LAL BAHADUR SHASTRI INSTITUTE OF BUSINESS

MANAGEMENT, DWARKA, NEW DELHI

PGDM EVENING BATCH (PART TIME)

OPERATIONS MANAGEMENT - END

TERM PROJECT REPORT

 
AIR INDIA
 
 
 

 
           
 
 
 
 
 
 
'Air India' is the flag carrier airline of India. Its
tagline is "Your Palace in the Sky!".

SUBMITTED TO :
DR. PRASHANT GUPTA
Professor,
Operations Management
Lal Bahadur Shastri Institute of Management
Plot No. 11/7, Sector - 11
Dwarka,New Delhi-110075

SUBMITTED BY GROUP 2 STUDENTS:

MANSI SHISHODIA ROLL NO. 5/ 2014

HARSH SAXENA ROLL NO. 6/ 2014
PIYUSH KAMRA ROLL NO. / 2014
 

FORWARDING LETTER

DATE:11.7.2015
TO: DR. PRASHANT GUPTA
FROM: GROUP 2

We the group members namely, Mansi Shishodia, Harsh Saxena, Piyush

Kamra feel immense pleasure to present our report on the topic Air India
.The objective of the report is to to get an insight of the aviation industry
and to understand the degree of competition in such a fast growing sector
as the aviation industry in India has seen a constant pace of growth over
the past many years. With the liberalization of the Indian aviation sector,
the industry had witnessed a transformation with the entry of the
privately-owned full service airlines and low cost carriers.

We would like to request you to please accept our report for your kind
perusal.

 
 
 
 
 
 
 
 
 
 
 
 
 

ACKNOWLEDGEMENT

The end of term project on Air India is part of the syllabus for
students undergoing the Part-time Post Graduate Diploma in Business
Management Course at the Lal Bahadur Shastri Institute of Management.

We, the students of Semester-III, wish to acknowledge the whole

hearted support of our families and friends, who had to bear with our
absence from home because our academic pursuits kept us from keeping
social commitments.

There were challenging times when some of us in the team could

not follow up with the task we had accepted to complete, because of
personal reasons and job constraints. There was total cooperation
amongst the team members and each of us compensated for what the
other person could not accomplish. We also wish to complement each
other for the solid support or else this project would not have been taken
to its state of completion.

We also wish to acknowledge the guidance provided by Dr

Prashant Gupta, Professor of Operations Management at LBSIM who not
only made the study of the subject lively but also provided us with the
right kind of timely advice that led to completion of this project.

 
 
Mansi Shishodia
Harsh Saxena
Piyush Kamra

 
 
 
 
 
 
 
 
 

TABLE OF CONTENTS

TOPIC PAGES

History of Air India 6

Air India 7

Logo 8

External Analysis: Industry Overview 9

PESTL Analysis 10

SWOT Analysis 13

PORTER Five Forces 15

The Dark Ages 17

Seven Steps 19

Cover up losses: Implementation 21

Air India Strike 2012 24

Recommendations 25
  

HISTORY OF AIR INDIA

Tata Sons, a division of Tata Sons Ltd. (now Tata Group) was founded by J.
R. D. Tata in 1932. The aviator Nevill Vintcent had an idea to run mail flights
from Bombay and Colombo that connected with the Imperial Airways flights
from the United Kingdom. He found a supporter for his plans from J. R. D.
Tata of the Tata Iron and Steel Company. After three years of negotiations
Vintcent and Tata won a contract to carry the mail in April 1932 and in July
1932 the Aviation Department of Tata Sons was formed. On 15 October 1932,
J.R.D. Tata flew a single-engined De Havilland Puss Moth carrying air mail
(postal mail of Imperial Airways) from Karachi's Drigh Road Aerodrome
to Bombay's Juhu Airstrip via Ahmedabad.

