Made By:

Shubham Garg(BBE/4502/13)

Ashit Saxena (BBE/4540/13)

CIVIL AVIATION

• The history of Indian civil aviation began with its first domestic air route between Karachi and Delhi in December 1912.

• It was opened by the Indian Air Services in collaboration with the UK based Imperial Airways as an extension of London-Karachi flight of the Imperial Airways.

• Without any backing from the Indian Government, Tata Sons Ltd., the first Indian airline, starteda regular airmail service between Karachi and Madras three years later.

• To further strengthen the aviation sector of India, the Indian Government and Air India (earlierTata Airline) set up a joint sector company, Air India International in early 1948.

• And the nationalization of Indian Airlines (IA) in 1953 brought the domestic civil aviation sector underthe purview of Indian Government. Later the Government-owned airlines dominated Indian aviation industry till the mid-1990s.

INTRODUCTION

• Air India Chief, Arvind Jadhav

• Fleet Size

133 (including subsidiaries)

• Destinations

55 (excl. subsidiaries)

Your Palace in the Sky

HISTORY OF AIR INDIA AIRLINES

• J. R. D. Tata founded Tata Airlines in 1932.

• It was the first to provide commercial Airline services.

• After World War II in 1946, Tata Airlines became a public

limited company under the name of Air India.

• Under the Air Corporations Act of 1953, the Government

nationalized the Air transportation industry and Air India

International Limited was born.

• In 1960, Air India flew its first international flight to New York

via London.

• In 1962, Air India became the world's first all-jet airline.

• from that its name shortened to AIR INDIA from AIR INDIA

INTERNATINAL LTD.

• In 2007, Air India and Indian Airlines merged into one

airline, with its name remaining Air India.

• On 1 March 2009, Air India had made Frankfurt Airport as

its international hub.

• It was made for onward connections to United States from

India.

• on 14 July 2010, Air India chief, Arvind Jadhav announced

their intention to make the new terminal 3 at Delhi's Indira

Gandhi International Airport.

• He has made plans of starting new direct flights to Chicago

(USA) and Toronto (Canada).

• Earlier the Primary hub for almost all international long

flights was Mumbai's Chhatrapati Shivaji International

Airport.

• But due to lack of space, almost all the international

flights take away from Mumbai's Chhatrapati Shivaji

International Airport to Delhi's Indira Gandhi International

Airport.

• With its main base at Mumbai and Delhi Airport Air India

connects 146 international and domestic destinations

around the world, including 12 gateways in India.

• On 27 February 2011, Air India and Indian Airlines merged

along with their subsidiaries to form Air India Limited.

Subsidiaries

• Air India Cargo

• Air India Regional

• Air India Express

• Air India Charters Limited

• Air India Air Transport Services

Involvement in Sports

• Air India Football Club

• Air India Hockey

• Air India Cricket Teams

Logo

• The logo of the new airline is a red coloured flying swan with the `Konark Chakra' in orange, placed inside it.

• The new logo would feature notably on the tail of the aircraft. While the aircraft will be ivory in colour, the base will retain the red streak of Air India.

• The painted on red palace style carvings on the outside of the windows refer to their slogan "your palace in the sky" which is written on the back of the aircraft.

The Maharajah

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

• This was began as an attempt to take Air India's sales and promotional messages to millions of travellersacross the world.

• He has completed 56 years and become the most recognizable mascot all over the world.

• In fact he has won numerous national and international awards for Air India for humour and originality in publicity.

• The Maharajah began merely as a rich Indian emperor, symbolizing politeness and high living.

• He has a distinctive personality by having outsized moustache, the striped turban and the curved nose.

• Other Schemes:

1. Air India American Express Gold Card

Pay 10% less on full fare Business Class tickets and 15% less on full fare Economy Class tickets - every time, on any domestic or International sector on Air India.

2. Complimentary upgrades to Business Class

Get a complimentary upgrade voucher to Business Class the moment you become an Air India American Express Gold Card member. These vouchers can be used on any of Air India destinations.

Financial Crisis

• Around 2006–2007, the airlines began showing signs of financial distress. The combined losses for Air India and Indian Airlines in 2006–07 were 7.7 billion (US$130 million). After the merger of the airlines, it went up to 72 billion (US$1.2 billion) by March 2009. This was followed by restructuring plans which are still in progress. In July 2009, SBI Capital Markets was appointed to prepare a road map for the recovery of the airline. The carrier sold three Airbus A300 and one Boeing 747-300M in March 2009 for $18.75 million to survive the financial crunch. By March 2011, Air India had accumulated a debt of 425.7 billion (US$7.0 billion) and an operating loss of 220 billion (US$3.6 billion), and was seeking 429.2 billion (US$7.0 billion) crore from the government. For three months (June–August 2011), the carrier missed salary payments and interest payments and Moody’s Investor Service warned that missing payments by Air India to creditors, such as the State Bank of India, will negatively impact the credit ratings of those banks.Areport by the Comptroller and Auditor General (CAG) blamed the decision to buy 111 new planes as one of the major causes of the debt troubles in Air India; in addition, it blamed on the ill timed merger with Indian Airlines as well.

