1. Abstract of the case study
This case study is about the aviation industry. In this case study all about
the Air India how they are working, their introduction, and present
situation of company.
Performance of Air India and financial statement and what’s theirs future
plans.
Why, Air india company now going in debt they don’t have enough fuel for
their planes.
And how Air India Industries pursued aggressive growth during 2010-11 in
all its business, protecting and wherever possible enhancing profit margins
result in a very attractive return on capital.
Objectives of the case study
The case study was done with a view to enhance my knowledge base
about the aviation industry, particularly air India.
The case was developed with a view to compare the statistics of air India
with its core competitors.
To knowledge about the future plans of the company.
The case study aimed at giving a brief review on the strategies adopted by
the company.
To learn about the competitors of the case study.
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2. Introduction
Scheduled air services in India began in October 1932 under the
Aviation Department of Tata Sons Ltd, which was succeeded by Tata Airlines.
This was subsequently renamed in July 1946 as Air India Ltd., and
incorporated as Air India International Ltd. in March 1948. In 1953, the Air
Corporations Act was passed. Air India International Ltd. was nationalized,
and two corporations came into existence – Indian Airlines Corporation (as
the national domestic carrier) and Air India (as the international carrier).
In 1994, the Air Corporations Act was repealed, and Air India Ltd. (AIL)
and Indian Airlines Ltd. (IAL) were incorporated under the Companies Act,
1956.
Government-owned airlines dominated the Indian aviation industry
till the mid-1990’s, when, as part of the open sky policy, the Government of
India (GoI) ended the monopoly of AIL and IAL in air transport services, and
allowed private operators to provide air transport services.
In March 2007, National Aviation Company of India Ltd. (NACIL) was
incorporated. The scheme of amalgamation of Air India Ltd. and Indian
Airlines Ltd. into NACIL was approved in August 2007, with the “appointed”
date of the merger being set as 1 April 2007. Subsequently, in November
2010, NACIL was renamed as Air India Ltd. (AI). The administrative Ministry
for these Government airline(s) is the Ministry of Civil Aviation (MoCA).
Air India is India's national flag carrier. Although air transport was
born in India on February 18, 1911 when Henri Piquet, flying a Humber bi-
plane, carried mail from Allahabad to Naini Junction, some six miles away,
the scheduled services in India, in the real sense, began on October 15, 1932.
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3. It was on this day that J.R.D. Tata, the father of Civil Aviation in India
and founder of Air India, took off from Drigh Road Airport, Karachi, in a tiny,
light single-engined de Havilland Puss Moth on his flight to Mumbai (then
known as Bombay) via Ahmedabad.
He landed with his precious load of mail on a grass strip at Juhu. At
Mumbai, Neville Vintcent, a former RAF pilot who had come to India from
Britain three years earlier on a barn-storming tour, during which he had
surveyed a number of possible air routes, took over from J.R.D.Tata and flew
the Puss Moth to Chennai (then Madras) via Bellary.
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4. Company’s present situation
Air India strike: situation worsens
Despite the hard attitude adopted by Delhi High Court against the pilots'
strike in Air India and the direction given by it to the pilots to resume duty,
the dispute continues to defy a solution. The situation has come to such a
head that despite the threat of losing their jobs and contempt of court
proceedings, pilots appear to be adamant to hold on to their stand. The Air
India administration has hinted a lock out in the organization.
Resolution to issue
Under the circumstances, the reported intention of the Air India
management to declare a partial lock out does not augur well. It would be
futile to expect any fruitful outcome of it. In fact, it may further deteriorate
the situation. If the government does want to take a decision, it should
decide to remove the present CMD Arvind Jadhav who continues to be in the
eye of the storm because of his way of functioning. At present, going by the
stage of the strike one can only surmise that instead of a resolution to the
issue, the situation is worsening with each passing day.