After World War II, regular commercial service was restored in India, and Tata
Airlines became a public limited company on 29 July 1946 under the name Air
India. In 1948, after the independence of India, 49% of the airline was
acquired by the Government of India, with an option to purchase an additional
2%. In return the airline was granted status to operate international services
from India as the designated flag carrier under the name Air India
International. On 25 August 1953 the Government of India exercised its
option to purchase a majority stake in the carrier and Air India International
Limited was born as one of the fruits of the Air Corporations Act that
nationalised the air transportation industry. At the same time all domestic
services were transferred to Indian Airlines (now a part of Air India)

Air India International entered the jet age on 21 February 1960 when its
first Boeing 707–420, named Gauri Shankar (registered VT-DJJ), was
delivered, thereby becoming the first Asian airline to induct a jet aircraft in its
fleet.[25][26] Jet services to JFK International Airport in New York City via
London were inaugurated that same year on 14 May 1960.

 
 
 
 
 
 
 

6   
  
AIR INDIA: FLEET
 
 

 
 

 
 

  7 
  
 

Logo: Signification and Importance

"The logo of the new airline is a red coloured flying swan with the 'Konark
Chakra' in orange, placed inside it. The flying swan has been morphed from
Air India's characteristic logo, 'The Centaur', whereas the 'Konark Chakra' is
reminiscent of Indian's logo".

The new logo features prominently on the tail of the aircraft. While the aircraft
is ivory in colour, the base retains the red streak of Air India. Running parallel
to each other are the orange and red speed lines from front door to the rear
door, subtly signifying the individual identities merged into one. The brand
name 'Air India' runs across the tail of the aircraft.

This now familiar lovable figure first made his appearance in Air India way
back in 1946, when Bobby Kooka as Air India's Commercial Director and
Umesh Rao, an artist with J.Walter Thompson Ltd., Mumbai, together created
the Maharajah.

The Maharajah began merely as a rich Indian potentate, symbolizing

graciousness and high living. And somewhere along the line his creators gave
him a distinctive personality: his outsized moustache, the striped turban and
his aquiline nose.

What began as an attempt as a design for an inflight memo pad grew to take
Air India's sales and promotional messages to millions of travellers across the
world. Today, this naughty diminutive Maharajah of Air India has become a
world figure. He can be a lover boy in Paris, a sumo wrestler in Tokyo, a
pavement artist, a Red Indian, a monk... he can effortlessly flirt with the
beauties of the world. And most importantly, he can get away with it all.
Simply because he is the Maharajah!

He has completed 56 years and become the most recognizable mascot the
world over. His antics, his expressions, his puns have allowed Air India to
promote it's services with a unique panache and an unmatched sense of
subtle humour. In fact he has won numerous national and international
awards for Air India for humour and originality in publicity.

8   
  

External Analysis: Industry Overview

The Indian aviation sector consists of many players which are divided into
Low-cost and Full-service carriers. Jet Airways, Kingfisher, Air India are some
examples of Full-service carriers and IndiGo, Spicejet, GoAir are some of the
leaders in Low-cost carriers segment.

Recently the Indian Airline Industry is witnessing a series of disastrous events

which are a cause for the significant loss in profit and reputation of the
individual airlines especially Kingfisher which is heading towards bankruptcy.
It is a very big challenge for the low-cost carriers to survive and manage their
profitability amid increasing fuel prices and high taxes.

The only way for airline companies to defeat the competitors and stay
profitable is to provide better service than that of their competitors. Customers
evaluate their experience of the flight based on the variety of services
delivered by the carrier. Currently low-cost carriers are offering variety of
services to attract new customers and retain the existing ones. It is a race and
the one who provides services superior to those of the others will always stay
ahead and sustain in this hyper-competitive environment.

Air India is desperately trying to gain its lost market share by lowering down
its fares and offering better service to its customer. It is trying to attract
customers by offering its new value added services like cheap up gradation to
first class and business class.

  9 
 

PESTL analysis:
PESTL analysis is a framework, which is used to analyse the external factors
acting on an organization and to recognize their impact on the organization.
PESTL full form is political, economical, social, technological and legal
factors.

