COMPANY PROFILE

HISTORY

Air India is India's national flag carrier. October 15, 1932 was the day
that J.R.D. Tata, the father of Civil Aviation in India found Air India.
Air India is the national flag carrier airline of India, flying a worldwide
network of passenger and cargo services. Air India is state-owned, and
administered as part of the National Aviation Company of India Limited
- which was created in 2007 to facilitate Air India's merger with Indian
Airlines. The main bases of operation of the airline are Mumbai's
Chhatrapati Shivaji International Airport and Delhi's Indira Gandhi
International Airport.
Air India is the 16th largest airline in Asia, serving 28 destinations
worldwide, and, with its affiliated carriers, serves over 100 cities. Air
India has code share agreements with twelve other international airlines.
In 2010, Air India is expected to join Star Alliance, the world's largest
airline alliance.
 SWOT Analysis of Air India

Strengths
Liberal Environment: India's airlines operate in a liberal environment
in both the domestic and international spheres. With three major
airline groups and four smaller carriers all operating domestic routes,
there is no shortage of competition, although this factor combined with
excess capacity has tended to depress yields. Nevertheless, carriers are
free to operate any domestic routes without seeking permission from
the government, and without restriction on pricing. One condition that
airlines find onerous however, is the requirement to operate a
proportion of ASKs to remote and underdeveloped regions of the
country.
On the international front, the Indian government has pursued an
increasingly liberal approach to bilateral air services agreements with
key overseas markets, resulting in greater access for foreign carriers.
Emirates for example, the largest foreign carrier by capacity into India,
will operate 185 weekly frequencies to ten cities across the country by
the end of 2009. India's carriers have a combined international capacity
share of just over 36% but face strong competition from foreign
carriers, both full service and low cost.

Modern Fleet: In light of the fact that much of the growth in Indian
aviation has occurred in the last five years, the country's airlines
operate a relatively young and modern fleet, ensuring a high quality
passenger experience, improved safety and good operational reliability.
High Quality: India's airlines offer a good quality product in each of the
operating models in existence. Jet Airways and Kingfisher Airlines are
competitive in terms of their in-flight service against the leading
carriers in the world. Kingfisher for example is one just half a dozen
global carriers such as Singapore Airlines and Cathay Pacific, with a
Skytrax 5 star rating. In fact it could be argued that the full service
product on domestic routes is excessive for the sector lengths involved
and results in a higher cost structure, which the passenger does not
necessarily see value in paying for. The LCC’s too, by and large, offer a
comfortable, efficient and reliable service. Until a couple of years ago,
Air Deccan was one carrier that had developed a reputation for poor
on-time performance, flight cancellations and overbooking, however
since being acquired by Kingfisher, most of these operational issues
appear to have been resolved.

Economic Growth: Economic growth has historically been the primary

driver of air traffic, and the relationship has generally been even
stronger in developing countries. Between 2004 and 2007, India
enjoyed four years averaging 9% per annum GDP growth. This slowed
to 6.5% in 2008, however against the background of a global economic
recession, this was a creditable performance. The increased business
confidence following the general election result in May 2009 has eased
concerns that growth may slow further. The stock market has soared
25% in the last month and the outlook for growth and consumption has
improved, which is a positive for the aviation industry.

Political Stability: The re-election of the Congress Party, with a stronger

majority is expected to allow the new administration to push ahead
with further economic reforms, which had to date been blocked by
coalition partners. The prospect of a government which has the ability
to last its full term and pursue its agenda is extremely encouraging. In
addition, Minister Praful Patel, who was the architect of the dramatic
transformation of the aviation sector, has retained the portfolio, which
brings experience and stability to the aviation industry.
Weaknesses
Airport Infrastructure: The rapid growth in air traffic over the last few
years exposed the deficiencies of airport infrastructure across the
country. After decades of neglect, many of India's airports were forced
to operate well above design capacity. The resulting congestion in the
terminals and on the runways delivered a poor experience for the
passenger and a costly, inefficient operating environment for the
airlines. However, although a weakness today, it is also fair to say that
it is becoming less so, as the airport modernization program starts to
deliver results, with new airports in Bangalore and Hyderabad, and
improving facilities at Delhi and Mumbai. The upgrade of non-metro
airports remains behind schedule so it may be another 3-4 years before
we see good quality facilities across the country, but there are tangible
signs of improvement.