Demands of Employees
The fact remains that the Air India administration or the government have
never displayed any liberal attitude to the just demands of employees, nor
it showed any courage to hold on to its decision despite its harsh attitude
which was displayed initially when the strike began. It remains a fact that
whenever there was a strike in the Air India, the administration took
strong measures to dismiss the striking pilots, but it never implemented
its own decision. It was compelled to withdraw the decision of dismissal of
pilots following the discussions and talks with the striking pilots. That is
why pilots are adamant despite dismissal of some of their colleagues and
the threat of contempt of court proceedings looming large on them.
Without caring for any punitive action pilots are continuing their strike for
which none other but the very attitude of the Air India is responsible.
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5. Company Background
J. R. D. Tata founded Tata Airlines in 1932 as a division of Tata Sons
Ltd. (now Tata Group).
After World War II, regular commercial service was restored in India,
Tata Airlines changing its name to Air India and becoming a public limited
company on the 29th of July, 1946. On the 8th of June, 1948, Air India
introduced a regular service from Bombay to London, and two years later, Air
India started regular flights to Nairobi.
In 1954, with the delivery of its first L-1049 Super Constellations, Air
India inaugurated services to Tokyo, Bangkok, Hong Kong and Singapore. In
1960, with the introduction of the first Boeing 707-420 aircraft, Air India
started using jets, and two years later, in June 1962, it became world's first
all-jet airline.
In 1970, Air India moved its offices to downtown Bombay. In 1986,
Air India took delivery of the Airbus A310-300, and now is the largest
operator of this type in passenger service. In 1988, the company started using
two Boeing 747-300Ms in mixed passenger-cargo configuration. In 1993, Air
India's first Boeing 747-400, named Konark, operated the first non-stop flight
between New York City and Delhi. In 1996, Air India started using its second
US gateway at O'Hare International Airport in Chicago.
Three years later, the airline opened its dedicated Terminal 2-C at the
newly renamed Chhatrapati Shivaji International Airport in Mumbai. Services
to Shanghai and to Air India's third US gateway at Newark Liberty
International Airport in Newark were introduced in the year 2000.
Air India was invited to join Star Alliance in 2007, and is set to become a full
member in 2010. On the 1st of March, 2009, Air India made Frankfurt Airport
its European Hub for its transatlantic North American Operations. Since its
operations were initiated, Air India managed to achieve a record of about
6.82 fatal events per million flights. First such accident happened in
November, 1950, all 48 people on board dying, and the last one, on the 23rd
of June, 1985, when a a Boeing 747-237B was blown up in mid-air by a
suitcase-bomb and all 307 passengers and 22 crew on board perished.
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6. CEO of Air India
Rohit Nandan
Mr. Rohit Nandan, IAS, today assumed charge as the new Chairman and
Managing Director of Air India Ltd. Mr.
Nandan was earlier Joint Secretary, Ministry of Civil Aviation, Govt of
India.
Born on January 27, 1957, Mr. Nandan did his post graduation in History
and his MBA from United Kingdom.
Mr. Nandan joined the Indian Administrative Service in 1982 and belongs
to the Uttar Pradesh cadre.
He has held posts in Ministry of Information and Broadcasting, Social
Justice and Empowerment, Disabled Welfare, rural Development.
Rohit Nandan, a 1982 batch IAS officer of the Uttar Pradesh cadre.
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7. Air India’s Strategies
Air India’s new Management plans to increase efficiency by launching
more flights and achieving higher passenger load factor (PLF) of 75 per cent
in the domestic market.(Assumption: An aircraft breaks even at a PLF of 62%)
The company aims to achieve a positive balance sheet by 2014-15. The focus
of the plan is on reducing the cost of debt to the company and replacing high-
cost debt with low-cost ones.
The government will also infuse equity to the tune of Rs 1,200 crore in
the coming month subject to the performance of the company. Air India
currently has a working capital debt of nearly Rs 18,000 crore and the airline
had appointed SBI Capital to assess and plan its financial restructuring.
The company will consider launching its domestic low-cost carrier in
the coming months to take on the existing low-cost carriers that have been
absorbing its market share. A plan to start a low-cost carrier (LCC) is being
implemented again, though the airline was unable to do this by September
last year as had been planned. Jadhav's plan is to have 27 pairs of daily
domestic flights by moving 10 aircraft to the new Air India Express low-cost
carrier.
