AIR INDIA THE WOUNDED MAHARAJA

PRESENTING BY:

IGNITED MINDS
MBA I SEM

THE MAHARAJA IS AIR INDIA'S OFFICIAL MASCOT (15 NOV 2006)

 Air India is a state-owned flag carrier, the oldest and the largest airline of India. Founder by JRD TATA in 1932. Named as TATA Airlines. 29 July 1946 became a Public Limited Company under the name of Air India.

In 1948, 49% of the airline was acquired by the Government of India.

 On 25 August 1953, the Government of India exercised its option to purchase a majority stake in the carrier. Head Office Located at Nariman Point, South Mumbai. 1960 purchased first Boeing 707(named Gauri Shankar) and entered jet age.

June 1962 the airlines name was officially truncated to Air India.

 Best International West Bound Airline out of India for three successive years by Galileo Express Travel World Award. (An initiative of GMR group.) Dun and Bradstreet (D&B) which ranked the airline as the first in terms of revenue out of the top airline companies out of India Was set for disinvestment in 2001 but it failed due to global slowdown. Senseless merger of the two wings of the airline took loss figures to Rs7,200 cr. by March 2009.

As Air India finds itself on the verge of bankruptcy, we take a look at the progression of the crisis after the AI & IA merger

 March 2007: Air India and Indian Airlines post a loss of Rs541.30 cr. and Rs230.97 cr. respectively during 200607. August 23, 2007: The government formally announces the merger of Air India and Indian Airlines into a new company called National Aviation Co of India Ltd, or NACIL. March 2008: NACIL posts a loss of Rs2226 cr. in 200708.

 June 12, 2009: Air India issues a circular that the June salary will be delayed by 15 days due to a cash crunch. June 24, 2009: Air India is asked to prepare a restructuring plan by Mr Manmohan Singh in 30 days. July 3, 2009 : Air India staff strike for two-hours against delay in the payment of June Salaries.

 July 14, 2009: Civil Aviation minister Praful Patel announces that AI has accumulated losses of Rs7200 cr. with a loss of more than Rs5,000 cr. in 2008-09. July 20, 2009: Mr. Patel announces Air Indias borrowings rose from Rs6550 cr. in Nov 2007 to Rs15241 cr. in June, 2009.

July 25, 2009: Air India executives and SBI Caps were asked by Committee of Secretaries to prepare a cost reduction initiatives to justify its demand of Rs15,000 cr. bail out.

 August 21, 2009: Air India said it will cut 50% of productivity lined incentives from its 31500 employees aiming at saving Rs700 cr. September 03 2009: Air India puts off domestic low fare service launch to November. September 28, 2009: Talks between Air India management, pilots fail.

 September 30, 2009: Govt intervention to end pilots strike wont help national carrier reach cost-cutting goal to qualify for rescue. October 6 2009: The losses are mainly on account of excess capacity in the industry and high jet fuel costs, said the official who did not want to be identified.

February 21, 2010: State-owned oil marketing firms had threatened to halt jet fuel sale on credit.

 The airline is still recovering from the 22 May crash of an aircraft in Mangalore that left at least 158 passengers and crew dead.

STEPS TAKEN BY NATIONAL AVIATION COMPANY OF INDIA LIMITED(OR NACIL).

 November 10, 2009: The launch of an all-economy domestic service by NACIL had been expected to reduce airfares and help the state-run airline firm compete better with rivals Jet Airways (India) and Kingfisher Airlines.

November 18, 2009 :Air India, which had posted an accumulated loss of Rs7,774 cr. till now, appointed Booz Allen to look at costs across the board and suggest ways to save.

 March 9, 2010: Air India wants to turn its maintenance, repair and overhaul (MRO) business and cargo operations arm into separate units. April2, 2010: The government has already put Rs945 cr. into Air India, most recently through two infusions totalling Rs800 cr. in February and March. May11,2010: The carrier plans to connect new domestic city pairs from 29 March onwards and extend its international flights to South Koreas capital Seoul in a bid to increase asset utilization

 May 30 2010: At least 16 banks have queued up with offers to refinance a $475 million aircraft acquisition loan as part of its restructuring programme.

MAJOR CAUSES OF THE PROBLEM

Unnecessary fleet expansion causing huge debt trap of around 25000 crore. Bloated workforce-due to the merger the workforce is double than the global benchmark. Compared to other international airlines which have a employee/aircraft ratio of around 150 Air India has around 250.

 Grievances of the staff ;HR issues is one of the most important reasons why Air India has become almost bankrupt.

Low passenger load factor: its load factor is less than 70% when other competitors like Air Deccan hit around 80%.

 The final and the most important issue is the efficiency of the top management which is actually running the airline. Over the years the head of Air India has been a handpicked person from the aviation ministry.

 Privatization free from government interference. Secure a massive debt and operational overhaul if it is to survive in a market growing at 20 percent a year.
To attract customers and grab lost market share. To tackle a bloated cost structure, a difficult task given a workforce that is heavily unionized to do some downsizing.

 To cut unprofitable routes and create a new plan that would focus on a hub-and-spoke route model. To clear $9 billion in debt as well as outstanding dues both to airport developers and state oil firms. To arrange $4 billion of working capital debt.

To lease some of the 14 vacant floors in its landmark building in south Mumbai to raise about $1 billion over five years.

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