Airways Infrastructure: Although congestion on the ground is relatively

visible, another current area of weakness is the limited investment that
has taken place in improving infrastructure for air traffic management.
This too results in expensive aircraft holding patterns, indirect flight
paths and sub-optimal use of runways.
National Carrier: The state-owned carrier, Air India, is in a dire
situation. The carrier is estimated to have posted losses of close to
USD1 billion in 2008/09, and morale within the bloated workforce is at
a low. With no clear direction, management instability at the top and
continuing issues with the integration of Air India and Indian Airlines,
the carrier is in need of radical restructuring. It is imperative that the
government develops a turnaround strategy for Air India as an urgent
priority.

Deep Pockets: Over the last three years, India's carriers have
accumulated billions of dollars in losses and debt. Ironically, a
characteristic that would normally be considered a strength - namely
deep pockets - has resulted in carriers remaining afloat that would
perhaps in other circumstances have failed. With the backing of either
the government or large corporations, several carriers have been able
to access funding that they might have been denied on a strictly
commercial basis as standalone airlines. As a result of the intense
competition which has been perpetuated, airlines have struggled to
raise fares to breakeven levels.

High Cost Structure: India's airlines operate in a relatively high cost

environment, primarily due to the punitive taxation structure. The
greatest impact is felt in the area of sales taxation on fuel, which can
increase the cost to 60% above the international benchmark. The
limitations of airport infrastructure also increase costs due to the fact
that carriers are unable to schedule fast turnarounds, resulting in
reduced aircraft utilisation. In addition, the fact that high quality
ancillary services such as MRO and training are not currently available
in India, means that aircraft and personnel have to be sent overseas.
Skilled Resources: Domestic air traffic in India tripled in the five years
to 2008, while international passengers doubled. This rate of growth far
outstripped the capacity to develop skilled technical and management
personnel. The gap was partly addressed by employing expatriates,
particularly as pilots, and by learning on the fly. This means there is a
lack of in-depth experience and knowledge at all levels. Furthermore,
there is an absence of high quality training infrastructure in-country to
deliver the resources to support future growth. This lack of personnel
affects the government as well and the FAA has expressed its concern
at the shortage of qualified safety inspectors within the Directorate
General of Civil Aviation (DGCA). India has been put on notice that
unless this issue is addressed, it may be relegated to a Category II
nation, which would mean that Indian carriers would not be permitted
to increase services to the US.

Opportunities
Market Growth: Despite the rapid expansion of recent years, India has
only just scratched the surface of the potential for the aviation sector.
Trips per capita remain low even by the standards of other developing
countries. China's domestic market is more than four times the size of
India's 40 million passengers. Even, Australia, a country with a
population of just 21 million, compared with India's 1.1 billion, has a
market 25% larger. Similarly on the international front, less than 1% of
Indians travel overseas each year. Inbound visitor numbers at 5.4
million in 2008 for the entire country, were less than for Dubai or
Singapore. It is not difficult to see the expansion potential from such a
low base as economic growth continues apace.
Geographic Location: India is ideally positioned as a major aviation hub
at the crossroads between Europe, the Middle East and Asia Pacific.
The fact that aviation was a neglected sector for so long has allowed
airports such as Dubai and Singapore to effectively establish themselves
as offshore hubs for Indian passengers, and they now have a significant
head start. However, as India's airports improve, and its airlines receive
international awards for their service, there may be an opportunity to
leverage its huge home market to compete with these longer
established hubs.
Lower Costs, Higher Quality: India has already managed to develop a
dynamic aviation sector despite, and not because of, its environment.
The improvements in airport and airspace infrastructure, the
development of indigenous training and maintenance facilities and the
potential for fiscal reform, all point to the potential for Indian aviation
to increasingly operate in a lower cost, higher quality and more efficient
manner. This could in due course lead to an opportunity for India to
develop as a global outsourcing hub in areas such as aerospace
manufacturing, MRO and training.
Threats
Middle East Aviation: The carriers of the Gulf are aggressively
expanding in India, with high frequencies from multiple destinations to
their hubs, from where passengers can access extensive global
networks. The ability for a passenger for example to travel one-stop
from Ahmedabad to Hamburg, or multiple daily frequencies from
Mumbai to London, connecting at an attractive hub, is a strength which
Indian carriers simply cannot match at present. It will take time and the
question is how far ahead will the Middle East carriers be by that stage.
Terrorism: India has seen frequent terrorist activity in recent years. The
country has shown great resilience in bouncing back after each attack;
however inbound international traffic in particular is sensitive to such
events. Similarly, the potential for India to develop as a global traffic
and services hub is contingent upon it being seen as a safe and
attractive destination.