Air India is a state-owned flag carrier and currently the oldest and largest airline of India. It is a part of the Indian government-owned National Aviation Company of India Limited (NACIL). The airline operates a fleet of Airbus and Boeing aircraft serving Asia, Europe and North America. Its corporate office is located at the Air India Building at Nariman Point in South Mumbai. It is the 16th largest airline in Asia. Air India has two major domestic hubs at Indira Gandhi International Airport and Chhatrapati Shivaji International Airport.
Air India was founded by J. R. D. Tata in July 1932 as Tata Airlines, a division of Tata Sons Ltd. On 15 October 1932, J. R. D. Tata flew a single-engine De Havilland Puss Moth carrying air mail (postal mail of Imperial Airways) from Karachi's Drigh Road Aerodrome to Bombay's Juhu Airstrip via Ahmedabad.
Air India serves 11 domestic destinations and 18 international destinations in 11 countries across Asia, Europe and North America. Air India has two subsidiaries and two affiliated carries. Together Air India, Air India Cargo, Air India Express, Indian and Air India Regional form the National Aviation Company of India Limited.
Air India Cargo
Air India Cargo was started in 1954. The airline operates cargo flights to many destinations. The airline also has ground truck-transportation arrangements on select destinations. As a part of the IATA carriers Air India carries all types of cargo including dangerous goods (hazardous materials) and live animals.
Air India Express
Air India Express is the airline's low-cost subsidiary which was established in 2005 during the aviation boom in India. It operates scheduled passenger services primarily to the Persian Gulf and South East Asia.
Indian
Indian which is based in Delhi focuses primarily on domestic routes, along with several international services to neighbouring countries in Asia.
Air India Regional
Air India Regional (formerly known as Alliance Air) serves mainly on Regional routes. Its main hub is Delhi's Indira Gandhi International Airport.
Tangible Assets
Fleet and Material Resources
Air India is gradually expanding its fleet. Seventeen new aircraft - eight B777-200LRs and nine B777-300ERs have so far joined the fleet apart from 15 Airbus A-321s and 16 A-319s. On the international network Air India now operates 28 weekly services to three destinations in the USA - New York, Newark and Chicago including a daily Non-stop flight between Mumbai-New York and Delhi-New York following the induction of brand new Boeing 777-200LR in its fleet. With a fleet of 136 aircraft, Air India has been gradually expanding its network to cover new destinations in India and abroad. Given below are the details of the Air India Fleet:
Aircraft type
Owned
Leased
Total
Operational Fleet
Wide Body
B777-200LR
NACIL (A)
8
0
8
B777-300ER
NACIL (A)
12
0
12
B747-400
NACIL (A)
5*
0
5
A310-300
NACIL (A)
4**
0
4
A330-200
NACIL (I)
0
2
2
Wide Body Total
29
2
31
Narrow Body
B737-800 (AIX)
NACIL (A)
17
4
21
A320
NACIL (I)
23***
5
28
A319
NACIL (I)
19
5
24
A321
NACIL (I)
20
0
20
CRJ-700
NACIL (I)
0
4
4
ATR42
NACIL (I)
0
7
7
Narrow Body Total
79
25
104
Total Operational Fleet
108
27
135
Freighters
A310-300 %
NACIL (A)
3****
0
3
B737-200
NACIL (I)
6
0
6
Freighters Total
9
0
9
Network
In its ever-growing quest for providing direct services from various points in India, Air India currently operates international flights from Mumbai and 16 other Indian cities, viz. Ahmedabad, Amritsar, Bangalore, Chennai, Delhi, Goa, Hyderabad, Kochi, Kolkata, Kozhikode, Lucknow, Jaipur, Varanasi, Tiruchirapalli, Gaya and Thiruvananthapuram. Commencement of international operations from these cities has obviated, to a very large extent, the need for passengers from these regions to necessarily travel to Mumbai and Delhi, the traditional gateways, for taking international flights. Passengers boarding or deplaning in these cities can now complete their immigration and custom formalities at their city airport, both at the time of departure and arrival.
Additionally, Air India has code-sharing arrangements with other international carriers.
