CASE STUDY ON AIR INDIA

INTRODUCTION
Air India limited is the national flag carrier airline of India. Air India is state owned and administered as a part of National Aviation Company of India limited (NACIL). The main bases of operation of the airline are Mumbai`s Chhatrapti Shivaji international airport and Delhi`s Indira Gandhi international airport. Air India is the 16th largest airline in Asia, serving 25 destinations worlwide.

ORIGIN OF AIR INDIA

Air India was founded by J. R. D. Tata in July 1932 as Tata Airlines, a division of Tata Sons Ltd. (now Tata Group). Tata Airlines became a public limited company on 29 July 1946 under the name Air India. In 1948, after the independence of India, 49% of the airline was acquired by the Government of India, with an option to purchase an additional 2%. In return, the airline was granted status to operate international services from India as the designated flag carrier under the name Air India International.

 On 25 August 1953, the Government of India exercised its option to purchase a majority stake in the carrier and Air India International Limited was born. At the same time all domestic services were transferred to Indian Airlines (now renamed as Indian). Indian aviation industry was dominated by these government-owned airlines till the mid-1990s.

EXPANSION
Air India International entered the jet age in 1960 when its first Boeing 707-420, named Gauri Shankar (registered VT-DJJ), was delivered. In 1971, the airline took delivery of its first Boeing 747-200B named Emperor Ashoka (registered VTEBD). This coincided with the introduction of the 'Palace In The Sky' livery and branding. In May 2004, Air India launched a wholly owned low cost airline called Air-India Express.

LIBERALISATION OF AVIATION INDUSTRY

In the year 1990, open-sky policy was adopted by the government and it allowed air taxi- operators to decide their own flight schedules, cargo and passenger fares. The monopoly of IA and AI in the air transport services were ended by Indian Government, as a part of its open sky policies in the year 1994. Now Private operators were permitted to provide air transport services.

 By this time, Indian Airlines began to lose market share to Jet Airways and Sahara. Today, Indian aviation industry is dominated by private airlines such as Kingfisher airlines, Jet Airways, Deccan Airlines, GoAir, SpiceJet etc; these include low cost carriers who have made air travel affordable.

DISINVESTMENT PLAN
AIR INDIA was put for disinvestment in 2001. Air India should in theory be an attractive buy. As a national carrier, it has the rights to about 90 routes, but with only 27 aircraft, it doesn't take full advantage of them. However it carries six years of losses and a debt burden of $70m.

 India's ambitious plans to raise more money through privatisation collapsed as Singapore Airlines' decided to pull out of a joint bid with Tata group to take over Air India. INDIAN government was hoping to raise $2.5bn in this process.

REASONS FOR DEBT ACCUMULATION

Was not prepared for competition it started getting after the liberalization of Indian economy in 1990. Bloated workforce. Air India has 28,000 permanent staff, double Jet's headcount. It operates 127 aircraft, compared with Jet's 115. Highest Employees per Aircraft in the world 200:1 where as desirable is 130-170:1.

 Bad management and faulty policies has brought Air India to this crisis level. Complete lack of Ownership. Lack of responsibility for results and failures. Deeply ingrained corruption in all levels. Poor marketing campaign management, competitors like spicejet, jet, and kingfisher do effective marketing.

 The discontinuation of 32 profitable routes. This has enabled private Indian and foreign competitors to eat into Air India's market share. Giving the best timing slots to private airlines. While Kingfisher airlines owned by the Mallyas has been bailed out with loans infused by SBI and other PSU Banks, no such move by the government regarding Air India. Under utilization of its large fleet strength, and its huge and skilled labour force, under various excuses.

MERGER OF AI AND IA
In 2007, the Government of India announced that Air India would be merged with Indian Airlines. As part of the merger process, a new company called the National Aviation Company of India Limited (NACIL) was established, into which both Air India (along with Air India Express) and Indian Airlines (along with Alliance Air) were merged.

POST MERGER IMPLICATIONS

The airline has not posted a profit since merging with former duopoly partner Indian Airlines in 2007 and relies on handouts from New Delhi to survive. Senseless merger of the two wings of the airline took loss figures to Rs7,200 crores ( 72 billion) by March 2009. The merger itself was hastily carried out. The pilots of the erstwhile Indian Airlines were promised parity with Air India pilots. For three years, nothing was done about it. Discontent built up and pilots went on strike.

EYE RAISING FACTS

May 2011 : Already reeling under financial crunch because of the ten day pilot strike Air India went in a tight spot as State-run oil companies the Indian Oil Corporation, the Bharat Petroleum Corporation Ltd. and the Hindustan Petroleum Corporation refuse to supply the fuel to the bleeding carrier. Out of the total daily average collections in India of Rs 22 crore, a sum of Rs 16.7 crore is being paid to oil companies, which have put Air India on cash and carry basis with effect from December 7, 2010, leaving only Rs 5.3 crore to meet repayment of aircraft loans and part of interest payment of working capital,

SWOT ANALYSIS
STRENGTHS Huge fleet strength National carrier status Highly recognized brand name Huge Airport Infrastructure Modern Airways Infrastructure Skilled Resources WEAKNESSES Enormous wasteful expenditure Involment of politics Discontinuation of profitable routes Giving away of best timing slots Non professionalism

SWOT ANALYSIS
OPPORTUNITIES Huge market size and rapidly growing market Growing tourism Rising income levels Liberal Environment Economic Growth THREATS Rising fuel prices Competition from the other operators Terrorism Political instability

UNEXPLORED OPTIONS
The Airlines industry in India has been an extremely fast growing sector of the economy in the past 15 years. Air India has by far the largest fleet strength, compared to the private competitors, and it has enormous fixed assets, including highly priced land and properties, in India as well as in major cities of the world. Just the fixed assets of Air India will more than cover all the accumulated losses. Air India has a brand name which is recognized worldwide.

FAILURE OF TURN AROUND PLANS

The various turnaround plans prepared by outside agencies and experts are virtual nonstarters as their implementation requires a modicum of normal corporate behaviour that is apparently not possible in a politically vitiated and demoralised environment. The Maharaja is not just sick; it seems to have entered a stage of terminal decline.

RECENT STRATEGIC IMPLEMENTATIONS

From June 15 to July 25. AI launched an economy class package. Long Pending salaries of its employees were disbursed by the end of June 2011. According to the restructuring plan, part of the debt would be converted to long-term loans at fixed rates of interest with the remainder converted into preference shares to be redeemed after 15 years, giving the lenders equity in the airline. Rohit Nandan became the new CMD of Air India. Capital infusion of Rs.1200 crore by GOI.

 If not full privatisation, at least a partial one can be carried out through disinvestment. This will bring in funds to run the airline instead of the government constantly raiding taxpayers' money to feed it. The management of Air India should also be professionalised. The airline should not be allowed to become a training ground for officers of the Indian Administrative Service who have no knowledge of the aviation sector. There should be less interference from the ministry.

I believe Air India is an important asset to Indian skies, and it has helped keep airfares in check. The moment the pilots went on strike airfares rose significantly. I hope this issue would be resolved and the government will take some good decisions on the airline.