Civil Aviation Minister Praful Patel has already justified the new
thrust on expansion, and on not touching the unions, by arguing that the
market has improved and that AI will now need the staff as well as extra
planes. The passenger growth in the year's first quarter was up by 18 per
cent. Apart from the fact that smarter managements try to control costs in an
upturn, the point worth keeping in mind is that Air India's performance
continues to plummet and there is nothing concrete that it has done to take
on the competition.
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8. Air India’s Performance in current year
Bankers will meet later in the week to work out a debt restructuring plan
for Air India and the ailing civil aviation industry, State Bank of India (SBI)
Chairman Pratip Chaudhuri said here today.
The flagship air-carrier is sitting on a mountain of debt running into Rs
69,000 crore, out of which Rs 42,000 crore was for fleet acquisition and the
rest was working capital loans taken from 14 lenders led by SBI.
Under the financial restructuring plan, Rs 11,000 crore out of the
working capital loans of around Rs 27,000 crore would be converted into
long-term debt and Rs 7,000 crore would be converted into cumulative
redeemable preferential shares.
Air India’s Performance in current year
The official did not divulge details of the equity to be granted to the
airline but said the grant would be substantial."The GoM would also consider
our proposal of converting some of our short-term loans into long-term
loans, thereby allowing us to save Rs.900-1,000 crore in interest payments
per annum.
The GOM would also discuss the airline's order of 27 Boeing Dream liners
it placed in 2005-06. "We expect some direction on this issue," the official
said. Recently, Civil Aviation Minister Vayalar Ravi said the government was
not considering selling its stake in Air India.
My first priority as a civil aviation minister is to bring Air India in no-profit,
no-loss (situation)," he had said. The last GoM meeting took place Aug 18
when the airline's credit limit by the state-run oil marketing companies
(OMCs) was extended by two-three months.
Earlier the state-run OMCs had put the flag carrier on a cash and carry
basis -- which basically meant that the airline would have to pay every time it
bought fuel from these companies. Currently the airline owes Rs.2,300 crore
to the OMCs, from whom it buys Rs.17 crore of fuel daily. The GoM was
formed to look into the airline's turnaround and financial restructuring plan
(TAP), which is currently under a review process by a sub-committee of
secretaries.
According to official figures, Air India's cumulative losses amounted to
Rs.22,165 crore apart from a Rs.22,000 crore debt burden to buy new
aircraft. The debt-ridden carrier has to pay almost Rs.3,200 crore as interest
to its lenders.
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9. Current scenario of aviation Industry
The liberalization of aviation industry in India has precipitated the
boom for domestic and international passenger carriers. The domestic
passenger and cargo traffic recorded a growth rate of 44.6% and 8.7%, and
the international passenger and cargo traffic recorded growth rates of 15.8%
and 13.8% respectively during 2006-071. The Airport Authority of India (AAI)
manages total 122 airports in the country, which include 11 international
airports, 94 domestic airports and 28 civil enclaves.
Top 5 airports in the country handle 70% of the passenger traffic of
which Delhi and Mumbai together account for more than 50%. The latest
data compiled by Airports Authority of India (AAI) shows that all the airports
handled 90.44 million passengers during the calendar year 2006 compared
with 67.95 million handled during the same period in the previous year. The
substantial growth of Indian aviation industry is mostly due to: (i) low fares
offered by
The liberalization of aviation industry in India has precipitated the
boom for domestic and international passenger carriers. The domestic
passenger and cargo traffic recorded a growth rate of 44.6% and 8.7%, and
the international passenger and cargo traffic recorded growth rates of 15.8%
and 13.8% respectively during 2006-071.
The Airport Authority of India (AAI) manages total 122 airports in the
country, which include 11 international airports, 94 domestic airports and 28
civil enclaves. Top 5 airports in the country handle 70% of the passenger
traffic of which Delhi and Mumbai together account for more than 50%.