International Hub: After taking the path of consolidation during the past one year, the airline has taken a major initiative towards strengthening its global network and has restructured its operations to Europe and USA by making Frankfurt its operational hub for West-bound flights.
Indian Hub: The Indian Hub resides at Delhi & Mumbai Airports which houses facilities for connections to all major Indian cities. On the domestic front AI operates to 64 stations out of which 17 are connected to our international destinations. The 172-seater Airbus A321 aircraft connects all major metros, including all flights on the Delhi-Mumbai sector. Spacious cabin, comfortable seats and the luxury of in-flight entertainment make this a superior product that travellers look forward to.
Star Alliance
With a quantum jump in product profile resulting from induction of new aircraft and consequent expansion of network, Air India will be all set to join the Star Alliance by March, 2011. Star Alliance, is a leading global airline alliance of 21 top international carriers. Once Air India becomes a member, passengers will enjoy enormous benefits, including seamless transfers while travelling across the world, more frequent flyer mileage points, code-sharing leading to a wider choice of flights and access to lounge facilities worldwide. The Star Alliance network offers more than 17,000 daily flights to 916 destinations.
Human Resources
Air India has more people than it needs is evident in the numbers. In 2009, 17% of the airline's expenditure went towards salaries; the comparable figure for private carriers was 9.5%. The merger didn't involve any retrenchment. Nor do any of the current recovery measures being discussed.
Air India has 14 recognized worker unions and several unrecognized ones for its 31,000 employees. While the unions say they are open to doing what needs to be done to revive the airline's fortunes, they do not support privatization of the airline or retrenchment
Retrenchment apart, employees are also worried that the new structure adopted by the airline will work against their interests. This structure is the so-called strategic business unit, one where a large organization is broken up into smaller units, each of which is run almost like an independent company.
In Air India's case, the problem is that the strategic business unit structure isn't perfect. Under this structure, a Delhi airport manager reports to his strategic business unit head, while his performance will actually be reviewed by the executive director of the northern region. Worse, adds this official, the decision on rewarding this airport manager with a foreign posting is in the hands of the commercial director, who is based in Mumbai. Recommendation is that this entire structure be done away with.
IT & Technology Resources
The entire IT integration between the erstwhile Air India and Indian Airlines is complete and new technology processes are put in place. NACIL (National Aviation Company of India Ltd), the holding company of Air India, entrusted SITA (Society International Telecommunications Aeronautics) with the task to implement an efficient online booking engine, departure control system, check-in and automated boarding control, baggage reconciliation system (BRS) and a frequent flyer programme. The $190 million (Rs 845 crore) contract for a period of 10 years will also enable Air India to use SITA's Horizon Passenger Services System. According to SITA, an integrated IT platform will enable Air India to streamline its ticket distribution system and save on high distribution cost.
SITA's Horizon platform provides hosted PSS services to 140 airlines boarding 120 million passengers and will be used to deliver a single airline code in order to allow the seamless integration of the former domestic carrier Indian Airlines with Air India for the first time since they merged in August 2007. Another early deliverable will be enabling Air India to meet the requirements for joining the Star Alliance.
SITA has been providing Air India with mission-critical services for more than 50 years, including network connectivity at all their domestic and international stations, check-in, air-to-ground communications, fares management and baggage tracing. Air India is now invited to join SITA's Horizon Advisory Board which sets the strategic direction for SITA as it engages with Oracle and other partners to deliver a next generation Passenger Services System which will greatly benefit Air India as it exploits new technology and open systems architecture. SITA's workforce in India along with its local partners - NIIT and Mindtree - now stands at almost 1,000 highly skilled personnel.
Low Cost Resources
Livery
Air India and Indian unveiled their new livery on May 22, 2007. The logo of the new airline is a Flying Swan with the Konark Chakra placed inside it. The Flying Swan has been morphed from Air India's characteristic logo, 'The Centaur' whereas the 'Konark Chakra' is reminiscent of Indian's logo.
While the aircraft is ivory in colour, the base retains the red streak of Air India. Running parallel to each other is the Orange and Red speed lines from front door to the rear door, subtly signifying the individual identities merged into one. The brand name 'Air India' runs across the tail of the aircraft in hindi.
