A STUDY ON FINANCIAL PERFORMANCE OF AIR INDIA AND THEE

IMPACT OF COVID-19 ON THE TRANSPORTATION INDUSTRY

Research Project Submitted in Partial Fulfillment of the Requirements for

the Degree of
MASTER OF BUSINESS ADMINISTRATION
By
SAIKA FATIMA
To the
DEPARTMENT OF BUISINESS ADMINISTRATION
KHAWAJA MOINUDDIN CHISTI LANGUAGE UNIVERSITY

SUBMITTED TO
Submitted by
Dr.SAYYED HAIDER ALI
SAIKA FATIMA Head of department
ROLL NO. 2253151035
SEM- 3th, BBA KMCLU,Lucknow

1
 DECLARATION

I hereby declare that this proje ct report entitled “A Study on the Financial Performance of Air India
and the impact of COVID-19 on the Transportation Industry“ was carried out by me for the degree
of BBA under the guidance of Dr.SAYYED HAIDER ALI

of Department of Management, KMC LANGUAGE UNIVERSITY . The interpretations put forth are
based on my reading and understanding of the original texts and they are not published anywhere in
any form. The other books, articles, and websites, which I have made use of are acknowledged at the
respective place in the text. This research report is not submitted for any other degree or diploma in
any other University.

Name of the Student: SAIKA FATIMA

DEPATMENT - BUISSINESS ADMINISTRATION

2
 ACKNOWLEDEGEMENT

Every work constitutes great deal of assistance and guidance from the people concerned and this particular project
is of no exception
.

A project of the nature is surely a result of tremendous support, guidance, encouragement and help.

Wish to place on record my sincere gratitude to DR. SAYYED HAIDER ALI, for his valuable guidance. Without his
support and guidance taking this would not have been possible.

Also, wish to acknowledge enthusiastic encouragement and support extended to me by my family members. At last,
I would like to thank all the faculty of business management to help me completing this project.

I’m also thankful to my friends who provided me their constant support and assistance
 TABLE OF CONTENTS

CONTENTS PAGE NO.

CHAPTER 1: Introduction of the Topic 08-21

1.1 Rationale of the study 08

1.2 Introduction to the industry 09

1.3 Introduction of the company 17-21

1.4 Justification of the topic 22

CHAPTER 2: Review of literature 23-33

2.1 International Reviews 24-28

2.2 National Reviews 29-33

CHAPTER 3: Research Methodology 34-39

3.1 Objective of the study 35

3.2 Research Hypothesis 35

3.3 Scope of the study 35-36

3.4 Case of Secondary Data 36-39

3.5 Limitation of the study 39

CHAPTER 4: Data Representation & Analysis 40-56

4.1 Data Representation & Interpretation 41-53

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4.2 Hypothesis Testing 54-56
CHAPTER 5: Result and Discussion 57-62

5.1 Major Findings 58-59

5.2 Discussions and Suggestions 59-60

5.3 Conclusion 60-62

REFERENCES 63-66

ANNEXURE 67-69

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 CHAPTER 1

INTRODUCTION OF THE TOPIC

1.1 Rationale of the Study

1.2 Introduction to the Industry
1.3 Introduction to the Company
1.4 Justification of the Topic

7
CHAPTER 1: INTRODUCTION OF THE TOPIC

The Indian transportation sector is one of the largest and diverse transportation sectors around the
globe. The Aviation industry is one of the most important parts of the transportation sector. Covid-
19 had a drastic impact on the Transportation Industry. Transportation Industry has been forced to
shut down due to the COVID-19 lockdown. The transport sector finds itself in a totally
unprecedented situation. The primary role of this industry is to enable citizens to meet face to face.
The transport industry is one of the main facilitators of social interaction. Due to the COVID-19
lockdown, the activities of this industry have been forced to shut down (Transportation in the face of
Pandemic, 2021). Before COVID-19 transportation industry was one of the most successful
industries. Post COVID-19 although things are getting better still the industry is facing a loss, now
the industry has to bear the cost of maintaining the guidelines issued by the government. After the
COVID-19 lockdown, the prices of fuel have been increased due to which the fair charges of
different public transports such as buses, auto-rickshaws, etc have been increased. This has
unfortunately resulted in people shifting from public transport to their personal transport.

One of the leading companies in the transportation sector is Air India. Air India is the national
carrier of India, which is under the control of the government of India. The company has been in
news in recent years because it has been incurring net losses since the time it was merged with
Indian Airlines way back in 2007. Air India is under a debt trap of Rs. 60,000 crore. The government
of India had decided to privatize the air carrier. Air India has to be closed if not privatized as the
government doesn't have funds to be injected in a company whose net loss touches Rs. 8,400 crore in
the fiscal year 2018-19. Tata Group and SpiceJet MD Ajay Singh are the final bidders chosen by the
government of India. Financial performance analysis of Air India will help in understanding the
reasons behind the failure of the airline. This research paper will help in analyzing the financial
performance of air India limited from the fiscal year 2015-16 to 2018-19 and the impact of COVID-
19 on the overall transportation sector. The study has been done to evaluate the Solvency, Liquidity,
and Profitability position of Air India Limited along with it the study also includes the impact of
COVID-19 on the transportation industry around the globe.

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1.1 RATIONALE OF THE STUDY

The study aimed to analyze the financial performance of Air India and to provide a clear
understanding of the impact of COVID-19 on the transportation sector particularly the Aviation
Industry. The primary objective of the study is to do a financial analysis of Air India with the help of
some of the financial tools such as ratio analysis. The secondary objective of the study is to research
the impact of COVID-19 on the transportation industry. The study will help in analyzing the
profitability, solvency, and liquidity position of the company, i.e. whether the company can fulfill its
short-term and long-term financial requirements. The study will also help in understanding what
impact COVID-19 has made on the transportation sector and what changes have been occurred in
the sector. What steps have been taken by the transportation sector to recover the damage which has
been caused by the pandemic restrictions and the new strategy formed by the industry to start its
operations along with the pandemic restrictions? Different ratios such as Net Profit Ratio, Gross
Profit Ratio, Current Ratio, Quick Ratio, Capital Turnover Ratio, Proprietary Ratio, Debt to Equity
Ratio, and Total Assets to Debt Ratio has been calculated to study the financial performance of Air
India Limited. The research paper will help in finding out the reasons behind the failure of Air India
Limited and will provide some of the measures to overcome the losses. The primary need for
conducting the study was to find out the financial performance of Air India Limited during the study
period ranging from 2015-16 to 2018-19 and to understand the reason behind its failure. On the other
hand, it was also needed to study and understand what all impacts COVID-19 has made on the
Transportation Sector. One of the drawbacks of the study is that the financial statements of Air India
Limited for the fiscal year 2019-20 were not available and therefore the impact of COVID-19 on the
financial performance of the company was not possible to calculate. The study will help in finding
out the main reasons for the failure of Air India and will also provide some of the measures which
can help the company in recovering or re-establishing its operations. With this, the study will also
help in understanding and give a brief knowledge about the negative or positive impact which
COVID-19 has put on the transportation sector particularly on the Aviation industry. The main
reason for conduction the research is to study the financial performance of Air India Limited as well
as the impact of COVID-19 on the transportation sector.

9
1.2 INTRODUCTION TO THE INDUSTRY

The Transportation industry is one of the most important sectors for the growth of the Indian
economy. Transportation helps people and goods to move from one place to another. The Transport
industry has helped in removing regional inequalities. The transportation industry plays a key role in
economically important factors such as generation of employment, utilization of raw material and
manufactured goods, generation of tax, etc. The transportation sector consists of several other
industries such as airlines, marine, roadways, railways, and logistics, etc. The Transportation
industry is a collection of different modes of transport such as road transport, water transport, air
transport, etc. The Transportation industry allows for the production and consumption of goods to
occur at various locations across the world; this helps countries in diversifying their products and
hence enables them to expand and grow freely.

From 4000 BC to 3000 BC, human beings used animals such as horses, donkeys, and camels for
transportation. Gradually there have been different inventions that have taken place in the
transportation industry; the first invention was the discovery of wooden wheels which was
developed in Iraq during 3500 BC. In the 17th and 18th centuries, many modes of transportation
were invented such as bicycles, trains, motor cars, trucks, and planes (Robertson).

There have been many changes in the traveling pattern of the people throughout these years. In
ancient times walking was one of the major forms of transport. People used to walk from one city to
another to reach their desired destination. Palanquins also called palkis were used by rich and
noblemen for traveling. Nowadays palkis are usually used in Indian weddings. Bullock carts and
horse carriages have been used for transport in rural areas. This type of transport is usually referred
to as tangas or buggies. Later there was the invention of bicycles which took place in the year 1817.
Bicycles became one of the primary mediums of transport in many rural as well as urban areas. A
human-pulled rickshaw was one of the modes of human-powered transport by which the runner
draws a two-wheeled cart that seats one or two passengers. This type of mode of transport is
considered "inhuman" and has been banned by the government in many parts of the country. Cycle
rickshaws were introduced in India in the 1940s. Cycle rickshaws are one type of tricycle which

10
seats two to three passengers at a time. This was also banned or discouraged in many parts of the
country. In 1897, the first car ran on an Indian road. Rail transport began in the early 19th century.
There has been continuous development in the transportation industry (Transport In India).

In India, the public transport system is the most heavily used transport. Indian transportation system
is said to be one of the vastest and busiest transportation systems in the world. India's road transport
is the second-largest and one of the busiest in the world. It transports 8.225 million passengers and
about 980 million tonnes of cargo annually, as of 2015. Similarly, India's rail network is the fourth
largest and the second busiest in the world. As of 2019 Indian railway transports 8.44 billion
passengers along with 1.23 billion tonnes of freight annually. Under the transportation system, the
aviation industry in India is divided into military and civil aviation. It is one of the fastest-growing
aviation markets in the world. India's waterway network is said to be the ninth-largest waterway
network in the world (Transport In India).

MODES OF TRANSPORTATION

RAIL TRANSPORT ROAD TRANSPORT WATER TRANSPORT AIR TRANSPORT

RAIL TRANSPORT:

Indian railways provide one of the important modes of transport. In India, railways were introduced
in the year 1853. Indian Railways (IR) is a government entity under the Ministry of railways. The
first line was constructed from Bombay to Thane which was almost 34 km long (Roja, 2020). The
route length of Indian railways 67,415 km with a running track length of 95,981 km, as of 2019
(INDIAN RAILWAYS). Indian railways are the world's eighth-largest employer. It employs about
1.227 million workers as of 2019. In the fiscal year march 2020, Indian railways carried 808.6 crore
passengers and transported 121.11 crore tonnes of freight. There are different types of rail in India
for example metro, suburban rail, monorail, high-speed rail, light rail, etc (Transport In India).