Political Factors:

In a country like India we cannot see any organization without political

influences. It is an open secret that every issue has political interferences, in
India. Some of those political factors are given below

• The route between Kashmir and other major countries was closed by Air-
India, due to the border problems with Pakistan. And terrorism is a major
issue, which was stopping many foreign tourists, coming to India
• Major political issue of the decade, which affects the airline industry, was
September 11 incident. Due to the fear of terrorism and the involvement of
air planes in the industry, a huge drop in air traffic occurred
• In a corrupted country like India, the state owned industry Air-India has to
face many problems in route clearances, permits and licences and offering
free seats to political leaders etc.
• As it was a state owned company, it kept the routes, which are yielding
constant losses as open, because of prestigious issues. Which pushes the
organization into losses

Economical factors:

The economical factors, which was acting upon Air-India are

Due the financial recession in recent year, people are thinking that air travel is
luxury and expensive. So a considerable decline in the no. of passengers
occurred, which in turn leads to reduce in ticket prices

• After the September 11 incidents, the world economy is facing a great

recession. Even biggest companies of India cut the air-travel facilities
to their managers and giving them first class train tickets
• The decline in income of Air-India leads to more operational costs and
huge insurance costs, which was increased after WTC destruction.
This makes Air-India to lay off its employees, which further fuelled the
recession as spending decreased due to the rise in unemployment.
  
• And the biggest economical factor, which is influencing the Air-India
was lack of midsized aircrafts, which intern increase the operational
costs of its big size aircrafts for the routes, which are yielding losses.
• Even the SARS (disease) outbreak in the Far East was a major cause
for slump in the airline industry. Even the Indian carriers like Air India
was deeply affected as many flights were cancelled due to internal
(employee relations) as well as external problems.

Social factors:
These factors tells about the effects of social groups and social issues on the
organization as follows:

• The rapid changing in the travelling habits of passengers has a great effect
on airline industry. Especially in the developing countries like India,
travellers came from various income groups. The air lines have to
concentrate on each group and have to provide satisfactory services
accordingly. The main passengers of Air-India are from low income group,
so it has to concentrate on the low income group passengers and their
habits of travel and have to serve them accordingly, like type of food
provided, quality of services etc. in order to satisfy them
• As India was a multi cultured country, the passengers may come from
various religions and expects more customisation, for example a Brahmin
customer will be satisfied, when the passenger, just beside him also a
Brahmin, at least a vegetarian. So he expects change of seats can be
possible.
• Another biggest issue is services in the airplane. Air-India has a poor
performance in this section. It has to improve its services in order to create
a user-friendly atmosphere in the airplane.

Technological factors:

The increasing usage of the Internet provides huge opportunities for airline
industries. Such technological factors are given below

• Air-India provides many online services for its customers such as online
ticket booking, flight information updates, and customer queries. But still
some inconsistency is there in flight updates
• Many of the international airlines are providing internet access for their
business class passengers; this service has a poor performance in Air-
India, which may make the business class customers to choose other air

  11 
  
lines, who pays more for the company.
• The Authority is developing modern communication, navigation,
surveillance, and air traffic management systems for India’s aviation sector

that will help the country meet the expected growth and demand for air
passenger and cargo service over the next decade.
• Providing total body scanners at the Indian airports may leads to feel more
security for the passengers, which intern makes them to travel with
comfort and security.

Legal factors:

These factors tells about the laws and barriers for the company according to
various legal factors:

• As Air-India was a state owned company, it has to face many legal issues
in order to make a decision, as the decision has to processed through
various levels of management
• In order to get licenses and route clearances, the company has to undergo
to the government processes, starting from aviation minister and involving
many legal issues.
• As Air-India was owned by the government, it has to suffer from many
archaic laws, applies only for it, such as free seats to ministers, retirement
age of pilots and air-hostess and the labour regulations, which intern
makes the management less flexible in making new decisions, as the
decision making process has to be done in the presence of strong
employee union. These barriers will not be there for privately owned
companies
• The heavy control and interface with the government affects the quality of
the service as well as type of services that has to be provided in order to
satisfy all of the customers from various countries and various cultures.
Non of these issues will not affect the privately owned air lines

 
 