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10. The latest data compiled by Airports Authority of India (AAI) shows
that all the airports handled 90.44 million passengers during the calendar
year 2006 compared with 67.95 million handled during the same period in
the previous year.
The substantial growth of Indian aviation industry is mostly due to:
low fares offered by Low Cost Carriers (LCC) like Deccan, Spice jet, Go Air etc;
and (ii) Scheduled domestic air services are now available from 75 airports as
against just 50 earlier.
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11. Air India Competitors
Jet Airways (India) Limited is an India-based company. The Company
operates in two segments: Air Transportation and Leasing of Aircraft. It also
has two geographic segments: domestic (air transportation within India) and
international (air transportation outside India). As of March 31, 2010, the
Company operates flights to 23 international destinations.
The Company has a frequent flyer program named Jet Privilege
wherein the passengers who frequently use the services of the airline
become services of the airline become members of Jet Privilege and
accumulates miles to their credit.
Jet Lite (India) Limited operates a fleet of 25 aircraft, which consists
18 Boeing 737 series and seven Canadian Regional Jets (CRJ) 200 series. The
airline flies to 28 domestic destinations and two international destinations
(Kathmandu and Colombo), operating over 110 flights a day, on an average.
The Company’s subsidiary includes Jet Lite (India) Limited.
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12. Kingfisher Airlines Limited is engaged in rendering scheduled and
unscheduled aircraft passenger and cargo services, including charter services.
The Company offers three classes of service: Kingfisher First (premium
business class of service), Kingfisher Class (premium economy class of service)
and Kingfisher Red (low fare basic class of service).
As of March 31, 2010, the Company had a fleet of 68 aircraft, having
an average schedule of 366 domestic and 12 international flights daily and a
route network covering 63 domestic and seven international destinations.
The Company’s wholly owned subsidiary is Vitae India Spirits Limited.
During the fiscal year ended March 31, 2010 (fiscal 2010), the Company
returned five Airbus A320 aircraft, 4 ATR-42 aircraft and 1 ATR-72 aircraft.
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13. Jet Lite, formerly Air Sahara, is an airline based
in Mumbai, India. Owned by Jet Airways, the airline operates scheduled
services connecting metropolitan centres in India, it operates 110 flights
daily.
The airline also provides helicopters which are available for charter
services and aerial photography. The airlines were established on 20
September 1991 and began operations on 3 December 1993 with two Boeing
737-200 aircraft as Sahara Airlines.
Initially services were primarily concentrated in the northern sectors
of India, keeping Delhi as its base, and then operations were extended to
cover all the country.
Sahara Airlines was rebranded as Air Sahara on 2 October 2000,
although Sahara Airlines remains the carrier's registered name. On 22 March
2004 it became an international carrier with the start of flights
from Chennai to Colombo.
It is part of the major Sahara India Pariwar business conglomerate.
The uncertainty over the airline's fate has caused its share of the domestic
Indian air transport market go down from approximately 11% in January 2006
to a reported 8.5% in April.
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14. Cathay Pacific’s new Business Class product is the result of an
intensive and iterative design process involving input from the airline’s Marco
Polo Club members to refine comfort, versatility and function.
This effort has culminated in a product where every aspect has been
thoughtfully designed around passengers’ needs, providing a space in which
to sleep, dine, work, read, watch TV or simply relax.
The new Business Class product will be installed on all of Cathay
Pacific’s new long haul A330-300 and Boeing 777-300ER deliveries. The first
A330 is due to enter service by March 2011, while the first Boeing 777-300ER
is due to enter service in April 2011.
The new Business Class product will also be progressively installed on
all existing long-haul A330-300 and Boeing 777-300ER aircraft. By February
2013, the airline will have all 30 of its Boeing 777-300ERs and 20 long-haul
A330-300s with the product.
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15. A Singapore airline has come a long way since our founding in 1972.
Evolving from a regional airline to one of the most respected travel brands
around the world.
