Does Air India Deserve a Bailout from the Government?

Does Air India deserve a bailout from the Government?

History

* Founded by J. R. D. Tata in 1932 as Tata Airlines

* Became public Limited in 1946 under the name Air India International

* In 1953, Govt. of India nationalized air transportation Industry under Air Corporations Act and took full control of Air India.

* In 2007, Indian (formerly Indian Airlines) merged with Air India

Scenario before late 80s

* Air India was an Overstaffed organization

* Involved in sticky negotiations with Unions

* High Gasoline taxes

* Flying on non profitable routes for prestige reasons

* Air-India was flying many flights with intermediate stops due to pilots refusal to fly more than nine hours

Revitalization of Air India

* Convinced the government to reduce its gasoline tax

* Convinced the pilots to fly longer flights

* Increased the number of flights to Europe, making Frankfurt, Germany, a hub.

* Adjusted the timing of the flight to have better connectivity.

* Marketed more profitable business class seat to affluent fliers.

Pricing Strategy

* Introduced Students schemes

* No rise in Fuel surcharge even after it was up by Rs. 300 in private airlines, hence cheaper fares

* Discounts of up to 70 per cent on 41 short-haul routes like Agartala-Guwahati, Chandigarh-Delhi, Hyderabad-Tirupati etc.

SWOT Analysis

Strengths Weaknesses

* Government backup

* Strong brand name

* Oldest Airline

* Monopoly in certain international routes

* Rights to travel 96 destinations

* Established infrastructure

* It has prime parking space/lots * Poor HR Strategies

* Inefficient usage of resources

* Aging fleet

* Poor aircraft maintenance

* Highest manpower ratio to aircraft

* Overpriced commission to travel agents

* Less advertising

Opportunities Threats

* Expanding tourism industry

* Untapped second tier cities

* Geographic location

* Lower Costs, Higher Quality * Increasing competition from private airlines

* Entry of foreign players, especially Middle East Aviation

* Economic slowdown/Recession

Highlight the story of Air mismanagement in general

Reasons for debacle

* Senior pilots on desk jobs get flying allowances even when they don't fly

* 111 aircraft acquisition plan for a whopping $10 billion, but when aircrafts did arrive the airlines had not planned for crew and marketing

* Over a dozen aircraft , including brand new 777s were idling

* Air India doesn't need all the ordered 111 aircrafts since it is finding it tough to fill seats in many of the