12   
  
SWOT Analysis
 
Strengths:
• Air-India is India’s finest flying ambassador. It is the largest air carrier in
India in terms of traffic volume and business

• AIR-India consists of most updated fleet and repair and maintenance

expertise

• Efficient usage of information technology for providing customer services

such as flight information and online booking

• Good reputation at domestic as well as global level

• Biggest advantage is, the company has the financial support from the
government

• Strong brand name at national level

• Firmly established infrastructure

• Air-India owns the rights to travel to 96 destinations, all over the world

• Biggest advantage of Air-India was, it has prime packing spaces

• It was a monopoly in specific international routes

Weaknesses :
• Declines in the profits and poor utilization of capacity

• Lack of clarity in strategic planning and poor management planning

• Intense competition at the level of low cost carriers

• Compulsion to be a public sector organization and the high cost structures

of Air-India are pushing the company into losses

• The company’s strategies in the perspective of human resources, is very

poor

• Intense competition in the field of aviation and the decrement in market

share
• Poor performance in terms of over head cost controlling

  13 
  
• Bad reputation in terms of in-flight services

• Lack of clarity in the efficient usage of resources

• Poor aircraft maintenance

• Manpower ratio with aircrafts is very high

• Level of corruption, within the organization

Opportunities:

• Faster growing aviation industry in India

• The regulations of aviation, at global level are made easy by the world
aviation authority, which leads easy access to the skies and the chance of
getting route clearances is very easy

• Strong regulations by the Indian aviation ministry and strong security

system attracting more tourists despite of the threat from the terrorists,
which intern provides more opportunities for the air line industries

• Very good time to introduce low cost carriers (LCCs)

• The business class customers are less price conscious and expects
quality service, it will be a great opportunity to Air-India to gain more
customers by providing high quality services

• Availability of highly skilled native-born pilots at low costs

Threats:
• Many new entrants in aviation industry at domestic level

• The price war triggered by the major air line industries, all over the world

• Immense and aggressive competition from the rival air line companies

• Chance to go into the collaboration with privately owned organizations

• Barriers for the business by various laws of the government, as it was

owned by the state

• Increase in fuel prices, all over the world

• The Indian Railway

14   
  
PORTER FIVE FORCES MODEL
 
Porter’s five force analysis is a frame work used for the industry analysis of an
organization. It was used to recognize the current market position of the
organization.

Threats of new entrants:

Threats from new entrants for Air-India is very high

The initial investment for the new entrants into the air lines industry is very
huge in amount. In olden days, it is very difficult to start a new air line
company, but in recent times, banks are providing good opportunities to the
new entrants, by providing long term loans with less interest rate. So this will
be a threat for Air-India from the upcoming and new domestic air lines

Threats from the competitors:

Threats from the competitors for Air-India is very high

The competitive rivalry within the air line industry is very intense, as many
major air lines are operating the flights to the same destinations, all over the

  15 
  
world. Air-India is facing major threats from the industry competitors like
Emirates, Jet Airways and Air Asia etc. The major airline companies are very
aggressively competing each other by offering travellers privileges for regular
customers, reducing the fares and offering high quality services etc, to attract
more customers than their rival companies. So Air-India was facing high
threat from its rival companies

Bargaining power of the buyers:

The threat from the buyers is intensively high for an organization like Air-India.
As more domestic and international air line companies are operating their
flights to the same destinations with low travelling fairs, the customer can
choose from a wide variety of travelling plans offered by the different
companies. Then the power of the buyer is very high, as the competition
between the companies is more. Air-India is already running in losses, the
customer may demand more. At international level this buyer threat is
somewhat moderate, but at domestic level, it was very high.

Threats from the substitutes:

Threats from substitute products is very less for Air-India

Airlines are the fastest possible ways to travel from place to place, so there is
less threat from the substitutes. However, by considering at domestic level,
the customers can choose railways or roadways that are connecting different
places. But still it is time consuming. The only one factor that makes people to
think about alternate travel options like trains or buses is the cost of air travel,
which was expensive for the people of developing countries like India. So
there is a little threat at domestic level, but very less threat at international
level

Bargaining power of suppliers:

The threat from the bargaining power suppliers is moderate for Air-India.
Suppliers for Air-India are very less in number. The major suppliers for the
company are Boeing and Airbus. From the international aviation surveys,
there is no cutthroat competition between Boeing and Airbus, so there less
chance of bargaining with the customer. However an airline company like Air-
India, which was running in losses, the suppliers may demand regarding the
payment options. And it was already known that, Air-India already owes $90
million to Boeing. 

