Air India was a great brand and whoever travelled abroad a few years back had an
excellent experience in travelling by Air India. The Maharaja symbol, represented the
rich Indian culture. The liberalization of the Airline sector coupled with lowered
productivity of the assets led to the present Economic Condition of Air India.
The financial condition is very bad today but it is not at a level that it would be difficult to
turn around the company. There are many hidden assets the company has which could
be capitalized to restructure the company. Since it is owned by government, reserving a
few privileges being the national carrier could be created for Air India.
The company requires restructuring of the Businesses, Operations, Systems and
Procedures and Capital Structure. There is a greater need to follow a asset light strategy
and capitalizing on the hidden assets going forward.
The vision can be set as To become a World Class Airline enterprise and be ranked
among the Top 10 Airlines by 2015..
The Mission could be , To operate in All businesses related to Air Transportation and
establish operations across the world. By addressing participating in all the related
businesses , the asset utilization could go up and the fixed cost of operation per
Passenger KM could be brought down substantially.
They could set an objective to become cash positive within a year and book break even
in two years and a profitable Airline in 5 years.
The opportunities for this business are :
Robust Indian Economic Growth and increasing liberalisation of the sector
Increasing purchasing power of Indian customers.
Governments proactive approach to fast growth of Air Transportation sector
Existence of underserved , unserved markets in India.
Growing international Trade
Likely opening of Military Airports for commercial aviation
Liberalisation of international routes through bilateral agreements.
The use of Aircrafts require lot of improvement from the present levels and there is a
scope for increasing the average use of these aircrafts by at least 15% from the present
levels.
An objective should be set to achieve usage of at least 12 hrs per aircraft per day.
Achieve a capacity utilisation of 85% of all the infrastructure and supporting facilities.
This could be achieved by sharing some of these facilities with the other airlines.
Explore the scope of leasing the extra free land , leased land and identify scope for
improving the revenue through this route.
The company has lot of hidden resources including Realty , which could be valued at
much higher rates than what was shown in the balance sheet.
An exercise to be conducted on all the non performing assets and action plans to be
drawn up for improving the utilisation of these assets or disposal of these assets which
would help in releasing resources for growth.
The company owns properties in Premium places and the scope for enhancing the
revenue from these properties could be explored including Sale/Lease/Joint
Development and extracting higher revenue from these properties
Cost Control
Reduce the number of types of Aircraft in the system which would help to save on
Maintenance costs.
Wherever possible convert the fixed costs into variable costs
Change the quality of paper in which the tickets are printed.
Identify the non value adding variable expenses and control them very effectively.
Cut down the speed of Planes if the availability of landing space for the aircraft is likely
to be delayed from the scheduled time.
Develop the crew scheduling in such a way that layovers and night halts are minimized
to a great extent.
Reduce the maintenance costs.
Reduce the number of lay overs by strengthening the route planning and crew
planning.
Share the infrastructure with other airlines and earn revenue from sharing of
infrastructure.
Fuel Management Strategies
High fuel costs are increasing the Break even levels for the Airlines.
Now they constitute 40% of an airlines operating cost.
ATF in India is costlier by 60 70%.
Fill the fuel where the price of fuel is very low
Enter into long term contracts for supply with a provision for lowering the price indexed
to the Price of the ATF in the world market.
Instead of using the Jet engine use on board diesel power generation unit to rev up
the aircraft while passenger board and embark.
Monitor the fuel consumption flight wise to ensure
Fuel Hedging strategies Like in other countries request the government to allow the
hedging of fuel requirements, which would help to reduce the cost of the fuel.
Performance Reporting system
Develop a very robust Operating and Financial Reporting system across the enterprise
and for each SBU and division.
Prepare Perspective Plans, Strategic Plans and Annual and Monthly Budgets.
Introduce the concept of Balanced Score card across the enterprise.
Prepare monthly Financial reports and forward it to the Ministry for their review. Have a
review with the Ministry every month on the performance.
Report Variances with the course corrections and action plans required .
Track the daily performance of each route, flight, aircraft and the major support and
infrastructure facility.
Consolidate this on a monthly basis.
Continuous performance review should be in place to achieve the fast response.
As soon as possible, bring the above system in synch with the ERP to be deployed
across the enterprise.
HR Strategies
Increase the level of operations without substantially increasing the employee head
count.
Bring down the number of employees per aircraft to 120 and this could be achieved
over a period of time.
Tie up with Aircraft manufacturers for training the Pilots and supply of pilots when a
new aircraft is delivered. When a new aircraft is delivered the Manufacturer can provide
4 trained pilots for each Air craft supplied.
Introduce the Balanced score card system to measure the performance of
employees.
Introduce the variable pay system and the variable pay could go up to 40% of
employees salary. Move towards the concept of cost to the company.
Retrain the staff in operating departments to handle functions relating to Customer
service.
Help the surplus manpower to get placed with other emerging Airlines in the country
through out placement services.
Union Management
Create a committee for all the Unions where each Union president will become a
member.
In the beginning, conduct a brain storming session with all the Unions to identify how to
make the company more competitive and survive in the highly competitive environment.
Request the Union to come with ideas on how to improve the productivity of all the
resources within the company which would increase the companys ability to increase
the wage levels of all employees.
Future wage agreements to be signed after based on productivity agreements with the
Unions. Productivity to be benchmarked with other leading airlines in the world.
Training/Retraining Strategy
Identify 10 leading institutes in India and abroad for training the personnel.
Enter into Strategic Alliances with leading Airline training organisations in the world.
Develop strategic alliance for training with the equipment suppliers and make it as a
part of the pacakage for purchase.
Co-operate with non competing Airlines like South West to design enterprise wide
training programme for staff and prepare a master training programme covering from
Senior Management level to Junior Management level.
IT and Systems Strategy
Install the best systems in the world in the Airline Industry for Enterprise Management,
Organisation Structure :
Create a Corporate Centre with Central functions like Finance, HR, Safety and Strategy
(including fleet net work and Brand)
Create Airline Business Units ( SBUs), Domestic Airline, Cargo Airline, International
Airline and LCC. Each business will have Divisional CEO and Head of Finance and HR.
Have profit centres for Catering, Ground Handling,MRO and Shared services
Have SBUs for Rental Cars, Hotels ,Resorts , Tourism, Travel Services and
Merchandising of products in the Aircraft, Airport and Web site.
Create a subsidiary for exploiting the Real Estates of NACIL and the associated
companies.
Provide a big focus to customer service which will be a differentiator for the company
going forward.
Other Strategies
Create a lead in forming Asian Airlines Association for protecting the interest of the
Asian airlines, since going forward the Asian markets are going to provide the
momentum to the growth of this industry.
Take the support of Government in adding capacity which would help to maintain the
present market share in the highly competitive market.
Take the support of government in protecting the routes, sectors which are providing
the profits today. The top 10 profit making international routes could be reserved for
NACIL for the next three years till the company attains self sufficiency.
Work closely in coordination with the government to promote the Aviation Sector and
Tourism Industry of India which will provide the momentum to the Indian Economic
Growth.
The key to success of all the above strategies will be treat the employees as partners in
implementing this exercise and protecting the interests of the employees.