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ROAD TRANSPORT:

Road transport is one of the most important modes of transport in India. Indian road transport comes
under the ministry of road transport and highways. Road transportation refers to a type of transport
in which goods and personnel are being transported using the road. Traveling through buses, bikes,
cabs, cycles or bicycles, auto rickshaws are all examples of road transport. India has the second-
largest road network in the world, comprising a total of 5.89 million kilometers (km). About 64.5%
of goods of the country are transported through roadways, along with this 90% of India's total
passenger traffic uses road transport for traveling, as of 2020 (INDIAN ROAD INDUSTRY
REPORT, 2021).

WATER TRANSPORT:

Water transport is that mode of transportation in which goods and people are being transported by
the way of water. Water transport refers to driving a boat, ship, or sailboat over a large body of water
such as sea, ocean, lake, canal, or rivers. This method of transportation falls into three categories; the
first one is Aqueducts, which includes pipelines, canals, tunnels, and bridges. The other category is
known as container shipment, it includes transport by tank truck, tank car, and tank ship. The third
category is towering, in which a tugboat is used to pull an iceberg or a large water bag. Water
transport plays a very important role in the economic development of the Indian economy. Water
transport is one of the cheapest Transports in India. India has 14500 km of inland waterways. Out of
which only 5685 km are navigable by mechanized vessels ("Water Transportation").

AIR TRANSPORT - AVIATION

Air transport is a form of transport that includes vehicles such as airplanes, helicopters, jet aircraft,
etc. Air transport comprises transportation of passengers and goods through the air with the help of
different mediums such as airplanes, helicopters, etc. Air transportation is one of the fastest modes of
transportation which connects international boundaries. It has helped in reducing the distance by

12
minimizing the time taken to travel from one place to another. Air transport helps people from
different countries to travel all over the world.

The International Air Transport Association (IATA) is a trade association of the world's airlines
founded in the year 1945. IATA represents about 290 airlines or 80% of total air traffic in 120
countries. The organization sets rules, regulations as well as forms industry policies for the airlines
and supports the functions of airlines. IATA has its headquarter in Canada, Montreal, and the
executive office is located in Geneva, Switzerland ("IATA").

Aviation in India is one of the fastest-growing aviation markets in the world according to the
International Air Transport Association (IATA). In India aviation is divided into military and civil
aviation. On 18 February 1911, the first commercial flight took place in India between Allahabad
and Naini. In the year 1947 Indian air transport was provided by four companies Indian National
Airlines, Tata Sons Limited, Air Service of India, and Deccan Airways. Later on, companies such as
Bharat Airways, Himalayan Aviation Limited, Airways India, and Kalinga Airways joined the
Indian Aviation industry in 1951 (Air Transportation, 2015).

The Indian aviation sector can be broadly divided into the following main categories: Scheduled air
transport service includes domestic and international airlines. Non- scheduled air transport service
includes charter operators and air taxi operators. Air cargo service includes air transportation of
cargo and mail. Scheduled air transportation is an air transport service undertaken between two or
more places operated according to a published timetable. It includes domestic airlines which provide
scheduled flights which India and to select international destinations. Air Deccan, Air India, Spice
Jet, IndiGo are some of the domestic players in the industry. International airlines operate from
scheduled international air services to and from India.

According to a report by the INDIAN BRAND EQUITY FOUNDATION (IBEF), in the Indian
Aviation Industry, India's passenger traffic stood at 341.05 million in the fiscal year 2020. It has
grown at a component annual growth rate (CAGR) of 11.13% during the year 2016 to 2020. The
domestic passenger traffic has stood up at 274.50 million in the fiscal year 2020, growing at a
CAGR of 12.91% over the fiscal year 2016. Similarly, International passenger traffic stood at 66.54

13
 million, growing at a CAGR of 5.01% during the fiscal year 2016-2020. Along with this freight
traffic grew at a CAGR of 5.32% during the fiscal year 2016-2020 from 2.70 million tonnes to 3.33
million tonnes. Aircraft movement from 1.60 million in the fiscal year 2016 to 2.49 million in the
fiscal year 2020 at a CAGR of 9.56%, which includes an increase in domestic aircraft movement to
2,155 thousand and International to 433 thousand at a CAGR of 9.83% and 3.57% during the fiscal
year 2020, respectively (INDIAN AVIATION INDUSTRY, 2021).

According to the Director-General of Civil Aviation (DGCA), there was a growth of 18.1% in
overall passenger traffic (Domestic plus International) leading to a total of 147.1 million passengers
in 2017-18 as compared to 2016-17. In the same period, the growth rate in domestic traffic was
18.9% totaling 123.3 million travelers and in international traffic, it was 14.4% totaling 23.8 million
travelers (SHOME & VERMA, ResearchGate, 2020)

Domestic and International Passenger Traffic in India

Year Scheduled domestic Scheduled Yearly growth in Yearly growth in Yearly growth in
passengers international domestic international total passengers
(in millions) passengers passengers passengers
(in millions) (In %) (In %)

2014-15 70.08 17.33 15.5 9.9 14.4

2015-16 85.20 18.63 21.6 7.5 18.8
2016-17 103.75 20.81 21.8 11.8 20.0
2017-18 123.32 23.80 18.9 14.4 18.1

IMPACT OF COVID-19 ON TRANSPORTATION INDUSTRY:

COVID-19 has a major impact on the transportation industry. The transportation industry is one of
those industries which provide jobs to not only educate but also to those who are illiterate and want
to earn their livelihood. The transportation industry is one of the basic mediums of income
generation for people who are illiterate and are unable to find a job. The transportation industry

14
provides different ideas of business development especially to those who are planning or struggling
to start their own business.

Most of the public transport, rental services companies suspended their services after the COVID-19
lockdown. This led to a large number of job losses in the transport industry. Automobile executives
also found that people will prefer to buy their vehicles in the future because the perception of the
people towards hygiene will change (Naik, 2020).

According to the Central Road Research Institute(CRRI) in the case of Delhi Metro which got
reopened on 9.9.2020 during the ongoing unlock 9.0, the number of passengers traveling is around
1,00,000 per day which is far lower than before COVID-19 which was around 4,80,000 per day.
This could be attributed to both the physical distancing guidelines issued by the government to
insure less number of passengers per train as well as the fair stuck in the minds of the passengers
about using public transport. Similarly, the report also states that domestic airlines reported a 33%
decline in the number of passengers posts COVID-19 lockdown. It is estimated that by the last
quarter of the current fiscal year, the Indian aviation industry is likely to report a reduction of almost
3-14% in domestic passenger traffic (s, Advani, & S, 2021).

In an article published by THE TIMES OF INDIA, COVID-19 has increased the demand for
bicycles all over the world. New York has added 40 miles of cycle lanes to its network. Similarly in
Milan, Italy, 22 miles of streets are converted into cycle lanes and many more. In India according to
Kolkata Municipal Corporation (KMC), about 15 lakh people have been out on Kolkata's roads on
cycles since June-1 (Roy, Bandyopadhyay, & Javed, 2020). In an article of THE GUARDIAN an
owner of a bike studio Varun Awasthi in BHOPAL, M.P. state that he was almost out of stock. He
had experienced about a 30% increase in sales and he also expected them to rise 50% more once he
got more bicycles (TWO WHEELS GOOD). COVID-19 led the world back in love with bicycles.
There is a huge percentage increase in sales of bicycles around the world which has ultimately
benefited the environment in terms of reduction in the pollution level.

According to an article published by the INTELLIGENT TRANSPORT more than 1.6 million buses
are registered in India. Before the COVID-19 lockdown or pre-COVID-19, the public bus sector

15
operated 170,000 buses carrying almost 70 million people per day. In a survey conducted by the
international association of public transport and the World Bank to know the impact of COVID-19
on Indian bus operators, 67% of the operators were only operating special services for the medical
department in response to the government requests. After the COVID-19 lockdown, there was a 90%
of reduction in the ridership and 81% was the operators had no ride at all (public transport
development in India).

As per the World Bank-International Association of Public Transport (UITP) study, there has been
an 80-100% reduction in passenger traffic during the lockdown, which has caused a loss of Rs.
69,000 crore to the bus operators alone in India. According to a statement by Nilayay Verma ( CEO
& CO-FOUNDER, Primus Partners), because most of the office-goers preferring to work-from-
home, public transport in cities has undergone a radical shift. This has led to continued revenue loss
to the public transport sector (Mishra, 2020).

A report published by THE FREE PRESS JOURNAL stated that the transportation department of
BHOPAL M.P. has earned Rs. 3266.38 crore in the year 2018-2019 ( i.e. BEFORE COVID-19)
(M.P. TRANSPORT DEPARTMENT, 2020). According to an article published by THE TIMES OF
INDIA, in BHOPAL M.P auto-rickshaw drivers had to change over other businesses due to lack of
passengers. Around 4000 auto-rickshaws have been sold off only in Bhopal due to lack of business.
The report also claims that the number of autos has also reduced by 50%. Before COVID-19 around
150 autos were available at the Habibganj station which has come down to 80-100 post-COVID-19.
Similarly, private cab owners have also experienced a reduction in the number of passenger’s post-
COVID-19. Before lockdown, due to very high flight frequency at the Bhopal airport, the cab drivers
were able to earn high. Post COVID-19 the situation became worse than the cab owner ended up
selling their cabs. (Singh R. , 2020)

Talking about private cab companies, in an article published by BUSINESS TODAY, Ola and zoom
Cars are planning to sell their cabs as their large number of fleets is lying idle since the beginning of
corona virus-induced lockdown. These mobility companies are looking to find prospective buyers
and have even approached pre-owned car dealers such as Mahindra First Choice (MFC) etc.
Mahindra First Choice is assessing about 60 vehicles from zoom cars (coronavirus fallout, 2020).

16
The Transportation industry has played an important role during the COVID-19 lockdown. During
the COVID-19 transportation industry helped in transporting essential commodities across the states.
During the lockdown activities of every industry were shut down but few sections of the
Transportation industry were still working to fulfill the necessary requirements of the people who are
unable to step out of their houses. The Transportation industry helped the medical department in
transporting doctors, patients, and medicines across the world. Indian railways have resumed parcel
trains during the lockdown for nationwide transportation of essential commodities and other goods
such as dairy products, medicines, medical equipment, groceries, edible oil, etc. required to meet the
needs of the citizens. Due to the continuous increase in the number of COVID-19 patients
RAILWAY coaches were converted into isolation wards for the corona virus patients. According to
reports, Indian railways had around 13,000 beds in their 125 railway hospitals across India. The
railway board, headed by the chairman, Vinod Kumar Yadav, announced in March 2020, that as
many as 20,000 train coaches spread across all railway zones in the country can be converted into
isolation wards for the patients. In a statement by the Railways Minister, Piyush Goyal, he said that
each carriage will be sanitized and can accommodate 16 patients, complete with a nurse's station, a
doctor’s cabin, and space for all the medical equipment. Each train will be said to the locations with
raising cases of COVID-19.