16   
  

THE DARK AGES:

From the beginning of 1970s, Air-India faced many difficulties. The economic
recession, all over the world, showed a huge impact on the company during
this time. In addition since the government owned the company, it kept the
routes that were yielding losses open, for prestigious purposes, whereas other
commercial airlines closed all these routes. Foreign airlines provided direct
competition in carrying foreign passengers. Air-India was mostly dependent
on local passengers for their business. Due to this the air fares had to be kept
low, which resulted this leads to losses. The darkest spot on Air-India history
was, the crash of one of its Boeing 747 with 329 foreign passengers, in to the
sea, in June 1985. During the years 1991-1995, Air-India losses incurred were
$171 million, complemented with bad reputation for poor services and
facilities.

2007 to 2012: The period of unrest

In 2007, the Government decided to merge both the airlines Air India and
Indian Airlines, including Air India Express and Indian Airlines' low cost
subsidiary Alliance Air under the control one body

As part of the merger process, a new company called the National Aviation
Company of India Limited (NACIL), now called Air India Limited was
established as the holding company for Air India and its subsidiaries. In
February 2011, the merger came into effect.

The merger was to be the starting point of all the trouble and distress of the
new Air India Limited

The combined losses for Air India and Indian Airlines in 2006–07 were ₹7.7
billion (US$120 million). After the merger of the airlines, it went up to ₹72
billion (US$1.1 billion) by March 2009

In July 2009, SBI Capital Markets was appointed to prepare a road map for
the recovery of the airline. The carrier sold three Airbus A300 and one Boeing
747-300M in March 2009 for $18.75 million to survive the financial crunch

By March 2011, Air India had accumulated a debt of 425.7

billion(US$6.8 billion) and an operating loss of 220 billion (US$3.5 billion), and
was seeking 429.2 billion (US$6.8 billion) crore from the government

  17 
  

For three months (June–August 2011), the carrier missed salary payments
and interest payments and Moody’s Investor Service warned that missing
payments by Air India to creditors, such as the State Bank of India, will
negatively impact the credit ratings of those banks

A report by the Comptroller and Auditor General (CAG) blamed the decision
to buy 111 new planes as one of the major causes of the debt troubles in Air
India; in addition, it blamed on the ill timed merger with Indian Airlines as well.

REVENUE:

• Total Revenue increased from Rs.140,620.1 million in 2010-11 to

Rs.147,138.1 million (an increase of Rs.6,518.0 million) during 2011-12.

• Operating Revenue was Rs.146,753.0 million as against previous year’s

revenue of Rs.139,760.3 million (increase of Rs.6,992.7 million).

• Passenger Revenue increased from Rs.104,438.2 million last year to

Rs.114,236.9 million (an increase of Rs.9,798.7 million) which was mainly
due to increase in yield per PKM from 3.46 to 3.74 and increase in
Passenger Load Factor from 66.1 to 67.9

EXPENDITURE:

• The total expenditure incurred during the year was Rs.234,594.8 million as
compared to the previous year’s figure of Rs.213,215.9 million (an
increase of Rs.21,378.9 million).

• Operating Expenses increased from Rs.180,808.0 million to Rs.198,139.9

million (an increase of Rs.17,331.9 million) mainly due to the following :

 Increase in fuel price by Rs.23,996.1 million i.e. 39.3%;

 Increase in interest on working capital loans by Rs.4,533.1 million

18   
  

Seven steps action plan to survive Air-India:

Airlines and the millions of passengers they shuttle around the globe share a
common experience: Periods of smooth flying are interspersed with nervous
episodes of gut-wrenching turbulence. Air India is now in the middle of one of
those bumpy patches.
A seven step action plan was proposed by the management to rescue the
organization. The plan was explained below :

1. Create a crisis:
Tell the blunt truth to the stakeholders. Openly announce the current situation
and actions have to be taken place, to the stake holders and the staff.
Creating the crisis includes the sense of urgency that has to take hold of the
current airline position and stake holders.