We one of the youngest aircraft fleets in the world to destinations
spanning a network spread over six continents. With our Singapore girls as
our internationally-recognizable icon providing the high standards of care and
services that customers have come to expect of us.
We have made a habit of leading the way, and along the way
developed a reputation for being an industry trendsetter.
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16. Prospects & Challenges for Company
Prospects for air india
Challenges for air india
o Increased Oil Prices
Skyrocketing oil prices during 2004 -08 were offset by
efficiency gains and rising consumer confidence.” The
broadening impact of the U.S. credit crunch has brought
buoyant consumer confidence to an abrupt end. Oil prices
continue to rise. Now oil price is almost US$140 per barrel.
o Aircraft Delivery Cycle
The downturn in demand coincides with a stepping -up of
aircraft deliveries from 1041 new aircraft in 2007 to an expected
1231 in 2008.while some of this will be offset by retiring less
fuel-efficient aircraft, real yields are expected to drop 4.1% in
2008 as compared to 3.2% drop in 2007.
o Increased Competition
There is increase in competition with private airlines
entering this field.
o Overstaffing
As mentioned earlier the total staff strength of Indian
Airlines Limited is 18715 as on date. On the average 19300 -
19500 people travel on Indian Airlines Limited on its 112 flights
daily. It records three hundred departures per day (including
Alliance Air). This means that there is roughly about one staff
recruited against every passenger traveling. This is no doubt a
bad sign. Indian Airlines Limited has understood this weakness
now and hence has not made any major recruitment for last few
years. Moreover, there are around two thousand employees
retiring within nex t two years which will trim work force
automatically.
o Lack of personalized and customer friendly services
This is one of the major findings of our study. Almost all
passengers feel that Indian Airlines Limited staff needs to be
more customers friendly and professional in its approach. In
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17. services industry, it is the kind of services that one provides
matters and leaves its impression in the mind of passengers. It
in fact is a measure of quality of the product. Indian Airlines
Limited needs to take immediate steps in this regard to change
the public opinion.
o Under utilization of capacity
Indian Airlines Limited sells space, which is highly perishable.
This is because idle capacity would imply opportunity lost.
Capacity means the total number of seats offered by Indian
Airlines Limited daily to its passengers. It has been observed
that Indian Airlines Limited offe rs around 32000 seats daily
where as on average 19300 seats are utilized meaning an
average seat factor of about 60%. It is imperative to improve
upon the situation before it is too late. More marketing efforts
are required to attract larger passenger.
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18. 11. Road ahead
Invite first and executive class passenger to participate in the
forthcoming food presentation, prior to menu change;
Plan to observe customer care week in the beginning of 2001;
Introduction of grooming checks for cabin crew;
Greater efforts to reduce distribution cost and augment revenue;
reviewing relevance of GASs w.r.t. today’s global alliance; market tie ups
inter-carrier arrangements such as code share etc.
To cater to Haj traffic demand, all is planning to re-rout 33 flights in
each phase-land phase-2 to Jeddah.
Keeping check and control on repetitive complaints and radically
improving passenger’s service.
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19. Annexure
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20. Bibliography
http://www.airindia.in/SBCMS/Webpages/JRD.aspx?MID=196
http://www.airindia.in/SBCMS/Webpages/JRD.aspx?MID=196#
http://www.airindia.in/SBCMS/Webpages/Logo-Livery.aspx?MID=196
http://www.airindia.in/SBCMS/Webpages/Logo-Livery.aspx?MID=196#
http://www.airindia.in/SBCMS/Webpages/Backgrounder-Note.aspx?MID=196
http://www.airindia.co.in./yatrik/vigmain.jsp?MID=196
http://www.airindia.in/SBCMS/Webpages/Magic-Carpet1.aspx?MID=196
http://www.airindia.in/SBCMS/Webpages/Explore-India.aspx?MID=198
http://www.airindia.in/SBCMS/Webpages/Citizens-Charter.aspx?MID=367
http://www.airindia.in/SBCMS/Webpages/Citizens-Charter.aspx?MID=367#
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