The Indian airways played a huge role during COVID-19 by executing the VANDE BHARAT
MISSION planned by the government. During this mission more than 3, 60,000 Indians were
brought back by the Indian airways from various countries due to COVID-19. External Affairs
Minister Spokesperson Anurag Shirivastava said that a total number of 5, 13,047 have registered
their request with the Indian mission abroad for repatriation to India. Of the people who registered,
3, 64,209 have returned under this mission. Similarly, more than 52,000 have flown back to different
countries (Sahay, 2020). COVID-19 had a very adverse impact on migrant workers. Due to the
COVID-19 lockdown, they were having no means to earn their livelihood and therefore it became
difficult for them to survive during this pandemic. Public transport played a crucial role in
transporting these migrant workers to their hometowns. Thousands of buses were engaged in
transporting these migrant workers. The Madhya Pradesh government has deployed 10,000 buses for
the migrant workers so that they can reach their desired destination.

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1.3 INTRODUCTION TO THE COMPANY
AIR INDIA -
Air India is one of the leading companies in the field of the transportation industry,
particularly under the aviation sector. Air India is India's national airline. Air India has its headquarter in
New Delhi. It has its hub at the Indira Gandhi International Airport, New Delhi. Air India was founded by
J.R.D TATA in 1932 as TATA AIRLINES. Shri Rajiv Bansal is the Chairman and Managing director of
Air India Limited. The line carried mail and passengers between the Indian cities of Ahmadabad, Bombay,
Bellary, and Madras, and Karachi, Pakistan. After a few years, Tata Airlines routes included the Indian
cities of Trivandrum, Delhi, Colombo (in Sri Lanka), Lahore, and some other locations in between. In
1946, after world war, II Tata Airlines changed its name to Air India Limited and became a public
company. In just two years, with the government having a 49% share in the company, Air India started
flying outside India to Cairo, Geneva, and London and therefore it became Air India International Limited.
In 1954, Air India started its services to Tokyo, Bangkok, Hong Kong, and Singapore. With the
introduction of the first Boeing 707-420 aircraft in 1960, Air India started using jets. In 1962, it became the
world’s first all-jet airline. In 1970, Air India moved its offices to Bombay. In 1971, the airline took
delivery of its first Boeing 747-200B named Emperor Ashoka. In 1986, Air India took delivered of Airbus
A310-300, being at that time the largest operator of this type in passenger service. In 1993, Air India took
delivery of a Boeing 747-400 named Konark and operated non-stop flights between New York and Delhi
("History Of Air India").

18
Air India's color scheme is red and white. The aircraft was painted white and the airline's name was written
in red color. The window was designed in line with the slogan your palace in the sky. The first logo of Air
India was a centaur, a stylish version of Sagittarius shooting an arrow in the circle representing the wheel
of Konark. The logo was chosen by the founder J.R.D TATA. The logo was introduced in 1948 and
represented Air India till 2007. Later on, there had been some changes in the logo of the company. The new
logo featured a red color flying swan with the 'Konark chakra' in orange color placed inside it. (The Air
India Brand)

In 2007, Air India and Indian Airlines were merged under Air India Limited. The combined loss of both
Air India and Indian Airlines in 2006-07 was 7.7million and it went up to 72 million after the merger by
March 2009. By March 2011, the company accumulated a debt of 426 billion and an operating loss of 220
billion. The company was seeking help for 429 billion from the government. Air India became the 27th
member of Star Alliance on 11 July 2014. During the fiscal year 2014-15, the revenue, operating loss, and
net loss of the company were 198 billion, 2.171 billion, and 5.41 billion respectively. Whereas during the
fiscal year 2011-12, the revenue, operating loss, and net loss of the company were 147 billion, 5.138
billion, and 7.55 billion respectively. In June 2017, the government of India decided to privatize Air India.
The government has decided to sell a 76% stake of Air India, along with low-cost airlines Air India
Express and 50% of the stake of the joint venture with Singapore Airport Terminal Services (SATS) and
therefore the government has issued an Expression of Interest (EOI). According to the EOI, the private

19
 buyer had to take a debt of 33,392 crore and due to this, no private firm wanted to buy a debt-laden airline.
After the unsuccessful attempt by the government to privatize Air India, the government has decided to
privatize the company in the fiscal year 2020-21 with a 100% stake of Air India including 100%
shareholding of Air India in Air India Express and 50% in AISATS, a venture between Air India Limited
and Singapore Airport Terminal Services (SATS Ltd.). (AISATS = Air India SATS Airport Services PVT
Limited). ("Air India")

AIR INDIA AND ITS SUBSIDIARIES

AIR INDIA LIMITED

Air India Charters Airline Allied Air India Air Air India Hotel
Transport Service Engineering
limited Services Ltd. Corporation of
Ltd. Service Ltd.
(AICL) (AASL) (AIATSL) (AIESL)
India Ltd.
“Air India For ground For maintains, (HCI)
“Alliance
Express” handling services) repairs, and
Air” overhaul services.

According to the data compiled by the Directorate General of Civil Aviation (DGCA), Air India’s
domestic market share in November 2019 was 12.1% which is the lowest of the year. There has been
a continuous fall in the market share of the company. In the year 2015, the domestic market share of
the company was 16.45%. In the year 2016, the domestic market share falls to 14.16%. In the year
2017, it falls to 13.3%. In the year 2018, it came down to 12.7%, and similarly, in the year 2019, the
market share was 13%. (Manish, 2019)

20
 AIR INDIA'S DOMESTIC MARKET SHARE
18
16
14
12
10
8
Domestic Market Shrare in %
6
4
2
0
2015 2016 2017 2018 2019
YEAR

In a statement given by Civil Aviation Minister Hardeep Singh Puri, Air India is under a debt trap
due to accumulated debt of around Rs. 60,000 crore. The government loses Rs 200 million every day
on the carrier Air India has to be closed if not privatized as the government doesn’t have funds to be
injected in a company whose net loss touches to Rs. 8,400 crore in the fiscal year 2018-19. Air
India’s privatization bid has been hit with several delays in the last two years. This time the
pandemic especially has hurt the biding process. However, at the end of 2020, the sale process began
heating up once again as airlines and companies began recovering. The government has chosen the
Tata Group and SpiceJet MD Ajay Singh as the final bidders for the airline. The sale is expected to
be completed around May/June 2021. (Siddhartha Singh, 2021)
.

1.4 JUSTIFICATION OF THE TOPIC

The topic of Financial Analysis of Air India Limited and the Impact of Covid-19 on the
Transportation Industry is one of the most important topics during this COVID-19 situation. Study
on Financial Performance of Air India Limited and the Impact of COVID-19 on Transportation

21
Industry has been documented in various literatures. The main aim of the study is to evaluate the
financial performance of Air India during the study period of four years ranging from 2015-16 to
2018-19 and also to understand the impact of COVID-19 on the Transportation Industry particularly
on the Aviation sector. This research paper will help in understanding the changes which have
occurred in the transportation industry post-COVID-19. This study will provide a clear view of the
financial situation of Air India Limited till 2020 and also provide the main reasons behind the failure
of Air India. The research involves deep information about the transportation industry as well as Air
India Limited under the transportation industry. The study involves every aspect of the transportation
industry.

22
 CHAPTER 2

REVIEW OF LITERATURE

2.1 International Reviews

2.2 National Reviews

23
 CHAPTER 2: REVIEW OF LITERATURE

2.1 INTERNATIONAL REVIEWS

(Nižetić, 2020) The study conducted by Sandro Nizetic shows the impact of COVID-19 on the
aviation industry. The research paper analyzes the mobility rate of air transportation in Europe
(EU). The data included for the research process is from January to April 2020. According to the
study, the recent pandemic caused by COVID-19 globally affected Air Transport mobility as well as
the airline industry in general. In the EU the number of reductions in the flights has reached more
than 89% when compared with the data of 2019. The main objective of the study was to investigate
the impact of COVID-19 on Air Transport mobility in regions of the EU. A comparative analysis is
been performed by the researcher between two different Airports in Croatia (EU), Zagreb and Split.
The effect of the pandemic was visible on both the airports whereas Split Airport was more affected
as compare to Zagreb Airport. In both the airports there has been a reduction in the mobility rate has
compared to 2019. Zagreb airport has expressed of almost 96.9% reduction in the number of
passengers flights during April 2020 whereas there were no passenger flights in the case of the Split
airport in April 2020. In April 2019, Zagreb Airport was having 3200 flights where in April 2020
there were only 100 flights. In April 2019, Split Airport was having 740 flights but in April 2020
there were no passenger flights in the case of split Airport. Along with the study of the mobility rate
of air transport the researcher has also stated in his research that there has been a reduction in CO2
emission. There is a reduction of CO2 emission to factor 1.81 for the commercial airport of Zagreb
and 3.49 for the seasonal airport Split.

(Kaitano Dube, 2021) Kaitano Dube, Godwell Nhamo, and David Chikodzi have done a study on
the impact of COVID-19 on the global aviation industry. The main aim of the study was to highlight
the impact of COVID-19 on the aviation industry. The researcher was mainly focused on North
America, Europe, and Pacific Asia. The study found out that the aviation industry has suffered huge
financial loss due to the pandemic restriction on the transportation industry which led to several
airlines downgraded. This raised the cost of restart and capitalization. The study also examines some
of the COVID-19 health and safety protocols adopted by the aviation industry. A host of measures

24
are being adopted to provide several layers of protection to the travelers using a high-efficiency
particulate air HEPA system. The system allows for the exchange of cabin air every 2-3 min and
kills close to 99% of COVID-19 virus particles. More frequent deeper cleaning and sanitization in
airports and aircraft. Health screening includes temperature checking. Physical distancing in the
airport. More contactless and self-service processes. The study develops and suggests a model for
airport operations during and post COVID-19 pandemic. The researcher also mentioned some
recovery pathways for the aviation industry. For a sustainable growth pathway, there is a need for
the airlines to revive their booking and cancellation policies to offer customers flexibility given that
customers might need to do last-minute amendments to travel itineraries.

(Maneenop & Kotcharin, 2020) The study examines the impact of COVID-19 on 52 listed airline
companies around the world. The study is done by using event study methodology. Three crucial
announcements are being selected for the study, which is (1) the first COVID-19 case reported
outside China on January 13, 2020 (event: 1). (2) Italy outbreak on February 21, 2020 (event: 2). (3)
the declaration of the world health organization (WHO) on the global pandemic outbreak and the
announcement made by President Trump to ban travelers from 26 European countries on March 11,
2020 (event: 3). All three events harm the stock price of the global airline industry. During event 1
there was no such effect was seen on the global stock traders. The negative impact was minimal,
implying that the event didn't catch much attention of the market worldwide. More harmful impacts
occurred during the 2 events. The airline stock performance continues to fall with a cumulative
negative abnormal return of 7.84%. When WHO announced a global pandemic i.e. during event 3
the investors overreacted which greatly diverted stock price from their intrinsic value. According to
the researcher's airline stock in Australia, Canada, the U.K., and the U.S., are the worst performers in
the post-event period in event-3. The study also suggests some measures to back up the aviation
industry. Several alleviation policies may deal with mergers and acquisitions, tax policy, and
government subsidies.