Contd…

• In 2011, the Rajya Sabha was informed that the national carrier had incurred acumulativeloss of over Rs 13,300 crore since its merger with Indian Airlines in 2007. Then-Civil Aviation Minister Vayalar Ravi said before the merger in 2006-07, the losses reported by erstwhile Air India and Indian Airlines were Rs 447.93 crore and Rs 240.29 crore, respectively. But the merged entity incurred a loss of Rs 2,226.16 crore during 2007-08. The cumulative losses at the close of financial year 2009-10 were Rs 13,326.86 crore.

Contd…

• In 2012, the Parliament's Public Accounts Committee, along with representatives of various unions and associations of Air India diverged on the huge losses incurred by the national carrier and invited suggestions from them to deal with the issue. Chaired by PAC chief Murli ManoharJoshi, Air India unions at the meeting said the merger of the erstwhile Air India and Indian Airlines was a major reason for the financial mess. They suggested that a holding company be formed under which Air India and Indian Airlines can be made separate entities.

Air India operating details

• Other sources of revenue (MM USD):

Year Cargo Mail Charter

1995-96 87 2 18

1996-97 77 2 19

1997-98 74 2 41

1998-99 77 3 47

1999-00 82 4 21

Air India operating details

• Air India travel market share of 21% (air traffic in India)

• Indian Airlines travel market share of 11%

• Major markets:▫ India/U.S.

▫ India/U.K.

▫ India/Europe

▫ India/South East Asia

Air India operating details

• Fleet size

Air India projections

• Revenue growth of 10%

• Major costs – aircrafts and fuels tied to US dollars

• Fuel costs based on a stable oil price of 27.5 USD/barrel

• High capital expenditure in 2003-2004 and 2006-2007 for fleet augmentation

• Prices consistent with competitive carriers

• Debt refinancing assumed to maintain high D/E ratio

Air India projections

Year

Operating Revenues

Operating cash flows

Capital Expenditure

Cash flow from

financing

Dividend payout in Cash

flow from financing

Fuel costs Interest

Expense

OB 2000/01 46,654.50 5,145.27 4,033.70 -237.38 0.00 9,981.50 2,581.70

2001/02 51,761.00 2,491.12 1,698.33 -792.79 0.00 9,619.87 2,016.00

2002/03 56,699.86 10,583.78 5,180.55 -5,403.23 0.00 8,885.85 1,074.93

2003/04 68,374.85 9,569.22 52,765.75 43,196.53 0.00 9,497.99 4,164.74

2004/05 74,868.33 11,297.17 18,916.41 7,619.24 0.00 9,974.14 4,661.96

2005/06 83,944.13 15,068.54 32,523.40 17,454.86 0.00 10,815.80 5,885.17

2006/07 93,875.34 20,081.03 46,199.02 26,117.99 0.00 11,898.22 7,724.70

2007/08 101,498.56 24,039.45 33,985.30 9,945.85 0.00 12,436.02 8,325.15

2008/09 113,089.34 22,793.14 31,357.95 8,564.81 0.00 13,766.89 8,449.22

2009/10 123,931.21 25,691.63 26,875.09 2,311.14 1,127.67 15,106.79 8,416.29

2010/11 141,094.54 30,464.62 38,459.08 9,861.79 6,867.32 17,197.83 8,844.53

2011/12 144,720.28 32,396.67 23,791.04 -2,662.00 14,943.63 17,703.65 7,242.48

2012/13 148,472.21 33,130.44 23,717.18 8,557.72 27,370.99 18,224.35 5,593.31

Issues to consider

• Adjustment to operating cash flows

• Adjustments to cost of capital

• Other adjustments

• Incorporating Indian Airlines option (probability of 0.4 and 0.5)

• Other qualitative issues

Corrective Measures

• Air India requires a rapid increase in qualitative methods to bring out the airline of its crisis.

• the product and service standards of Air India need identification and ought to be benchmarked against the best in the industry.

• Air India has great potential to threaten and ward off competitors.

• The Government must provide an environment where Air India and other Indian carriers can grow.

Air India References

• Information memorandum and valuation model from a leading Investment Bank

• Other Emerging Market cases

• Presentation by HSBC on divestment in India

• Discussions with Ministry of Civil Aviation

• Some of the case facts, cash flow projections and probabilities have been modified for simplification