Tata and Sons’ ambitions to take control of the Indian civil aviation industry are set to materialise through Air India 3.0. It appears that this move is a lucrative opportunity for Modi’s vision of boosting India’s global standing.

Competition for superlatives in commercial aviation is fierce. Actors jostle for titles such as the world’s longest commercial flight, the best cabin products, and the finest wine selection at 30,000ft. The quest for aviation superlatives is not just a game of one-upmanship. It reflects the strategic importance of the global network of air travel in shaping the global order, or simply, international aviation politics.

Aviation is an essential tool for states to project influence, protect interests, and achieve foreign policy goals. It reveals the underlying geopolitical aspirations of countries seeking to dominate the skies. Civil aviation also serves as a means of continuous interaction between states, signaling their foreign policy intentions. As an example, Taiwan recently reinstated air routes between Taiwan and Mainland China as a goodwill gesture amid growing cross-strait tensions.

Power plays in international aviation politics are one aspect of power that can be more adequately measured. As the Lowy Institute’s Asia Power Index illustrates, the level of air connectivity a state maintains, defined as the number of direct air routes each state has with other airport hubs, highlights the expansive and complex web of political, economic, and commercial links it can draw upon for national development, security, and prestige.

Transforming Air India

India’s Tata Group is the country’s largest and most important conglomerate. It recently added a new superlative to the Indian aviation sector by acquiring Air India and placing the single largest order ever of 470 new commercial aircraft, worth an eye-watering US$70 billion. For reference, British Airways will operate just 280 planes by the end of 2024.

Tata’s recent reacquisition of Air India, initially founded by J. R. D. Tata of the Tata Group, marks a return to its original owner after spending over 69 years as a government-owned corporation. The new venture comes with ambitious plans. Beyond dominating India’s domestic aviation sector, its new owner aims to increase Air India’s global competitiveness through service improvement and route network expansion.

Air India’s record-breaking ambitions have gained recognition from several prominent leaders, such as Indian Prime Minister Narendra Modi, French President Emmanuel Macron, American President Joe Biden, and British Prime Minister Rishi Sunak.

Beware the attraction of Monopolies

India’s aviation market is one of the fastest growing in the world—currently the third largest domestic aviation market—and is supported by a growing middle class with the world’s largest population, recently overtaking Mainland China. Geographically, India sits in a position to serve as the regional hub for intra-Asian routes and under-served routes between the Middle East, Africa, and East Asia. Perhaps it is not surprising that Tata’s Air India seeks to capitalise on the country’s tremendous potential for domestic and international travel.

Tata’s Air India strategy is emblematic of India’s economic system, which revolves around a few influential “national champion” conglomerates. Like South Korean chaebols, these large, private oligopolistic entities possess significant political sway and shape the country’s economic landscape. Heavy reliance on a select group of conglomerates like Tata and Adani has led to an economy heavily concentrated in the hands of a few decision-makers and shareholders. This concentration affords conglomerates the ability to wield substantial influence over elected officials and policymakers, often to their benefit. Unfortunately, this has resulted in stifling innovation and entrepreneurial spirit, leading to the demise of promising start-ups and local businesses.

While many on this side of the aisle lament that the dominance of the few will not leave enough space for others, the question of whether others can compete is troubling. India’s aviation sector has seen its fair share of successful start-up airlines, like IndiGo, as well as failed ones like Kingfisher Airlines. With a growing middle class and an increasingly global outlook, the question of competition in India’s aviation sector depends largely on state policy, or crudely, the relationships between conglomerates and their friends in New Delhi.

Tata’s close relationship with the prime minister makes it almost certain that the Competition Commission of India will approve the merger between Air India and Vistara, as well as Air India Express, its namesake’s budget subsidiary, and AIX Connect. If approved, this would mean that Tata will have firm control over India’s sole full-service carrier. Meanwhile, Air India’s budget subsidiary would continue to compete with just three others: Akasa Air, SpiceJet, and IndiGo.

This is a particularly concerning development compared to Mainland China, the only other market with a comparable population. Mainland China boasts nine major carriers, eleven low-cost carriers, and twenty-one smaller domestic airlines. While the regulatory environment in China differs from that of India, with Beijing regulating airlines, airports, routes, and prices, the lack of competition in India’s aviation sector remains a significant issue.

Prestige Speaks Louder Than Words

The Modi government has not been shy in showing its nationalist support—and ambition—for the new venture. It hopes Air India will be a symbolic homage to Modi’s populist nationalism, and strengthen India’s reputation and position as a global power. This is echoed by Tata’s aim to transform Air India and bring back its glorious past as a national and global icon that rivals the likes of Singapore Airlines, Emirates, and Swiss International Air Lines.

Air India is a symbolic yet tangible component of Indian foreign policy and serves India’s prestige aspirations in three main ways. Firstly, positioning the airline as a premium national carrier means Air India represents the country to the world. As a pseudo-embassy, a global premium airline may enhance India’s reputation as a regional, if not global, power.

Secondly, Air India will have an outsized impact on the regional economy. Air travel drives business and tourism between states generating billions of dollars in revenue annually. Economies with strong civil aviation industries, such as Singapore and Qatar, tend to have significant economic advantages by creating ease of travel and transactions, which attracts investment, creates jobs, and stimulates growth.

Thirdly, India can gain international prestige and recognition as a vital player in the global economy. India may gain international prestige as it seeks to strengthen its relationship with other notes and expand its position within the global aviation network.

India has already made moves in this space. Gulf carriers have attempted to capitalize on the high demand for air travel from India, but the Modi administration has moved to restrict growth for these carriers and promote the growth of Indian airlines. This strategy seeks to establish Air India as a more significant player in the global aviation network.

Conclusion

India understands its reliance on monopolies poses a significant risk to its economy, and Air India’s recent moves to gain a competitive edge in the Indian aviation market are not occurring in isolation. The Modi government has shown a strong desire to promote Air India as a source of national pride and international prestige, and the close relationship between Tata and the ruling party gives the company a significant advantage over other players in the industry. While India’s flourishing low-cost aviation market suggests that the government’s gamble on Air India may be misplaced, the Modi administration values the symbolic importance of a thriving national airline. It seems Modi’s government needs Air India to do well more than India’s economy beckons.

Kazimier Lim (he/him) is a public policy consultant based in Sydney. He holds a Master of International Relations (Advanced) from the Australian National University and has a background in academic research focusing on Asia, international prestige, and international aviation politics. Follow him on Twitter.

This article is published under a Creative Commons License and may be republished with attribution.