(MELAS & MELASOVÁ, 2020) The research is done to study the early economic impact of the
COVID-19 pandemic on the aviation industry. According to the study due to COVID-19 restrictions,
the airline passenger revenue drops by $ 314 billion in 2020, a 55% decline compared to 2019. The
main reason behind this is the travel restrictions. The path of recovery depends on factors such as

25
availability of government assistance, general economic conditions, consumer confidence, and the
most importantly duration and magnitude of the outbreak and successful containment measures
which could bring faster recovery for the airline industry. The study looks at two out of the many
possible path scenarios called a V-shaped path and a U-shaped path. A V-shaped scenario is a
normal shape for a recession, with a quick drop than a smooth recovery with positive growth. U-
shaped path scenario is a long path that has greater impact and slow recovery. COVID-19 is likely to
take the U-shaped path with a greater impact on the aviation industry. The study suggested that
COVID-19 has a bigger impact on Asia/ Pacific and Europe regions.

(Peoples, Abdullah, & Satar, 2020) Health crises associated with COVID-19 have severely
affected the financial stability of airline companies globally. The study mainly focuses on Asia
Pacific regions. Airline companies based in this region have experienced a 41.3% decline in revenue
passenger kilometers year-to-year for February 2020, compare to a 14.1% decline for all regions.
The main objective of the study is to highlight airline performance in the Asia Pacific regions during
COVID-19. The study suggests that recapturing financial stability total depends on the aviation
companies' ability to attain efficient and productive operations. Social distancing which requires
airline companies in the Asia Pacific region to fly with a significant percentage of unfilled seats
weakens the performance of those companies.

(Stepanyan, 2014) The study addresses the traditional ratio analysis in the airline industry based on
the U.S Carriers. Eight U.S largest airline companies have been selected for 2007-2012. Liquidity
ratio, Solvency ratio, and Profitability ratio have been used to examine the financial performance of
selected U.S carriers during the study period. This will reveal the main challenges that airlines were
facing during that period. Some of the leading airline companies which were selected for the study
were United Continental holding, Continental Airlines, Delta Air Lines, Southwest Airlines co, and
JetBlue Airways Crop. Etc. The analysis of Airline's short-term liquidity risk has shown that during
the given period they have been operating with a negative or very low level of working capital, a
current ratio less or a bit higher than 1, quick ratio mainly less than 1 which indicate that airlines
under review were quite likely to face liquidity risk in the short run. Furthermore, according to the
profitability ratio the industry has been poor throughout the study period. One of the limitations of
the study was that the traditional ratio analysis was based on the balance sheet that contains static

26
information and statements of operations that include special items therefore a further analysis will
require excluding special items for better comparison among the airline companies.

(DİZKIRICI, TOPAL, & YAGHI, 2016) The study is aimed to reveal the relationship between
profitability and traditional financial and airline-specific ratios for 17 leading major airlines.
Operating profit margin, net profit margin, return on assets was selected for the profitability rate
while current ratio, debt ratio, total assets turnover ratio, and revenue per revenue passenger
kilometer were chosen in the study as traditional financial and airline-specific ratios. The method of
Descriptive statistics, Correlation, and Regression Analysis were studied respectively to interpret the
outcome of major airlines. Some of the airline companies which were selected for the study were
Aeroflot (Russian), Air Asia (Malaysia), and Air Canada (Canada), Delta Airlines (USA), etc. The
data was collected from secondary sources from 2011-3013. According to the correlation, the total
assets turnover ratio was negative and strongly significant relations with profitability ratios in each
of the years similarly debt ratio and the mentioned profitability rates are negatively correlated.
Further, the correlation between revenue per revenue passenger kilometer and profitability rate do no
resemble each other.

(Havonen, 2019) The study shows a comparative performance analysis of airline companies. The
study is based on two airline companies EasyJet and Norwegian. The study period is from 2014 to
2018. The study aims to find out how two airline companies with the same business plan and
operating region differ in their financial performance during the study period. The study reveals that
EasyJet's financial performance is much better when compared with Norwegain. Norwegain has
struggled in almost every aspect of its business. Different financial ratios have been used by the
researcher to perform the study. Some of the ratios are Return on Assets ratio, Net Profit Margin,
Return on Equity, Current Ratio, Quick Ratio, and Debt to Equity Ratio, etc. The result of the study
shows that the Net profit margin of Norwegain is much lower than EasyJet. Norwegian's profit
margin was -5, 4.8% during the year 2014 while EasyJet's profit margin was somewhere around
10%. Secondary data has been used by the researcher for the study. The study suggests that an over-
aggressive growth strategy can be financially life-threatening for an organization like Norwegain.

27
(Meng, Gong, Liang, Li, Zeng, & Yang, 2021) The study is done to make a comparison between
China, the U.S, and Singapore Airline industry during the period of COVID-19. With the great
reduction in human mobility and daily activities, a considerable impact has been imposed on the
global air transportation industry. Different measures have been taken by the air transportation
industry to overcome the impact of COVID-19. Monthly air passenger and air freight traffic/turnover
data for China, U.S., and Singapore between Jan 2010 to May 2020 has been collected by the
researchers for the study. In the paper, air passenger traffic (in million) and air freight traffic (in
million tons) were used for the comparison between the three countries' air transportation industry.
National government all over the world has been seeking ways to balance the losses suffered by the
air transport industry. It has been observed by the study that all three countries have used different
measures to overcome form the effect of the pandemic. China has taken the lead to enforce cordon
sanitaria and travel restrictions, followed by Singapore’s cutting inbound airline services responding
to the global pandemic situation in Feb. The U.S. has actively issued flight cancelation policies at the
early stage of the pandemic. This had a major impact on the air transport industry.

(Zhang & Hayashi, 2020) The research has been made to study the impact of COVID-19 on the
transportation sector. A survey has been conducted by the researchers for the study. The survey was
conducted worldwide between the end of April 2020 and late May 2020. In particular, experts were
requested to provide their opinions and suggestions. Based on the results of the survey, the study
first reveals the realities of lockdown, restrictions, and other physical distancing requirements.
According to the findings of the survey, stay-at-home campaigns, physical distancing measures in
public transport, economic measures, and avoidance of face-to-face social contact resulted against
the transportation sector. Probably due to fear of infection inside public transport vehicles, the
decline of public transport usage was reported. The shift from public transport to motorcycle or
bicycle has been observed in many countries especially Europe. Various issues in developing
countries are pointed out by the experts such as the balance between travel demand management and
public transport operation, promoting and safeguarding public transport via taxation and
infrastructure improvements, standards of personal protective equipment for transit passengers and
drivers, and enlightenment about social distancing measures.

28
2.2 NATIONAL REVIEWS

(Abbadasari & Adapa, 2020) Profitability analysis of the Indian Aviation Industry has been done
by Miss. Rajni Abbadasari and Mr. Naganjaneyulu Adapa. The study mainly focuses on the
profitability analysis of Air India Limited. The primary objective of the study is to assess the
financial performance of Air India Limited with the help of selected financial ratios. The study
covers the period of five financial years from 2014-15 to 2018-19. Ratio analysis, mean and chi-
square test is being used by the researchers for analyzing the data. According to the study, the gross
profit margin of the company was increased from 24.53% to 36.71% during the period of 2014-15 to
2015-16. Further, the study shows that the gross profit margin of the company has gradually
decreased to 18.84 in the year 2018-19. The researcher also analyzed the net profit ratio, capital
turnover ratio, and solvency ratio of the company. The capital turnover ratio of the company has
increased 1.22 times to 7.89 times during the study period. In 2018-19 it was negatively showing
1.32 times. The solvency ratio of the company decreased from 3.68 times to 2.69 times during the
study period. The study shows that the profitability and financial performance of the company were
not good during the study period.

(SHOME & VERMA, ResearchGate, 2020) The Indian aviation industry has shown significant
growth prospects on various parameters like passenger traffic, freight traffic, aircraft movements,
and the number of airports, among others. But unfortunately, the financial performance of most
airline companies is not at all impressive. According to the study done by Samik Shome and Sushma
Verma, every five years one airline in India is being grounded; the latest was Jet Airways which had
to suspend its operations in April 2019 due to financial crises. The main object of the paper was to
analyze the financial health of different Indian airline companies. Different test models have been
used by the researcher to study the existence of financial distress on Indian aviation companies. The
study includes four leading airlines of India which are, Indigo, Jet Airways, Air India, and Spice Jet.
The data considered for the study is from 2015 – 2018. According to the research except for Indigo,
all other chosen airlines (Jet Airways, Air India, and Spice Jet) have been under financial distress.
The study further says that the presence of financial distress doesn't always lead to a situation of

29
bankruptcy. This kind of analysis is beneficial for different stakeholders like shareholders, bankers,
customers, other creditors.

(Gupta, 2015) Air India Limited bring the third largest airline company in India is still facing
challenges to survive in the present competitive era. The study mainly focuses on Air India and
unravels questions on the survival and growth of Air India Limited. The study explains the factors
which were responsible for the failure of Air India. According to the research, the merger of Air
India with other airline companies caused several challenges in front of Air India. Air India took a
loan of US $ 534 million from the government of India to fulfill its losses. Due to incomplete
mergers, the organization's structure becomes massive and unwieldy. There were two sets of
managers for practically every position and nothing was shared. Being a government-owned
organization; Air India has to contend with requests from politicians and bureaucrats that cannot be
refused. Political concentrations play a greater role than economic logic when any strategic decision
is taken. The data for the study was collected from secondary sources.

(Makwana, 2020) In her study titled, "A Comparative Study of Financial analysis of Jet Airways
and IndiGo", the main aim of the research was to analyze the financial performance of the two
selected Indian airline companies and to perform a comparative study. The data considered for the
research process is from 2011-12 to 2018-19. To make a comparative analysis net profit, operating
expenses, and revenue of both the airline companies Jet Airways and IndiGo have been used. The
researcher has used different statistical tools for the study such as mean and standard deviation. The
researchers have concluded in her study that as per profitability base Jet Airways achieved more
profit compared to IndiGo and provide the best service to the customers.

(Dhanda & Sharma, 2018) A study on the Analysis of Operating Efficiency of Air India and
IndiGo Airlines has been done by Dr. Neelam Dhanda and Mamta Sharma. The main objective of
the study was to evaluate the operating efficiency of both the airline companies and to make a
comparative study between Air India and IndiGo Airlines. The data has been collected from the past
twelve years ranging from 2004-05 to 2015-16. The data for the study was collected from secondary
sources such as the profit & loss a/c and balance sheet of the respective companies. The tools and
techniques used to analyze the data were ratio analysis, mean, standard deviation, coefficient of

30
variation, and compound annual growth rate. According to the study, the financial performance of
Air India is not that good during the study period as compared to IndiGo Airlines. Air India couldn't
able to earn profit even in a single year of the study period hence resulted in a negative mean value
of net profit ratio. The resulted expenses ratio and profitability ratio depicts that the operating
efficiency, as well as the profitability of Air India, has been poor during the study period. The
researcher concluded that there a greater need to improve the finances of Air India as it is a national
carrier that leads the Indian economy.

