraft onto the latter’s operating certificate.
On paper, this was a masterstroke to create an IndiGo-scale challenger. In practice, stitching together fleets, systems, and staff across two divergent carriers within India’s razor-thin margin environment proved anything but seamless.
The Numbers Tell the Tale
In FY 2024-the first full year under Tata ownership-Air India Express slipped into the red with a net loss of about ₹163 crore, despite healthy revenues from international routes. By FY 2025, after absorbing AIX Connect and its integration costs, the combined entity’s losses exploded to nearly ₹5,678 crore, dragging the entire Air India Group’s pre-tax deficit to ₹9,568.4 crore.
Group revenues actually rose sharply, revealing that the core problem lay not in passenger demand but in cost shocks and operational disruption. The “budget” airline had become the costliest headache in the Tata aviation portfolio.
Turbulence Within: Crew Strikes and System Chaos
In May 2024, Air India Express faced a crippling mass “sick-leave” by nearly 300 cabin crew. About a quarter of scheduled flights were delayed or cancelled within two days, causing chaos across airports and denting public perception. The airline blamed HR software migration glitches that garbled crew rosters and payroll data during the merger transition.
Lost flights meant refunds, re-bookings, and empty legs-financial poison for a LCC (low-cost carrier) whose profitability hinges on high aircraft utilisation. A single week of such disruption can erase a full quarter’s margins.
The Integration Ledger
Even well-planned airline mergers could suffer near-term P&L pain: duplicate systems, overlapping contracts, rebranding, and pay harmonisation. Air India Express’s FY 2025 filings show significant restructuring and integration expenses.
Two distinct low-cost legacies-AIX Connect’s domestic-centric network and Express’s GCC-heavy overseas base-clashed operationally, creating schedule gaps, station inefficiencies, and elevated unit costs. In aviation terms, it sent the CASK (Cost per Available Seat Kilometre) climbing at precisely the time it needed to fall.
Accounting Gravity
Under Ind AS 116 on leases, re-measurement of sale-and-leaseback liabilities and variable payments can front-load depreciation and finance costs. Amendments issued in late 2024 further tightened how such adjustments are recognised. For a carrier simultaneously re-contracting aircraft, standardising maintenance, and merging fleets, this created a perfect accounting storm: reported losses ballooned even before real cash outflows peaked.
Facing the IndiGo Wall
Through 2025, DGCA data placed IndiGo’s domestic market share at about 64 percent versus roughly 27 percent for the entire Air India Group. IndiGo’s single-fleet discipline, deep maintenance base, and ruthless punctuality make it almost impossible to beat on CASK.
For Air India Express, a few mis-scheduled sectors, an extra overnight crew layover, or slower turn-times could mean the difference between profit and plunge.
Group-Level Headwinds
Meanwhile, group-wide engineering bottlenecks and supply-chain snags forced several aircraft groundings, raising maintenance and lease costs. External shocks-Pakistan’s temporary airspace closure, and isolated safety probes-added turbulence. In such a turnaround, each crisis steals bandwidth from integration hygiene at the low-cost end.
Seeking surgical discipline
The evidence shows that Air India Express’s ₹5,800-crore loss in FY 2025 is not a mystery but a cascade of predictable merger costs, inevitable accounting adjustments, and possible execution failures. A once-profitable government-owned workhorse (AI Express) was over-stretched in a sprint to create an IndiGo rival.
Recovery depends on surgical discipline: stabilising crew management systems; completing pay harmonisation; reducing turnaround times; leveraging Express’s GCC footprint rather than replicating IndiGo’s domestic playbook; and communicating clearly which losses are one-offs versus structural. Restoring confidence-among employees, passengers, and regulators-will be Tata’s real low-cost challenge.
(This is an opinion piece, and views expressed are those of the author only)
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