The Maharaja
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. What began as an attempt as a design for an inflight memo pad grew to take Air India's sales and promotional messages to millions of travellers across the world. Today, this naughty diminutive Maharajah of Air India has become a world figure.
He has completed 56 years and become the most recognizable mascot the world over. His antics, his expressions, his puns have allowed Air India to promote its services with a unique panache and an unmatched sense of subtle humour. In fact he has won numerous national and international awards for Air India for humour and originality in publicity.
Dining
Dining aboard Air India is a gourmet experience. The airline offers a choice of menus to suit all types of palates - Indian and Continental. Apart from these, there is western nouvelle cuisine, an appetizing choice of Asian specialities, and even Japanese meals on the India-Japan route. Besides, if any passenger has a special food requirement, he can choose from any of the 23 special meals. The menus are constantly revamped and the wines carried on board live up to the food they complement. Meals are served to First Class passengers in bone china crockery. Alcoholic beverages are served complimentary in all classes.
Inflight Entertainment
The selection of music on board Air India aircraft would be the envy of any radio station. Passengers can choose from Indian popular music, Indian Classical, Ghazals, Bollywood hits and from Western Classical, Pop, Jazz, Country and Nostalgia. A special channel for Regional songs has been compiled to suit all passengers coming from different regions.
Air India's video programmes include a choice of the most recent English and Hindi feature films. One-hour video magazine represents the finest in comedy, nature & wildlife, adventure, action and life style. There are special movies in Tamil and Malayalam selected for passengers travelling from Thiruvananthapuram, Kochi, Kozhikode and Chennai to the Gulf and Singapore.
On Ground Facilities: Lounges, etc
Air India has its own exclusive lounges at Delhi, London, Hong Kong and New York in addition to the one in Mumbai. At other international airports, Air India has tie-ups with other international airlines or local Airports Authorities for lounge facility. There is a lounge for unaccompanied minors as well.
Online Booking, Web Check-in, etc
The quick, easy and convenient way to book AI tickets online through the Air India website. An e ticket will be generated and the details with the e ticket link will be emailed to the passenger. Air India has extensive facilities for Web check in and Tele check in for its passengers to provide ease of facilities.
Balance Scorecard at Air India
The balanced scorecard is a holistic design of looking at an organization. It helps align the activities of the business to the vision, mission and the strategy of the organization. It helps improve communication, both internally and externally as well as measure the performance against said goals using proper metrics. Balanced Scorecard concept was started by Dr. Kaplan and David Norton as a means of measuring performances of organization. It was a measurement framework, which for the first time added non-financial metrics along with the traditional metrics that gave managers a better view of the performance of the organization.
Over the years, balanced scorecards were refined to become a complete planning and management system for strategy. It helps operationalize vision and mission documents; progress on which can be monitored daily.
The airline industry is cyclical in nature. Demand fluctuates seasonally; while planning for capacity and investments have to be done long term. This means that airlines usually go through sessions when they are operating in the red financially. Hence, it makes perfect sense to use a Balanced Scorecard to evaluate the performance of the organization. It gives a better indication of the health of the organization as well as helps create proper milestones for evaluating the progress towards strategic goals.
Air India has been facing turbulent times recently. A lot of reorganization, restructuring with regards to the organization, finances and fleet have taken place. The company is deep in the red and there have been calls to divest this 'white elephant'. As Air India struggles through this mess, using a balanced scorecard will give clarity to their goals and help them focus their efforts in achieving the said goals.
Balanced scorecard has been implemented in several airlines, the most documented one being the Balanced scorecard implementation at Southwest Airlines.
Southwest Airline is a USA based low-cost airline company and is also the world's largest no-frills airline. It is headquartered in Dallas, Texas. Southwest has among the largest fleet of passenger aircraft among all of the world's commercial airlines, operating more than 3200 flights daily. Southwest is also a very profitable airline, having posted profits for 37 consecutive years.
The balanced scorecard implementation at Southwest airlines has gone through a series of iterations and they are currently in their 3rd generation.