(Agrawal, 2020) The study was attempted to analyze the impact of lockdown and COVID-19
crises on airlines in India and possible challenges ahead. The Lockdown of two months has been
drastic for the fragile airline business distressed with thin margins, liquidity crisis, over mounting
fixed cost, and debts. Restrictive movements, weak tourism, curtailed income, compressed
commercial activities, and fear psychosis are expected to compress the passenger demand from 30%
to 60%, endangering the commercial viability of airline operations. The Indian aviation industry is
characterized by high fixed costs of nearly 35% to 40%. These costs include lease rental, employee
cost, interest charges. Per day of suspended operations as hit the industry at the rate of rupee 75-90
crore per day. The researcher has selected some of the Indian airline companies such as Air India,
Spice Jet, Jet Airways, Air Asia Limited, etc. to study the effect of COVID-19 lockdown on the
airline industry. Social distancing practices initiated by regulatory authorities and airlines to prevent
infection outbreaks will be a financial hit on Airline Company’s pocket. Social distancing norms and
sanitization norms for airlines to be followed during passengers handling, sanitizing aircraft, check-
point, and baggage, PPE kits, medical teams, etc. This cost will further dig the profitability of
airlines. The study also
Suggest some of the possible ways to cover the expected losses.

(Khan & Govindarajan, 2017) The main objective of the study was to do a profitability analysis of
Air India Limited. The data considered for the research process is from the fiscal year 2009-10 to
2014-15. Secondary data has been collected for the study from different sources such as from the
audited Profit & Loss and Balance Sheet of the company. Air India has experienced a strong 30-35%
year-on-year improvement in revenue during the study period. According to the study Air India's
domestic market share declined from 1.1% to 16.5%. To evaluate the profitability of the company

31
the researcher used some of the selected financial tools such as ratio analysis. The selected
profitability ratios are Return on Investment ratio, Gross Profit ratio, Operating profit ratio, Net
Profit Ratio, and Return on Net Worth. The gross profit of the company in the fiscal year 2010-11
was 10.32 and during the fiscal year 2011-12, it was -29.84. During the fiscal year 2013-14 the gross
profit of the company was -14.36 and similarly in the fiscal year 2014-15, it was -9.23. The main
objective behind the airline analysis is to reveal the actual techniques that airline practices to drive
away from the competition to achieve high-end profit.

(Singh C. , 2019) The primary aim of the study is to identify the factors responsible for the low sales
of Air India. It was found during the study that Air India should reduce its ticket cost on both
domestic and international flights. The customers don't find services delivered up to the mark. The
quality of food, service of cabin crew, the lateness of flight, and safety should be improved by Air
India to remain in the competitive market. The study will help in identifying the underlying causes
of passenger dissatisfaction. The data for the research process is collected from primary sources. A
structured questionnaire is a tool used to collect the data. The target population was Air India's
passengers. The study also includes some of the major factors responsible for the downfall of Air
India. One of the reasons is the merger of former India airlines and Air India. The merger resulted in
massive dissatisfaction and anger between the workers. The other reason could be the wrong
decisions taken by the company. Before the merger Air India brought 68 new plans, while Indian
Airlines brought 43 plans. These 111 plans cost almost rupee 70,000 crores. This was when Air
India was running on heavy debt. The study will help Air India in improving passenger satisfaction
and improving brand equity and goodwill.

(Agarwal & Reddy, 2020) The study is based on the epic disinvestment of air India limited which
eventually did not take off. According to the study after the merger of Air India with other Indian
airline companies the losses began to enlarge exponentially. All the efforts of the government to
restructure the airline proved to be a failure. The government is expecting more and more bidders to
participate to derive maximum out of the auction. The researcher has highlighted some of the
reasons for Air India Losses. Increases in the competition are one of the major reasons for the losses
suffered by the company. Passenger revenue earned by the company was rupees 157.73 billion that
is almost 20% lower than the forecasted rupee 212.97 billion in the fiscal year 2016. Air India lost

32
revenue due to its inefficiencies like lack of aircraft availability, faulty development, low utilization
of human resources, and lack of ancillary revenue. The data for the study is been collected from
secondary sources such as different research papers, journals, etc.

(Shah, 2014) The study deals with the profitability of Air India Limited to know the performance of
the company during the study period. The research involves the use of some of the financial tools
such as ratios analysis as well as statistical tools such as the f-test. Ratios such as Operating Profit
Ratio, Return on Investment, Cash Margin, and Net profit has been used to calculate the financial
performance of the company during the study period of five years ranging from 2009-10 to 2013-14.
With the help of one way annova f-test, the data has been compared with two other companies of the
same industry to check whether there is a significant difference between them or not. The main
objective of the study was to know the financial performance of Air India Limited and to compare it
with some other airline companies such as Jet Airways and Kingfisher Airlines. The study is based
on secondary data which was collected from different sources such as the profit and loss, balance
sheet, and cash flow of the companies. It has been observed that the Cash Margin Ratio of Air India
Limited continues to fall during the study period but was greater than the other airline companies,
i.e. Jet Airways and Kingfisher. The net profit of Air India Limited also continues to fall and from
the year 2011-12 to 2013-14 the company started suffering from net losses.

33
 CHAPTER 3

RESEARCH METHODOLOGY

3.1 Objectives of the Study

3.2 Research Hypothesis
3.3 Scope of the Study
3.4 Case of Secondary Data

34
 CHAPTER 3: RESEARCH METHODOLOGY

Research Methodology can be termed as a specific procedure or techniques used to

process and analyze information about a topic. It is a procedure to identify and select
information or data about a particular topic. The research methodology section of the
research paper helps the reader to identify the steps and techniques used by the
researcher during the study process. Methodology in research can be defined as the
systematic method to find the solution of a problem through data collection and data
analysis. (Kothari)

3.1 OBJECTIVE OF THE STUDY

 To study the financial performance of Air India Limited.

 To determine the profitability, liquidity, and solvency ratios of Air India Limited.
 To study the impact of COVID-19 on the transportation sector around the globe.
 To study the impact of COVID-19 on the National as well as International Aviation Industry.

3.2 RESEARCH HYPOTHESIS

NULL HYPOTHESIS: The Financial Performance of Air India Limited is satisfactory.

ALTERNATIVE HYPOTHESIS: The Financial Performance of Air India Limited is not

satisfactory.

3.3 SCOPE OF THE STUDY

The study shows the financial performance of Air India during the fiscal year 2015-16 to 2018-19.
The study involves different financial tools to determine the profitability and solvency of Air India.
Profitability ratio, liquidity ratio, solvency, and capital turnover ratios have been used to study the

35
financial changes that occurred in the airline during the period of 2015-16 to 2018-19. The study
also shows the impact of COVID-19 on the transportation sector, particularly on the aviation
industry. The study will help in understanding the challenges which the transportation industry has
faced during the pandemic.

3.4 CASE OF SECONDARY DATA

STUDY PERIOD: The data considered for the study ranging from 2015-16 to 2018-19.

DATA TYPE: The study is based on secondary data from Air India Limited.

DATA COLLECTION: The data has been collected from secondary sources such as the balance
sheet, profit & loss, and cash flow statement of the company along with newspaper articles,
magazines, etc.

METHOD OF DATA ANALYSIS: Ratio Analysis Method has been used to analyze the data.

 Liquidity Ratios ( Short-Term Solvency ):

Liquidity Ratios are those ratios that are computed to evaluate the capability of the entity to
meet its short-term liabilities. Commonly used liquidity ratios are:

1. Current Ratio: Current Ratio is a liquidity ratio that measures the ability of the
enterprise to pay its short-term financial obligations, i.e., current liabilities.

Computation: The formula to calculate the Current Ratio is:

Current ratio = Current Assets ÷ Current Liabilities

36
 2. Liquid Ratio or Quick Ratio: A liquid Ratio or Quick Ratio is a liability ratio that
measures the ability of the enterprise to meet its short-term financial obligations, i.e.,
liabilities.
Computation: The formulas to calculate the Quick Ratio is:

Quick/Liquid Ratio = Liquid/Quick Assets ÷ Current Liabilities

 Solvency Ratio (Long-Term Solvency)

Solvency of the business means that the business is in a position to meet its long-term
financial obligations as and when they become due. (Grewal, 2017)
Solvency ratios are the ratios that show whether the enterprise will be able to meet its long-
term financial obligations, i.e., long-term liabilities. Some of the solvency ratios are:

1. Debt to Equity Ratio: The Debt to Equity Ratio is computed to assess the long-term
financial soundness of the enterprise.

Computation: The formula to calculate the Debt to Equity Ratio:

Debt to Equity Ratio = Debt ÷ Equity (Shareholder’s Funds)

2. Total Assets to Debt Ratio: Total Assets to Debt Ratio shows the relationship between
total assets and long-term debts of the enterprise.

Computation: The formula to calculate the Total Assets to Debts Ratio is:

Total Assets to Debt Ratio= Total Assets ÷ Debt (long-term debts)

3. Proprietary Ratio: Proprietary Ratio establishes the relationship between proprietor’s

funds and total assets.

37
 Computation: The formula to calculate proprietary ratio is:

Proprietary Ratio = Proprietor’s Funds ÷ Total Assets

 Profitability Ratio

Business efficiency is measured by profitability. Profitability refers to the financial

performance of the business. Accounting Ratios measuring profitability are known as
Profitability Ratios. Some of the profitability ratios are:

1. Gross Profit Ratio: Gross Profit Ratio establishes the relationship of Gross Profit
and Revenue from Operations, i.e., net sales of an enterprise.

Computation: The formula to calculate Gross Profit Ratio is:

Gross Profit Ratio = Gross Profit ÷ Revenue from Operation × 100

2. Net Profit Ratio: Net Profit Ratio establishes the relationship between Net Profit
and Revenue from Operations, i.e., Net Sales.

Computation: The formula to calculate Net Profit Ratio is:

Net Profit Ratio =

Net Profit after Tax ÷ Revenue from Operations, i.e., Net Sales × 100

 Activity Ratios

Activity Ratios also termed as Performance or Turnover Ratios, measure how well the
resources have been used by the enterprise. These ratios are calculated based on Cost of
Revenue from Operations, i.e., Cost of Goods Sold or Revenue from Operations, i.e., Net
Sales.

38
 1. Working Capital Turnover Ratio: Working Capital Turnover Ratio shows the
relationship between working capital and revenue from operations.
Computation: The formula to calculate Working Capital Turnover Ratio is:

Working Capital Turnover Ratio = Revenue from Operations ÷ Working Capital =

Times

TRADITIONAL FINANCIAL RATIOS

LIQUIDITY RATIOS PROFITABILITY SOLVENCY ACTIVITY RATIOS

RATIOS RATIOS
Current Ratio Gross Profit Ratio Debt to Equity Ratio Working Capital
Turnover Ratio
Quick/Liquid Ratio Net Profit Ratio Total Assets to Debt -
Ratios
- - Proprietary Ratio -

3.5 LIMITATION OF THE STUDY

 The data included in the study is more related to India and somewhere the data outside India
will remain unnoticed.
 The financial performance of Air India is done only for the past 4 years.
 It is difficult to show the impact of COVID-19 on Air India because the financial statements
of the company belonging to the fiscal year 2019-20 are not available.
 The study is based on secondary data and therefore the research mainly involves old data.