2. Take drastic steps:

Air-India had to take some drastic steps in order to generate some revenue.
For example Air-India could have given its iconic Nariman House building or
New Delhi’s airline building to the new tenants, instead of losing them and
generate some revenue

3. Let the leader to do the job:

The first step required, to turn over the Air-India’s situation was to have a
clear mandate from the government to establish the new leadership. Re-
establishing the leadership with highly talented managers from the private
sector, who could run the airline very effectively

4. Bringing in talent from private sector:

Air-India had to focus on its long term marketing position as well as it had to
keep in mind that they may adopt the capital investments from the private
sectors. After that, the next step was, bringing the top most executive
managers from other private airline industries.

5. Learn from Satyam experience:

Satyam was one of the biggest software company established in India, until it
was closed down. The main reason for the failure of Satyam was, the
individual managers who do not react when the company was going into
heavy losses. AirIndia was also facing the same problem with the individual
managers. To eliminate this, the organization needed managers with good
communication skills and shoulder responsibility for the loss of the company.

  19 
  

6. Establishment of new network and new fleet:

Small changes in schedule may lead to bigger results. For example the flights
of Air-India would start at 9 am in the morning from the major cities to London.
By changing these timings, such that each flight will set off with a ten minutes
gap,so that runways and airport gates could be effectively utilized.
Establishing the new fleet by cutting down the loss yielding routes as well as
aircrafts may lead to positive results.

7. Marketing, yields and revenues:

The new management had to take quick steps to yield some revenues and
have to stop loss of market share. For example, establishing new plan such
that allocating a group of employees for each aircraft, who are responsible for
each and every issue of the aircraft.

20   
  

To cover up the losses: Implementation

 
• The company planned to increase its reserve cash by selling its Hotel
Corporation in Indian sub continent, worth of $220 million and some old
Boeing 747s, worth of $60million.

• The company was planning for a private collaboration from other airlines,
which was not accepted by many of the employees and the Government of
India.

• And the company plans to reduce the pay roll by $40 million by closing
some unprofitable routes and reducing the employment, which leads to a
strike by the employees and the pilots.

• The national carrier has also decided to discontinue loss-making routes,

among others steps, to rein in the spending and return to break-even.

• The use of expensive hotels or five-star hotels for stay during the travel or
holding events has been restricted unless it is unavoidable and the budget
for such activities has been reduced by 10 percent as part of the measures
by AI.

• After a long spell of losses, Air India had recorded a net profit of Rs 14.6
crore in December last on account of a healthy growth in both passengers
and cargo revenues.

• Air India's total revenue rose by 6.5 percent to Rs 2070 crore during
December 2014 as compared to Rs 1,944 crore in the same period in
2013.

• The state-run airline has reduced both its operational and net loss over the
last two fiscals. Its net loss came down to Rs 5,389 crore in the last fiscal
compared with a net loss of Rs 5,490 crore in financial year 2013 and Rs
7,559.74 crores in FY12.

• AI has a cost base of nearly Rs 24,000 crores out of which nearly Rs

14,000 crores is variable and this includes fuel cost of Rs 9,500
crores."With the decline in fuel prices, the company plans to achieve at
least a 20-25 percent reduction in its fuel bills in the next fiscal, which will
be a substantial saving for the carrier.

  21 
  

• The management has also directed that all routes should be critically
reviewed and routes which are not covering fuel cost or variable costs,
removed from the network after studying the historical trends.

• The management has also emphasised to all its employees that the
targets set under the turnaround plan and the budgets should be achieved
for this fiscal on a "war footing" and there can be no compromise on these.