We suggest a similar balanced scorecard for Air India. For the balanced scorecard we must have:
Vision
Mission
Core Goal
Activities and Outcomes
Vision statement is the picture of your company in the future. It forms the lynchpin around which strategy formation takes place.
Mission statement is the fundamental purpose of the existence of the company. It clarifies "Why do we exist?"
Core Goal is the goal that is to be achieved by the balanced scorecard.
Activities refer to processes that take place inside the organization, that lead to desired outcomes.
Activities consists of
Internal Processes
Learning and Development
Outcomes consists of
Financial Performance
Customer Satisfaction
Activities are internal to the organization, while the outcomes in terms of financial outcomes and customer outcomes are visible outside the organization.
Also internal processes, Learning and Development are long-term goals while financial and customer outcomes are more short-term goals. However they act as leading indicators of the changes happening in internal processes and Learning and Development.
These show that the activities that were internal to the organization has reached a point of maturity that they have started impacting the customer and financial outcomes.
As shown in the balanced scorecard given below, activities and outcomes interact with other activities and outcomes and hence no item can be looked at in isolation. The interactions between the strategic goals in each of these four divisions (2 activities and 2 outcomes) have been identified and dwelled upon in the balanced scorecard.
The internal processes which must be measured for the scorecard that we identified were:
Faster Turnaround of flights
Increased Utilization of fleet
Adherence to Schedule
These will help rationalize workforce, fleets and bring in incremental improvements in operational efficiencies, bringing down costs and making Air India more competitive vis-à-vis low cost carriers.
Adherence to Schedule will help Air India rebuild customer confidence in the ability of the Airline to perform.
The Learning and Development initiatives that need to be taken up and measured are:
Alignment of employees with company goals
Cross Functional Training
Team work
Cross functional Training and teams will increase the efficiency of the organization allowing it to make decisions faster and hence respond more quickly to changes. This is very important for Air-India as the general perception is that the company is slow to change and lethargic in decision making.
The financial outcomes from these activities are:
Profitability
Lower Costs
Increased Revenue
Fewer Planes
The customer outcomes are:
Lower Prices
On-Time flights
Frequent flights
Friendly Service
Given below is the pictorial depiction of the balanced scorecard for Air India.
Resource Based Turnaround Strategy for Air India
This part of the report deals with understanding the reasons for the near collapse of Air India and proposing a turnaround strategy for the airline. Since its inception by the Tata Group and the subsequent takeover by the Indian Government, Air India has seen a lot of issues emerging and changes happening in the environment in which it operates. These issues and changes have been compounded by volatile economic growth, sluggish European and Asian recoveries, and a crisis of confidence in professional fields, reducing the average time available to the organization seeking to affect a successful turnaround. Also the rising competition in the field it operates has compounded the problems by making Air India fight for limited resources with players which quite often have people with greater conviction at the top and thereby can apportion a greater part of critical resources to the firm's operations.
This challenge is particularly severe for organizations operating in high-tech industries. Airlines business being one that is fairly high technology is characterized by factors that include product and/or process sophistication, research and development (R&D) intensity, and a large population of technical employees. High-tech firms often exist within a high-velocity environment that is characterized by rapid changes in technology, demand, and competition overlaid by sharp and discontinuous change. Thus unless the management is equipped for change management, it can often struggle to remain profitable. This is precisely what happened to Air India.
Within this high-velocity context, a strategy for recovery faces unique demands. These demands have been depicted in the figure below.
Business Decline
The framework that the group uses in analysing the reasons for Air India's failure and proposing the turnaround takes a new view of turnarounds by integrating constructs drawn from existing turnaround literature with others from the resource-based view of the firm. It posits that the effective operations of a business are based on the confluence of key resource availability, appropriate strategy, and the right implementation of that strategy through resource leveraging.