39
 CHAPTER 4

DATA REPRESENTATION AND ANALYSIS

4.1 Data Representation & Interpretation

4.2 Hypothesis Testing

40
 CHAPTER 4: DATA REPRESENTATION AND ANALYSIS

4.1 DATA REPRESENTATION AND INTERPRETATION

 Liquidity Ratio:

1. Current Ratio of Air India Limited

Year Current Assets Current Liabilities Current Ratio

(rupees in millions) (rupees in millions)
2015-16 1,26,414.9 3,04,410.1 0.415:1

2016-17 3,10,540.6 63,902.5 4.85:1

2017-18 59,292.8 4,40,905.9 0.13:1

2018-19 53,801.2 7,06,259.9 0.076:1

Interpretation:
The above table shows the financial data relating to the liquidity position of Air India Limited. The
table shows the calculation of the Current Ratio of Air India Limited from the fiscal year 2015-16 to
2018-19. In the table, the Current Ratio of the airline in the fiscal year 2015-16 was 0.415, 2016-17
was 4.48, 2017-18 was 0.13 and in 2018-19 it was 0.076. As per the data of the table, the Current
Ratio of the company has increased from 0.415 (2015-16) to 4.85 (2016-17) and after that the ratio
decrease from 0.13 (2017-18) to 0.076 (2018-19). The objective of calculating the Current Ratio is
to assess the ability of the company to meet its short-term financial obligations, i.e. current
liabilities.
The Current Ratio of the company was 0.415 during the year 2015-16 which increased to 4.85
during the fiscal year 2016-17. In the year 2017-18 the ratio decreased to 0.13 and in the year 2018-

41
19 it came down to 0.076. This shows that the company is having difficulty in fulfilling its short-
term financial requirements.

Fig.1: Graphical Representation of the Current Ratio of Air India Limited.

5
4.5
4
CURRENT RATIO

3.5
3
2.5
2
1.5 CURRENT RATIO
1
0.5
0
2015- 2016-
16 2017- 2018-
17 18 19
YEAR

The above figure shows the graphical representation of the Current Ratio of Air India Limited during
the fiscal year 2015-16 to 2018-19. The graph represents that the current ratio of Air India during the
year 2015-16 is 0.415. The ratio increases to 4.85 in the year 2016-17 and then the ratio continues to
fall and came to 0.076 in the final year of the study period i.e., 2018-19.

42
 2. Quick Ratio of Air India Limited.

YEAR QUICK ASSETS CURRENT QUICK RATIO

(rupees in millions) LIABILITIES
(rupees in millions)
2015-16 11,403.8 3,04,410.1 0.037:1

2016-17 51,135.5 3,10,540.6 0.164:1

2017-18 49,519.5 4,40,905.9 0.112:1

2018-19 44,278.6 7,06,259.9 0.062:1

Interpretation:
The above table shows the financial data of Air India Limited related to the Liquidity position of the
company during the study period. The table represents the Quick Ratio of the company. According
to the calculations, during the fiscal year 2015-16, the Quick Ratio of the company was 0.037, in
2016-17 the ratio was 0.164, in 2017-18 it was 0.112 and in the fiscal year 2018-19, it was 0.062.
According to the data in the table, the Quick Ratio of the company continues to change during the
study period. The objective of computing the Quick Ratio is to assess whether the company would
be able to meet its short-term financial obligations, i.e. liabilities. There has been a continuous
decrease in the Quick Ratio of the company. During the year 2015-16 the Quick Ratio of the
company was 0.037 which increased to 0.164 in the year 2016-17. In the year 2017-18, the ratio
came down to 0.112 and finally it decreased to 0.062 in the year 2018-19. This clearly shows that the
capacity of Air India to meet its short-term financial requirements is very weak.

43
Fig.2: Graphical Representation of Quick Ratio of Air India Limited.

0.18
0.16
0.14

QUICK RATIO
0.12
0.1
0.08
0.06 QUICK RATIO
0.04
0.02
0
2015-16
2016-17
2017-18
2018-19
YEAR

The figure shows the graphical representation of the quick ratio of Air India Limited during the
fiscal year 2015-16 to 2018-19. The graph represents that the Quick Ratio of Air India Limited
during the year 2015-16 is 0.037. Quick Ratio of the company increases to 0.164 in the year 2016-
17. Then the ratio continues to fall and came to 0.062 in the final year of the study period i.e., 2018-
19. The graph clearly represents that the Quick Ratio of the company is lower than that standard
ratio that is 1:1. This shows that the company is not in a position to meet its immediate current
liabilities.

 Solvency Ratios:

1. Debt to Equity Ratio of Air India Limited

YEAR DEBT EQUITY DEBT TO EQUITY

(rupees in millions) (rupees in millions) RATIO
2015-16 3,69,457.4 -1,97,309.5 -1.872:1

44
2016-17 3,47,170.2 -2,00,517.5 -1.731:1

2017-18 3,27,759.8 -2,48,937.1 -1.316:1

2018-19 1,11,271.4 -29,46,663.6 -0.377:1

Interpretation:

The above table shows the financial data of Air India Limited related to its solvency position.
The table shows the Debt to Equity Ratio of the company during the year 2015-16 to 2018-
19. According to the calculations, the Debt to Equity Ratio of the company during the fiscal
year 2015-16 was -1.872, in the year 2016-17 it was -1.731, in the year 2017-18 it was -1.316
and during the year 2018-19, it was -0.377. The Debt to Equity Ratio of the company is
negative throughout the study period which shows that the company has more liabilities than
assets and therefore the company is at extreme risk.

Fig.3: Graphical Representation of Debt to Equity Ratio of Air India Limited.

0
-0.2
DEBT TO EQUITY RATIO

-0.4
-0.6
-0.8
-1
-1.2 DEBT TO EQUITY RATIO

-1.4
-1.6
-1.8
-2

YEAR

45
The above figure shows the graphical representation of the Debt to Equity Ratio of Air India Limited
during the study period 2015-16, 2016-17, 2017-18, and 2018-19. The graph represents that the Debt
to Equity Ratio of the company throughout the study period is negative.

2. Total Assets to Debt Ratio of Air India Limited

YEAR TOTAL ASSETS DEBT TOTAL ASSETS

(rupees in millions) (rupees in millions) TO DEBT RATIO

2015-16 506514.7 3,69,457.4 1.370:1

2016-17 459152.1 3,47,170.2 1.322:1

2017-18 519895.3 2,21,667.6 2.345:1

2018-19 523521.8 1,112,71.4 4.70:1

Interpretation:

The above table shows the financial data relating to the solvency position of Air India Limited. The
table shows the Total Assets to Debt Ratio of Air India Limited during the study period ranging from
2015-16 to 2018-19. According to the calculations, the Total Assets to Debt Ratio of the company
during the year 2015-16 was 1.370, 2016-17 was 1.322, 2017-18 was 2.345 and during 2018-19 it
was 4.70. The objective of computing the ratio is to establish the relationship between total assets
and long-term debts of the company. It measured the extent to which debt is covered by the assets.

46
 Fig.4: Graphical Representation of Total Assets to Debt Ratio of Air India.

TOTAL ASSETS TO DEBT RATIO

4.5
4
3.5
3
2.5
2
1.5 TOATL ASSETS TO DEBT
1 RATIO
0.5
0

YEAR

The above figure shows the graphical representation of the Total Assets to Debt Ratio of Air India
Limited during the study period ranging from 2015-16 to 2018-19. The graph represents that the
Total Assets to Debt Ratio of the company is increasing during the study period.

3. Proprietary Ratio of Air India Limited

YEAR PROPRIETORS TOTAL ASSETS PROPRIETARY

FUNDS RATIO
(rupees in millions) (rupees in millions)
2015-16 -1,68,019.5 5,06,514.7 -0.33:1

2016-17 -1,99,145.1 4,59,152.1 -0.43:1

2017-18 -3,36,855.4 5,19,895.3 -0.64:1

2018-19 -4,42,767.5 5,23,521.8 -0.84:1

47
Interpretation:
The above table shows the financial data relating to the solvency ratio of Air India Limited.
The table shows the Proprietary Ratio of Air India Limited ranging from 2015-16 to 2018-19.
According to the calculations, the Proprietary Ratio of the airline company during the fiscal
year 2015-16 was -0.33, 2016-17 was -0.43, 2017-18 was -0.64 and during 2018-19 was -
0.84. The objective of computing this ratio is to measure the proportion of total assets
financed by Proprietors Funds. The ratio is important for creditors as they can ascertain the
position of shareholders' funds in the total assets employed in the company and thus the
safety margin available to them. The Proprietary Ratio throughout the study period is
negative which shows that the company may be using too much debt, rather than equity to
fulfill its operational needs. This shows that the financial position of Air India Limited is not
stable.

Fig.5: Graphical Representation of Proprietary Ratio of Air India Limited.

0
-0.1
PROPRIETORY RATIO

-0.2
-0.3
-0.4
-0.5 PROPRIETARY RATIO
-0.6
-0.7
-0.8
-0.9

YEAR

The above figure shows the graphical representation of the Proprietary Ratio of Air India
Limited during the study period ranging from 2015-16 to 2018-19. The graph represents that
the Proprietary Ratio of the company continues to increases negatively throughout the study
period. In the year 2015-16 the ratio was -0.33 which fall down to -0.84 during the final year
of the study period 2018-19.

48
 4. Solvency Ratio of Air India Limited
YEAR TOTAL ASSETS TOTAL OUTSIDE SOLVENCY RATIO
(rupees in millions) LIABILITIES
(rupees in millions)
2015-16 506514.7 6,74,534.2 0.75:1
2016-17 459152.1 6,58,297.2 0.69:1
2017-18 519895..3 7,68,832.4 0.67:1
2018-19 523521.8 8,17,579.2 0.64:1
Interpretation:
The above table shows the financial data relating to the solvency position of Air India Limited. The
table shows the Solvency Ratio of the company during the study period. According to the
calculations, the solvency ratio of the company during the fiscal year 2015-16 was 0.75, 2016-17
was 0.69, 2017-18 was 0.67, and during 2018-19 was 0.64. The solvency ratio of the company
continues to decrease throughout the study period. In the year 2015-16, the ratio was 0.75 which
decreased to 0.69 during the year 2016-17. Similarly, the ratio decreased to 0.67 in the year 2017-18
and finally in the year 2018-19 the ratio came down to 0.64. According to the calculation, the
capacity of the company to meet its long-term financial obligations is becoming weak.

Fig.6: Graphical Representation of Solvency Ratio of Air India Limited.

