Once a national carrier and now a Tata Group-backed airline, Air India is witnessing one of its worst nights. And all it took was a catastrophic crash of Flight 171, killing 241 souls out of 242. Days after the crash, Air India is facing a decline in passenger confidence, forcing the airline to make deep cuts in its ticket costs while being under the scrutiny of the Aviation Ministry. The cost of losing a plane has a far greater impact on the airline than one can digest!
Air India Flight AI171 Crash:
Air India's flight AI171, carrying 242 passengers and crew members, departed from Sardar Vallabhbhai Patel International Airport on June 12 at 1:39 PM local time. Tragically, the airline met its doom shortly after takeoff. Reaching 625 feet from the runway, eyewitness accounts revealed that AI171 struggled to maintain an altitude before descending and crashing near the BJ Medical College and Hospital hostel ground.
As per local media reports, a total of 290 lives succumbed to the accident, including citizens on the ground, apart from 241 passengers and crew members. From the flight, only one person survived and walked out of the wreckage.
International Air Transport Association (IATA) spokesperson told GoodReturns, "We are deeply saddened by the news of the accident involving Air India flight AI 171. Our thoughts and heartfelt sympathies are with the families and loved ones affected by this tragedy."
When asked how this plane crash will impact Air India, IATA's spokesperson said, 'The industry's safety performance has improved over the years. Every accident is one too many, and is a reminder that our efforts to make aviation ever safer never end. The priority is to establish the factors that contributed to the accident. The accident will be investigated by the authorities under the conditions defined in Annex 13 of the Chicago Convention. IATA is not a party to the investigation."
This is Air India's worst plane crash since May 22, 2010, when Air India Express Flight 812, a Boeing 737-800 flying the Dubai-Mangalore route, surpassed Runway 25 at Mangalore International Airport, resulting in the death of 158 passengers.
History Of Air India's Plane Crashes In India:
The Cost Of An Aircraft:
First and foremost, each aircraft is bought at an extensive price, and its loss makes a sharp impact on the airliner's daily commercial flights, shortage of planes, and eventually impacting its growth.
Unlike the latest models like the Boeing 737 MAX 8 and Airbus A320neo which are low-cost and offer fuel efficiency, 787-9 Dreamliners are part of the older generation of aircraft which were usually expensive.
The estimated cost of the Boeing 787-9 Dreamliner is $292 million, with a capacity of carrying at least 296 passengers. Still lower compared to the Airbus A350-900 and Boeing 777-9 aircraft, whose estimated costs are $317 million and $442 million. But Dreamliners are expensive compared to widely used 737 MAX 8 and A320neo aircraft, which have an estimated cost of $121 million and $110 million respectively.
The Boeing 787 Dreamliner aircraft entered Air India's ambit in September 2012, and since then, the airline has operated at least 33 Dreamliners.
How Do Plane Crashes Impact An Airline Or Aviation Industry?
An airline involved in a plane crash struggles with financial, reputational, operational, legal and regulatory liabilities.
Financial impact includes stock price drop, insurance cost, compensations and decline in future bookings. This has already begun at Air India.
This Tata Group airline is not listed on stock exchanges; however, the plane crash led to sharp selling in other airline stocks. For instance, SpiceJet share price has been falling from June 12 to June 20, nosediving by 12%. Currently, SpiceJet is at Rs 40.04.
Meanwhile, Interglobe Aviation (Indigo), the largest airline in India in terms of market share, has been volatile since June 12. Following the plane crash, Indigo dropped by nearly 6% from June 12-13, before entering into volatility. Currently, the stock is down by 4.2% from its Rs 5,631 level on June 11. It traded at Rs 5,390.
The maker of the 787 Dreamliner, Boeing, also crashed by nearly 6% from June 12-13.
The Ahmedabad tragedy occurred just as India ascended to the position of the world's third-largest market for passenger aviation and sixth in air cargo movement7. Years of infrastructure expansion and regional schemes such as UDAN -Ude Desh ka Aam Naagrik- had positioned the industry for sustained growth, as per a Sebi-registered platform, Grip Invest.
"That growth narrative now faces scrutiny. Incidents of this magnitude tend to unsettle investors and shift strategic expectations. As noted above, early trading reflected that mood," it added.
Furthermore, Grip Invest highlighted that confidence impact is not limited to carriers. It influences the entire ecosystem. When perceptions change, travelers defer plans, reduce discretionary spending or avoid bookings altogether. Hence, travel-adjacent sectors also face some headwinds.
Apart from this, the Directorate General of Civil Aviation and the Aircraft Accident Investigation Bureau are leading the investigation while coordinating with Boeing and the US-based National Transportation Safety Board.
The regulatory consequences could lead to modification in aircraft-specific airworthiness directives, operational reviews and revised maintenance protocols.
The sales of airlines take a huge blow, and the return of consumer confidence takes time. An example is the Boeing 737 MAX which was grounded between March 2019 and December 2020, after two plane crashes in five months during that time.
In the case of Air India, the airline has grounded about 9 flights since the crash and is likely to cut its wide-body aircraft by 15%. Also, the airline is compensating an interim sum of RS 25 lakh, in addition to the Rs 1 crore or GBP 85,000 compensation that Tata Group announced. The cost would be massive on Air India's books. Additionally, Air India has cut its fares by 30-70%.
While struggling internally, Air India is also facing stern warnings from the Directorate General of Civil Aviation (DGCA) or else would lose their license to fly again. Air India has removed three of its top officials in the wake of DGCA's direction.
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