Key resources within an enterprise can serve as the foundation for a strategy for sustainable competitive advantage. Such resources are the products of historical strategy and environmental action and withstand rigorous tests of quality. A list of the key attributes of these resources is provided below:
(Refer "High-Velocity Environment Trims Time to Act ... Creating a Framework for High-Tech Turnarounds" by Rolph N.S. Balgobin, Naresh Pandit; Nov 1, 2002)
Turnaround Strategy
While existence-threatening decline is often a key feature of turnaround attempts, there is less certainty with regard to the origin of the change intervention and the necessity of new top management. Frequently, a turnaround attempt is initiated after pressure from a significant stakeholder, such as a parent company or strong shareholder group. Air India has witnessed this quite a few times as with the ascent of every new government at the center of Power in New Delhi, the attitude towards the airline has changed. Hence pressure often came from the private players whose bids to take over the airline provided the fillip to the management of the airline to change the scheme of things at Air India.
In many cases, however, the trigger for change is internally generated by management attuned to signals of decline. Similarly, the need for new top management to start a turnaround is not a rule in high-tech companies. The attitude of the management team is at least as important as having new leadership in getting a turnaround attempt underway.
Recovery plans of successful turnarounds are distinguished from unsuccessful recovery attempts in several ways (shown in the figure below). In successful turnaround cases, a diagnostic review leading to an analysis-led understanding of the dynamics impacting the business provides a clear indication of the opportunities available. These are pursued with the explicit goal of establishing a sustainable market position and a profitable end point.
Successful turnaround Plan characteristics
Result from a diagnostic review (inductive rather than prescriptive)
Profitability is explicitly set as an objective
A single turnaround plan rather than competing initiatives or no plan at all
Communication with stakeholders to ensure alignment
A turnaround team develops and implements the plan
Causes of decline are appropriately addressed
The Turnaround Process
Traditional frameworks of turnaround often portray recovery as a sequential process, with a change of management initiating the turnaround attempt, followed by retrenchment, stabilization, and finally a return-to-growth stage. Contrary to this, four distinct stages can be identified in the high-tech turnaround process - crisis development, management change, transformation and stabilization, and return to growth.
In the case of Air India, the Crisis Development phase started in the year 2008-2009 when the airline reported financial losses of 5000 crores. Due to this, the airline couldn't pay the salaries of its employees leading to a massive announced by the employees in the summer of 2009. This was one of the biggest human resource crises in the history of Indian business with nearly 30000 Air India employees going on strike. Immediately following this, the disastrous incident of the crash of Air India Express Flight 812 leading to the death of 158 people, happened.
In the management change phase, contrary to findings in more traditional sectors, change does not always occur at the top of the organization as the turnaround gets underway. Rather, there is frequently a change in problematic management, supporting the view that a CEO's knowledge and relationships can often be crucial to a successful recovery. The same happened in the case of Air India. The entire top management of Air India was recast in a period of 30 days by the then aviation minister Mr. Praful Patel. As part of the shakeup, several old time directors were asked to leave and a Professional Chief Operating Officer was appointed under the CMD, Mr. Arvind Jadhav.
In the third phase, a number of simultaneous actions took place, including cost reductions, asset reduction, revenue generation activity, and product-market reorientation. In successful turnarounds, firms are careful not to dispose of resources that could prove useful to recovery efforts, while unsuccessful firms often lose their most valuable assets early as they concentrate on survival rather than competitive leadership. Thus key resources in firms that succeed in turning around their operations are not lost as a result of reflex cutbacks. Rather, costs are reduced in line with a clearly defined turnaround plan. Also Air India disinvested some of the less efficient parts of its operations, while retaining the more important and useful ones.
After an early emphasis on cost reduction, the focus of Air India then shifted to Structural alterations, joint-venture participation, investment, and the introduction of new products. This is a significant deviation from the turnaround experience of firms operating in less volatile industries and suggests that the high-tech environment demands that changes occur in parallel rather than sequentially. As a result, this phase represents a transformation of the firm's resource base, structure, and approach to market.
As the transformation takes hold, the turnaround firm passes through an inflection point that marks a shift in emphasis from cost and asset reduction to growth. In the case of Air India this has been characterized by the commitment of the top management to the growth of top line and sales and a conscious effort on the part of the airline to drive up volumes and occupancies of the airlines. The airline plans to reduce its price up to 23% by the end of this year. Industry experts see this as a clear sign of conscious effort on the part of the airline to drive up its volumes and occupancy rates.