0.76
0.74
0.72
SOLVENCT RATIO

0.7
0.68
0.66 SOLVENCY RATIO
0.64
0.62
0.6
0.58
2015-16 2016-17 2017-18 2018-19
YEAR

49
 The above figure shows the graphical representation of the Solvency Ratio of Air India
Limited during the study period ranging from 2015-16 to 2018-19. The graph represents that
the solvency ratio of the company continues to fall. This clearly indicates that the firm’s
financial performance is not good during the study period.

 Profitability Ratios

1. Gross Profit Ratio of Air India Limited

YEAR GROSS PROFIT REVENUE FROM GROSS PROFIT

OPERATIONS RATIO
(rupees in millions) (rupees in millions)
2015-16 85,545 2,33,026.3 36.72%

2016-17 84,877.90 2,56,436.4 33.10%

2017-18 77,707.10 2,70,979.1 28.60%

2018-19 55,109.10 2,92,433.1 18.84%

Interpretation:
The above table shows the financial data relating to the profitability position of Air India
Limited. The table shows the Gross Profit Ratio of the airline company during the study
period ranging from 2015-16 to 2018-19. According to the calculations, the Gross Profit
Ratio of the company during the fiscal year 2015-16 was 36.72%, 2016-17 was 33.10%,
2017-18 was 28.60%, and during the year 2018-19, it was 18.84%. It has been observed that
the Gross Profit Margin of the company continues to fall during all the four years of the
study period ranging from 2015-16 to 2018-19. The main objective of computing the Gross
Profit Ratio is to determine the efficiency with which production and purchase operations

50
and selling operations are carried on. The Gross Profit Ratio of the company continues to
decrease. The Gross Profit Ratio decreased to 33.10% in the year 2016-17 from 36.72% in
the year 2015-16. Similarly, the Gross Profit Ratio Decreased to 28.60% in the year 2017-18
and finally, it came down to 18.84% in the year 2018-19.

Fig. 7: Graphical Representation of Gross Profit Ratio of Air India.

GROSS PROFIT MARGIN

40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00% GROSS PROFIT RATIO
5.00%
0.00%

YEAR

The above figure shows the graphical representation of the Gross Profit Ratio of Air India
Limited during the fiscal year 2015-16, 2016-17, 2017-18, and 2018-19. The graph
represents that the gross profit ratio of the company is not good during the study period.

2. Net Profit Ratio of Air India Limited

YEAR NET PROFIT REVENUE FROM NET PROFIT

(rupees in millions) OPERATIONS RATIO
(rupees in millions)
2015-16 -43,106.50 2,33,026.3 -18.50%

2016-17 -62885.20 2,56,436.4 -24.52%

2017-18 -5799.10 2,70,979.1 -21.40%

51
 2018-19 -87,724.0 2,92,433.1 -30.00%

Interpretation:
The above table shows the financial data relating to the profitability position of Air India
Limited. The table shows the Net Profit Ratios of the company during the study period of
four years ranging from 2015-16 to 2018-19. According to the calculations, the Net Profit
Ratio of Air India Limited during the fiscal year 2015-16 was -18.50%, 2016-17 was -
24.52%, 2017-18 it was -21.40% and during 2018-19 it was -30.00%. According to the
analysis the company suffered from Net Loss during the study period considered for the
analysis. Net Profit Ratio is an indicator of the overall efficiency of the business. Higher the
Net Profit of the company betters the performance. The ratio helps in determining the
operational efficiency of the company. According to the above calculation, the company has
a negative Net Profit Ratio throughout the study period. This clearly shows that the
operational efficiency of the company is not good.

Fig. 8: Graphical Representation Net Profit Ratio of Air India Limited.

-5
NET PROFIT MARGIN

-10

-15 NET PROFIT RATIOS

-20

-25

-30
YEAR

The above figure shows the graphical representation of the Net Profit Ratio of Air India
Limited during the study period ranging from the fiscal year 2015-16 to 2018-19. The Net
Profit Ratio of the company is negative throughout the study period i.e., the company is
suffering from net loss during all the four years of study.

52
 Activity Ratio
1. Capital Turnover Ratio of Air India Limited

YEAR NET SALES NET CAPITAL CAPITAL

(Rupees in Millions) EMPLOYED TURNOVER RATIO
(Rupee in Millions)
2015-16 2,33,026.3 1,76,886.6 1.32 times

2016-17 2,56,436.4 1,14,272.9 2.24 times

2017-18 2,70,979.1 3,4,342.4 7.89 times

2018-19 2,92,433.1 -2,22,063.7 -1.32 times

Interpretation:
The above table shows the financial data relating to the performance or efficiency position of
Air India Limited. The data shows the Capital Turnover Ratio of the company during the
study period ranging from 2015-16 to 2018-19. According to the calculations, the Capital
Turnover Ratio of the company during the fiscal year 2015-16 was 1.32 times, 2016-17 was
2.24 times, 2017-18 was 7.89 times, and during 2018-19 it was -1.32 times. The objective of
computing the Capital Turnover Ratio is to determine the company’s financial performance
and analyze its overall operations.

53
Fig. 8: Graphical Representation of Capital Turnover Ratio of Air India Limited.

8
7
6
CAPITAL TURNOVER RATIO

5
4
CAPITAL TURNOVER
3
RATIO
2
1
0
2015-16 2016-17 201-18 2018-19
-1
-2
YEAR

The above figure shows the graphical representation of the Capital Turnover Ratio of Air
India Limited during the study period of four years ranging from 2015-16 to 2018-19.

54
4.2 HYPOTHESIS TESTING

1. H0 Hypothesis:
The financial performance of Air India Limited is satisfactory.
2. H1 Hypothesis:
The financial performance of Air India Limited is satisfactory.

 Liquidity Ratio: The standard for acceptable Liquidity Ratio differs from industry to
industry. A good liquidity ratio is anything greater than 1. If the liquidity ratio of the
company is above 1 it indicates that the company is in good financial health and is
less likely to face financial hardships. The higher the liquidity ratio, the higher is the
safety margin that the company possesses to meet its current liabilities.

The current ratio of the company during the study period of four years ranging from
2015-16 to 2018-19 is less than 1 except in the year 2016-17. According to the overall Current Ratio
of all the four years, the company's financial situation is not good. Similarly, the Quick Ratio of the
company during the study period is less than 1. This indicates that the financial performance of Air
India Limited during the study period is not in a good position and the company is unable to meet its
short-term requirements. The financial performance of Air India Limited is NOT SATISFACTORY.
Therefore, H0 Hypothesis = REJECTED.

 Profitability Ratio: As a general rule of thumb, a 10% Net Profit Ratio is considered
average, a 20% ratio is considered high or good, and a 5% ratio is considered to be
the lowest. Similarly, a higher Gross Profit Ratio is better as it leaves a higher margin
to meet operating expenses and the creation of reserves. A Gross Profit Ratio of 65%
is considered to be healthy for the company. A good profitability ratio of a company
indicates the good financial performance of the company.

The Gross Profit Ratio of Air India Limited during the study period of four years
ranging from 2015-16 50 2018-19 continues to fall. The overall Gross Profit of the
company is less than 65% which shows that the efficiency of Air India Limited is

55
 poor. The company suffered Net Losses throughout the study period. The Net Loss of
the company continues to increase during the study period. In the year 2015-16, the
net loss was -18.50 which increased and came to -30.00% in the final year 2018-19.
This indicates that the financial health of the company is not good during the study
period. The financial performance of Air India Limited is NOT SATISFACTORY.
Therefore, H0 Hypothesis = REJECTED.

 Solvency Ratios: In terms of Solvency Ratios, a good debt-to-equity ratio is anything

lower than 1.0. A ratio of 2.0 or higher is considered risky for the organization. If the
debt-to-equity ratio is negative, it indicates that the company has more liabilities than
assets and therefore the company would be considered at extreme risk. A high
Proprietary Ratio means adequate safety for the creditors. But a very high means an
improper mix of proprietors' funds and loan funds. A low ratio means lower safety
for the creditors.

The debt-to-equity ratio of the company during the study period was negative. This
indicates that the company has more liabilities than assets and therefore the financial
position of the company is very poor. On the other hand, the proprietary ratio of the
company is also negative this also indicates that the company is highly dependent on
debts for its operations. The overall solvency ratios of the company indicate that Air
India Limited is unable to meet its long-term debt obligations. This shows that the
financial performance of the company is NOT SATISFACTORY.
Therefore, H0 Hypothesis = REJECTED.

 Activity Ratio: Higher Turnover Ratio means, better use of capital or resources,
which in turn, means a better profitability ratio. The ideal capital ratio is considered
between1.2 to 2. The Capital Turnover Ratio of Air India Limited during the study
period was lower in the year 2015-16 i.e. 1.32 times. Then the ratio increased to 2.24
times in the year 2016-17. In the year 2017-18, it came up to 7.89 times. During the
final year, it became negative i.e. -1.32 times. According to the overall Capital
Turnover Ratio, the company is using its capital or resources in a better way except

56
 during the year 2018-19. This shows that the financial performance of the company is
SATISFACTORY.
Therefore, H0 Hypothesis = ACCEPTED.

So as per the results of hypothesis testing, it is clear that the financial performance of the Air India
Limited is not satisfactory. The liquidity and profitability ratios of the company are lower than the
standard ratios. The company has suffered net losses during all the four years of study period. The
Gross Profit margin of the company has also experienced continues fall during the study period. All
this shows that the company is at great risk. According to the results, the null hypothesis had been
rejected. Null hypothesis in the case of Capital Turnover Ratio is accepted because during the
hypothesis testing the company experienced increase in the Capital Turnover Ratio except the year
2018-19. This shows that the company is using its capital resources efficiently except the year 2018-
19. Overall calculations shows that the financial performance of Air India is not satisfactory and
therefore, Null Hypothesis is been rejected.