• On the operational front, the measures are aimed at improving aircraft

utilisation by cutting down the turnaround time at transit stations, reducing
duty travel of crew to the minimum to increase their productivity, close
monitoring of occupancy ratios on various flights, bringing down
expenditure on entertainment at foreign stations,
 

Financial Restructuring and bail out

In April 2009, due to high fuel and loan costs, the Indian government
pumped 32 billion (US$510 million) into Air India and in March 2012 the
government bailed out Air India Ltd. with a grant of 67.5 billion(US$1.1 billion)

As of May 2012 the carrier invited offers from banks to raise up $800 million
via external commercial borrowing and bridge financing.

In 2013, the Indian government planned to delay equity infusion of Rs.300

billion (US$4.8 billion) that was slated to be infused into the airline slowly over
a period of eight years. Plans were changed as the government then planned
to spread it over a longer period of time as part of measures to bring down the
economy's financial deficit. The original plan was to pump in some Rs.300
billion (US$4.8 billion) into the airline in 2013, while less than half of that
amount was mentioned in the annual budget

Air India paid GMR Group a sum of 4.15 billion (US$66 million) towards
outstanding dues on account of charges related to the airports at Hyderabad
and Delhi. Of the amount paid, 3.4 billion (US$54 million) was paid to clear
the user development fee (UDF), airport development fee (ADF) and landing
and parking charges at the Indira Gandhi International Airport in Delhi.

The remaining 750 million (US$12 million) was paid to clear similar fees at the
Rajiv Gandhi International Airport in Hyderabad

22   
  
In order to raise funds for reconstruction, Air India decided to sell and lease
back its aircraft, including the newly acquired Boeing 787 Dreamliners.
In March 2013, the airline posted its first positive EBITDA after almost 6
years. The airlines bolstered its financial and physical performance with a 44
per cent slash in its operating losses in 2013-14 and an almost 20 per cent
growth in its operating revenue since the previous financial year.

As of January 2014, Air India is the third largest carrier in India,

after IndiGo and Jet Airways with a market share of just above 19%

  23 
  

Air India Strike-May 2012

On May 8, 2012 about 100 pilots went on medical leave as a mark of protest.

• Later, the same day it sacked ten agitating pilots and de-recognized their
union after 160 pilots failed to join duty by the given deadline.

• After putting forth an original list of 14 demands, the aviators are now
asking for reinstatement of their 101 sacked colleagues

• On the 15th of May, the Union Civil Aviation Minister Ajit Singh stated that
the Government was giving Air India one last chance and that it must
perform in order to qualify for a bailout.

• On 4 July 2012 AI management gave an assurance to Delhi High Court

that it would look into the hardships of the pilots sympathetically, the
striking pilots have decided to end the 58 day old strike immediately.

• Due to pilots' strike Air India suffered a loss of 500 crores (US$90.5
million)

Demand:

• Better salary, promotion and increment.

• Equality between Air India and India Airline Staff.

• Reappoint the pilots, who force to resign.

• Career progression

• Integration across various cadres

• Rationalization of pay scale

24   
  
Recommendations
Air-India has to cut down all the unnecessary routes, which are yielding
losses. However for prestigious purposes, they have to run the flights in those
routes, at least they have to provide the list of those routes to the government,
such that the government can subsidize those routes

• There is a need for Air-India to establish a new fleet with mid and small
sized aircrafts, to serve the less busy routes

• Air-India has to appoint, highly skilled managers from private sector, in

order to turn over the situation

• Instability in the management has to be eliminated, by appointing a firm

and constant management and director, as government is changing the
management frequently.

• Ratio of manpower to number of aircrafts has to be reduced, in order to

reduce the staff costs

• The unnecessary aircrafts have to be rented or they can sell those

aircrafts. For example, half of Air-India’s Boeing 747 aircrafts are
remaining in the hangers, without regular usage. The company have to
gave them for rent or have to sold them, in order to generate some
revenues and to reduce the maintenance costs

• Quality of service and aircraft maintenance have to be improved

• The organization has to encourage the private investments, in order to

recover some costs

• Collaboration with major international air line companies will be helpful

• The pace of decision making process has to be improved

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