The final phase of the turnaround effort is marked by an assumption of survival, an emphasis on growth, and increased acquisition activity. In high-tech turnarounds, this phase does not require a change of CEO; either management is not changed at all, or members move on to access other career opportunities. Our group expects the same to happen by the end of the nest fiscal year when the economy would have recovered and new opportunities would arrive at the horizon for the troubled airline.
Influencing Factors
Literature study suggests that there are significant differences between successful and unsuccessful cases when compared in terms of the contextual factors of turnaround attempts. Factors like macroeconomic improvement and market growth appear to assist turnaround attempts. Though, it has also been seen that environmental changes are not deterministic. Because each organization is a unique collection of resources, external events do not have a uniform impact. Thus, a rising tide lifts only seaworthy boats.
External influencing factors thus include:
Macroeconomic improvement and market growth
Stakeholders' attitude. Interaction with stakeholders like buyers, suppliers, employees, bankers, unions, the government and the community go a long way in determining the success of the turnaround efforts. When key stakeholders hold an active interest in the viability of the firm, there appears to be a greater chance of success.
Internal Influencing factors include:
Mission institutionalization
Availability of financial resources
Power concentration, and
Perception of the permanence and controllability of decline.
Mission institutionalization, driven by internal and external expectations of the businesses the high-tech firm should be in, can be a driver or an inhibitor of positive change demanded by a turnaround. In cases in which the changes required place the firm in a new strategic domain(say low cost carriers), mission institutionalization can hinder efforts if a firm's constituents instinctively rule out courses of action that are perceived to be inconsistent with the mission of the firm or its founders. If required changes lead to the firm operating within the same strategic domain, resistance appears less likely. This in Air India's case can be explained by the reluctance of the airline's part to move into low cost carriers' strategic domain. While this remains a possible strategic domain for the future, the airline shows remarkable reluctance in adopting this as a possible strategy. Maybe the Maharaja can't fly cheap after all.
Available financial resources are a requirement for a high-tech turnaround attempt, particularly since many technology companies have significant cash demands. However, the availability of funds has not been found to be a deciding factor in the outcomes of turnaround efforts. This is a potentially significant finding because it is sometimes suggested that high-tech firms in difficulty require only a steady injection of cash until their products gain market acceptance. Also in the case of Air India with the airline being heavily government funded, the opportunity to save money and possible publicize it makes a great political success story.
Of greater impact on the success of a turnaround attempt is the concentration of power within the organization. Firms with greater levels of power concentration are freer to develop and implement successful turnaround plans, while failing cases are often constrained by parent companies, powerful stakeholders, or internal politics. In non-turnaround cases, management appears to have much less power relative to stakeholders. In the case of Air India, with the creation of a new position of power of CEO, can potentially dilute the power vested in the top management. Yet considerations of operational efficiencies far outweigh the concern for power dilution.
Similarly, with the entire airline industry showing signs of recovery with the economy firmly on the path of recovery, the perception of the permanence and controllability of decline is that of impermanent and one that can be managed by suitable strategy implementation.
Strategy Implementation
Successful firms reduce their resource base in areas that are no longer core activities. Failed firms are more likely to sell off or otherwise lose valuable resources that might support a recovery attempt. In successful cases, the remaining resources are realigned and augmented with resources "borrowed" through development agreements, joint ventures, or outright acquisitions. This is depicted in the diagram as shown below.
Resource Leveraging diagram
As a rule, successful turnaround cases concentrate their resources on a single and consistent turnaround plan, emphasize a few improvement areas at a time, and focus on critical performance levers. They often have strong feedback mechanisms to drive new learning throughout the organization.
Firms that go through successful turnarounds are also able to blend and balance resources to bring products and services to market, while unsuccessful firms often have an imbalance of skills, which effectively neutralizes capabilities that exist elsewhere in the organization. Finally, parsimonious resource use and the ability to implement turnaround plans quickly also characterize successful recoveries.
Thus, this is the comprehensive resource based turnaround strategy that we propose for Air India.