57
 CHAPTER 5

RESULTS AND DISCUSSION

5.1 Major Findings

5.2 Discussions and Suggestions
5.3 Conclusion

58
 CHAPTER 5: RESULTS AND DISCUSSION

5.1 MAJOR FINDINGS

 Ratio analysis has been done to calculate the financial performance of Air India
Limited. Profitability Ratios, Liquidity Ratios, Solvency Ratios, and Activity Ratio
have been used for the analysis.
 Secondary data has been used for conducting the study ranging from the fiscal year
2015-16 to 2018-19.
 The overall financial performance of Air India Limited is not satisfactory during the
study period.
 The Current Ratio of the company throughout the study period was lower than the
required standard. This indicates that the company is unable to meet its short-term
financial requirements.
 The Quick Ratio of the company is also less than 1 which indicate that the company's
financial health is not good during the study period
 The company was suffering from Net Losses throughout the study period. There was
a continuous increase in the net loss of the company during the selected four years. In
the year 2015-16 the net loss of the company was 27.61% which increased and
reached 30.00% in the year 2018-19.
 A negative Net Profit Ratio indicates that the company's operational efficiency is
decreasing year by year.
 The Gross Profit Ratio of the company is lower than 65% which shows the poor
financial health of the company.
 The debt-to-equity ratio of the company was negative throughout the study period.
This implies that the company has more liabilities than assets and therefore the
company is at high risk during the study period.
 The proprietary ratio of the company was also negative throughout the study period.
This shows that the company is heavily dependent on debts for its operations.
 The Capital Turnover Ratio of the company during the study period continues to
change. During the period of 2016-17 to 2017-18 the ratio was satisfactory, but in the

59
 year 2018-19, it became negative. Overall the company is using its capital and
resources efficiently.
 It is observed during the research that the main reason behind the failure of Air India
Limited was its merger with other Indian airline companies.
 The domestic market share of Air India continues to decline during the study period.
 The government of India is planning to sell Air India Limited as it is becoming
difficult for the government to invest in a company that is undergoing extreme losses.
 In late 2019, the government of India has decided to sell a 100% share of the
company and announced an EOI but due to the ongoing pandemic situation, the
privatization of the company is at hold.
 COVID-19 had a negative impact on the Transportation Industry.
 The main reason behind the negative impact of COVID-19 is the travel restrictions
around the globe.
 It was observed during the study that there has been a 70% reduction in the number of
passengers. Public transport has been severally affected by the COVID-19 pandemic.
 The profitability margin of many transportation companies has been negatively
affected. Many of the companies have to shut down their operations as it became
difficult for them to survive during the pandemic.
 The cost of following some of the important COVID-19 protocols such as
maintaining social distancing in public transportation, 50% of the passengers allowed
in public transport, proper sanitization, etc. have to lead to a reduction in the profit
margin of the transport companies.
 New strategies and measures is been opted by the transportation industries to
overcome the losses they have come across during the pandemic.

60
5.2 DISCUSSIONS AND SUGGESTIONS

 With the arrival of many low-cost domestic and international carriers, Air India
should reduce its cost of the ticket on both domestic and international flights.
 The quality of food, services of cabin crew, the lateness of flights, and safety should
be improved by the company to remain competitive in the market.
 Air India should use its resources more efficiently to survive in the market.
 Air India needs a strategic leader under whose guidance the company can float
successfully.
 Re-establishing a new leadership team of Air India by incubating the best private
managers who can demonstrate better capacities to run an airline.
 The new leadership team should be given full freedom to act and accomplish the
mission.
 The company should bring in new talents from the private sector.
 Realigning flights will help in better utilization of plans and ground assets.
 Marketing activities play a very important role in a company’s development. Air
India should focus more on marketing activities to improve its brand image.
 Air India can lease out its wide-bodied aircraft and earn money from them.
 The proper implication of COVID-19 protocols can help the transportation industry to
overcome the losses.
 Ensuring that the traveling is safe for the passengers can attract them towards public
transports.
 Adjusting routing is a good way to support Social Distancing. To keep traveler
density in public transport low, new distribution rules must apply.
 There is a need for government support for the local transportation company so that
they can restart their operations.

61
5.3 CONCLUSION
Transportation Industry has always been a major part of our society. A sudden outbreak of
COVID-19 lead to the loss of many livelihoods. This research paper focuses on two aspects
of the Transportation Industry, one is to analyze the financial situation or performance of Air
India and the other is to study the impact of COVID-19 on the transportation Industry. The
research will help in exploring how the pandemic affected the Transportation Industry. The
research will also help in evaluating the financial performance of Air India which is one of
the leading companies in the Transportation Industry. Profitability, Solvency, Liquidity, and
Activity Ratios of Air India have been evaluated in the study from the fiscal year 2015-16 to
the fiscal year 2018-19. It was not possible to calculate the financial performance of Air
India Limited after COVID-19 due to the unavailability of the financial statements of the
company for the fiscal year 2019-20. The financial performance of Air India was not
satisfactory throughout the study period. The company is under a debt trap of Rs. 60,000
according to the reposts of 2020. The Net Profit Ratio of the company during the study
period of four years ranging from 2015-16 to 2018-19 was negative, i.e. the company is
suffering from Net Losses throughout the study period. After analyzing the selected
profitability ratios (Net Profit and Gross Profit Ratio) it was found out that the operational
efficiency of the company is very poor. The solvency position of the company is also not
satisfactory during the study period. The debt to equity ratio of the company in the year
2015-16 is -1.872 and during the final year, 2018-19 is -0.377. This shows that the company
is at high risk. The liquidity ratio of the company was also lower than the standard ratio
which indicated that Air India is unable to fulfill its short-term financial requirements.
According to the research, the main reason behind the failure of Air India is its merger with
Indian Airlines. Hence, the financial performance of Air India Limited is not satisfactory
throughout the study period. Looking at the losses of the company the government of India
has decided to privatize the company. The government is selling a 100% stake of Air India
including 100% shareholding of Air India in Air India Express and 50% in AISATS (Air
India SATS Airport Services PVT Limited). The final bidders shortlisted by the government
are Tata Group and SpiceJet MD Ajay Singh.
COVID-19 has widely affected the TRANSPORTATION INDUSTRY. Due to the new
guidelines issued by the government to slow down the spread of viruses the transportation

62
industry has experienced huge changes in its performance. To make public transport safer for
staff and individuals using it, there have been new norms for traveling in public transports
which can be termed as "NEW NORMAL IN THE TRANSPORTATION INDUSTRY”.
One of the steps taken by the government is maintaining social distancing while traveling on
public transport such as buses, trains, etc. For maintaining social distance only 50% of the
passengers can travel in particular public transport. Before COVID-19 public transports were
called one of the most crowded places where it was difficult for people to even stand but post
COVID-19 due to maintaining social distancing guidelines public transport has experienced a
huge change. Before COVID-19 it was easy to travel on a bus or a train but post COVID-19
to travel on a bus or a train within states a particular person is mandatory to reserve his or her
seat. COVID-19 crisis has put a spotlight on the safety of transportation workers such as
drivers, conductors, etc. Drivers, conductors used to wear PPE while working. Sanitization of
buses, trains have been done for maintaining hygiene standards. Passengers were requested to
wear a mask while traveling on public transport. These new ways of traveling have surely
brought safety and hygiene standards to the public transportation system. Although , the
industry is still facing some unpredictable challenges and trying to overcome them.
Transportation as a whole is responding with creativity to the COVID-19 crisis. Car makers
are shifting production to make respirators. Rail operators are turning high-speed trains into
rolling hospitals. Taxi and ride-sharing services offer free transport to patients and medical
staff or delivering food to needy peoples. Following the rules and regulations of the
government, the transportation industry is trying to gear up but still, it will take time.

63
 REFERENCES

1. "Air India". (n.d.). Retrieved from Wikipedia:

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2. "History Of Air India". (n.d.). Retrieved from seatmaestro:
https://www.seatmaestro.com/airlines-seating-maps/air-india/history/
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 ANNEXURE

BALANCE SHEET OF AIR INDIA LIMITED 2015-16 AND 2016-17

(Rupees in Millions)

PARTICULARS MARCH 2016 MARCH 2017

I EQUITY AND LIABILITIES :

Shareholders' Funds
a) Share Capital 214,960.00 267,530.00
b) Reserves and Surplus -412,269.50 -468,047.20
-241,538.70 -200,517.20
Share Application Money Pending Allotment 29,290.00 1,32.1

Non-current Liabilities
a) Long Term Borrowings 370,479.60 335,498.40
b) Other Long Term Liabilities 1,074.90 586.4
c) Long Term Provisions 17,580.80 11,671.80
Current Liabilities
a) Short Term Borrowings 156,616.10 125,714.30
b) Trade Payables 89,134.10 93,176.50
c) Other Current Liabilities 94,840.50 89,573.30
d) Short Term Provisions 3,410.80 2,076.50

TOTAL 520,888.10 459,152.10

ASSETS
Non-current Assets
a) Fixed Assets
(i) Tangible Assets 318,905.00 294,963.50
(ii) Intangible Assets 3,945.10 628.4
(iii) Capital Work-in-Progress 6,813.90 2,320.90
(iv) Intangible Assets under development 13.50 13.5
(v) Investment Property

b) Non-Current Investments 302.20 16,717.70

c) Deferred Tax Assets (net) 28,572.70 28,425.20
d) Long Term Loans and Advances 26,185.90 52,019.30
e) Long Term Trade Receivables 47.4 61.6

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f) Other Non-Current Assets 47.9 99.5

Current Assets
a) Inventories 16,931.70 12,767.00
b) Trade Receivables 22,534.60 18,572.30
c) Cash and Bank Balances 10,827.70 7,351.40
d) Short Term Loans and Advances 10,366.80 10,826.00
e) Other Current Assets 75,393.70 14,385.80

TOTAL 520,888.10 456,152.10

BALANCE SHEET OF AIR INDIA LIMITED 2017-18 AND 2018-19

(Rupees in Millions)

PARTICULARS 18-Mar 19-Mar

EQUITY AND LIABILITIES :

1 Equity
(i) Equity Share Capital 286,902.10 326,652.10
(ii) Other Equity -535,839.20 -621,315.70
-248,937.10 -294,663.60
2 Liabilities
Non-current Liabilities
a) Financial Liabilities
(i) Borrowings 302,275.30 82,999.60
(ii) Trade Payables
(iii) Other Financial Liabilities 166.7 47.9

b) Provisions 302,442.00 28,271.80

c) Other Non Current Liabilities 25,484.50

Current Liabilities
a) Financial Liabilities
(i) Borrowings 219,554.90 276,303.40
(ii) Trade Payables 821,157.00 82043
(iii) Other Financial Liabilities 80,457.60 283,464.40

b) Other Current Liabilities 56,623.70 62,331.90

c) Provisions 2,112.70 2,117.20

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TOTAL 519,895.30 523,521.80

ASSETS:

1 Non-current Assets
(i) Tangible Assets 264,655.90 255,284.60
(ii) Capital Work-in-Progress 813.6 726.7
(iii) Investment from Property 9,919.60 4,377.70
(iv) Intangible Assets 401.50 194.7
(v) Intangible Assets under development 82.9 12.5

(vi) Financial Assets:

(a) Investments 17,461.60 9,330.70
(b) Trade Receivables 57.3
(c) Loans 3,056.00 3,316.40
(d) Others 39,189.80 11,200.30

(vii) Income Tax Assets (Net) 2,591.30 2,264.10

(viii) Deferred Tax Assets (Net) 28,425.20 28,425.20
(ix) Other Non-Current Assets 6,029.50 5,877.70

2 Current Assets
(i) Inventories 9,031.90 8,063.80
(ii) Financial Assets:
(a) Trade Receivables 17,767.20 19,921.00
(b) Cash and Cash Equivalents 1886 2,452.20
(c) Bank balance other than (b) above 5,545.80 5,980.10
(d) Loans 121.9 145.8
(e) Others 4,872.30 3,122.50

(iii) Income Tax Assets (Net) 741.4 1.458.8

(iv) Other Current Assets 19,329.30 12,657.00

3 Assets held for Sale 87,918.30 148,710.10

TOTAL 519,895 523,521.80

70