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 Umesh
Rao, 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 travellers
across 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.A
report 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 acumulative
loss 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 Manohar
Joshi, 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

Dividend
Cash flow
Operating Operating Capital payout in Cash Interest
from Fuel costs
Revenues cash flows Expenditure flow from Expense
financing
Year financing
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