Brand Makeover for Air India

8/8/2019 Brand Makeover for Air India

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Brand Makeover for Air India

Air India is a state-owned flag carrier and currently the oldest and largest airline of the Republic

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.

Brief History:

Air India was founded by J. R. D. Tata in July 1932 as Tata Airlines, a division of Tata Sons Ltd.

(now Tata Group). On 15 October 1932, J. R. D. Tata flew a single-engined 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.

On 25 August 1953, the Government of India exercised its option to purchase a majority stake in

the carrier and Air India International Limited was born as one of the fruits of the Air

Corporations Act that nationalized the air transportation industry. At the same time all domesticservices were transferred to Indian Airlines (now renamed as Indian). In 1954, the airline took

delivery of its first L-1049 Super Constellations and inaugurated services to Bangkok, Hong

Kong, Tokyo and Singapore.

In 1993, Air India took delivery of the flagship of its fleet when the first Boeing 747-400 named

Konark (registered VT-ESM) made history by operating the first non-stop flight between New

York City and Delhi. In 1994 the airline was registered as Air India Ltd. In 1996, the airline

inaugurated service to its second US gateway at O'Hare International Airport in Chicago. In

1999, the airline opened its dedicated Terminal 2-C at the renamed Chhatrapati Shivaji

International Airport in Mumbai.


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In 2001, Air India was put up for sale by the then NDA government. One of the bids was by a

consortium of Tata Group-Singapore Airlines. However the re-privatization plans were shelved

after Singapore Airlines pulled out and the global economy slumped.

Merger with Indian:

In 2007, the Government of India announced that Air India would be merged with Indian. As

part of the merger process, a new company called the National Aviation Company of India

Limited (NACIL) was established, into which both Air India (along with Air India Express) and

Indian (along with Alliance Air) will be merged.

In 2006, the Indian government ordered 111 aircraft from Boeing and Airbus.

The Government of India, on 1 March 2007, approved the merger of Air India and Indian

Airlines. Consequent to the above, a new Company viz. National Aviation Company of India

Limited (NACIL) was incorporated under the Companies Act, 1956 on 30 March 2007 with its

Registered Office at Airlines House, 113 Gurudwara Rakabganj Road, New Delhi. The

Certificate to Commence Business was obtained on 14 May 2007. Presently, the Board of

NACIL consists of:

y Shri Raghu Menon, Addl Secretary & Financial Advisor, Ministry of Civil Aviationy Shri R K Singh, Jt Secretary, Ministry of Civil Aviationy Shri Rajiv Bansal, Director, Ministry of Civil Aviation

The Scheme of Amalgamation of Air India Limited and Indian Airlines Limited with National

Aviation Company of India Limited was approved by the Board of Directors of all the three

Companies.

The Authorised and Paid-Up Share Capital of the merged entity was Rs.1500,05,00,000/- and

Rs.145,00,00,000/- respectively.

New Logo:

It was decided that post merger, the new entity will be known as Air India while Maharaja

will be retained as its mascot. The logo of the new airline will be a red colored flying swan with

the Konark Chakra in orange placed inside it. The flying swan has been morphed from Air

Indias characteristic logo The Centaur whereas the Konark Chakra was reminiscent of

Indians logo. The Corporate Office of NACIL will be at Mumbai.


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The new logo would feature prominently on the tail of the aircraft. While the aircraft will be

ivory in color, the base will retain the red streak of Air India. Running parallel to each other will

be 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' will run across the tail of the

aircraft.

Air India in trouble:

Around 20062007, the airlines began showing signs of financial distress. The combined losses

for Air India and Indian in 2006-07 were 770 crores ( 7.7 billion). After the merger of the

airlines, this went up to 7,200 crores ( 72 billion) by March 2009. This was followed by

restructuring plans which are still in progress. In July 2009, SBI Capital Markets Ltd 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.

Why Air India went into trouble???

Air India, the brand that today encompasses both the erstwhile Air India and Indian Airlines,

went into serious trouble. The National Aviation Company of India (NACIL), formed by the

merger of the two airlines, ran up losses of Rs 2,200 crore in 2007-08. Losses for 2008-09

estimated at over Rs 5,000 crore. In 2009-10, losses could exceed Rs 12,000 crore. How did the

airline get in to such mess?

Some perceived causes of Air India's losses and examining how far these are valid:

y Public ownership is the problem: Governments just can't run commercial enterprises.There is no way that Air India and Indian Airlines could have survived in the face of

greater competition.

y Several public sector enterprises have successfully weathered greater competition post-liberalization and are doing better than before. In the period since 2001, Air India made a


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profit every year until 2006-07. Indian Airlines made a profit in three out of those six

years.

y Losses in aviation are not unique to the Indian public sector. Private airlines in India toohave been in the red. The airline industry is notoriously prone to losses. Worldwide, the

International Air Transport Association estimated losses at $17 billion in 2008, $11

billion in 2009 and $3 billion in 2010.

y Air India suffers from a bloated work force typical of the public sector: Air Indiaperforms in-house a wide range of functions that other airlines outsource. Still, Air India's

workforce per aircraft of 214 compares favorably with that of several other airlines:

Malaysian Airlines (230), Virgin Atlantic (282), KLM (220), etc. Wages account for just

16% of total costs, so the scope for reducing losses through wage or employee reductions

is quite small.

y The failed merger is responsible for non-performance and losses: There is little doubt thatthe merger of the two airlines, done in 2006-07, has turned out to be a nightmare. But it is

hard to ascribe the mounting losses to the merger per se.

y The failure of the merger cannot explain losses of over Rs 5,000 crore in 2008-09 andthe even higher losses projected for 2009-10. Merger makes it more difficult for Air India

to respond to the situation it is in, it is not the cause of the situation.

Thus, none of the perceived causes can explain the mess Air India is in today. The reportprovides useful clues. Air India's problems, it turns out, arise from two errors, one strategic and

the other structural.

As the accompanying table shows, in 2007-08, one-third of the increase in losses was on account

of increased interest and depreciation charges. Increase in wage costs contributed a little less

than a third. In 2008-09, estimates indicate that half the increase in losses will be on account of

increase in interest and depreciation.


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Restructuring Exercises at Air India:

The National Aviation Company of India Limited (NACIL), the holding company of Air India, is

working overtime to prepare by the month-end a business plan and a financial restructuring plan.

The NACIL is also expected to come up with plans for the next six months, 12 months and 18

months for bringing in cost reduction and improving revenue generation.

Some of the measures include rationalization of manpower and productivity- linked incentives,

integration of the erstwhile Indian Airlines and Air India, review of all agreements on technical

and operational matters, return of the leased aircraft at the earliest, large-scale redeployment to

curb infructuous expenditure, and closure of all overseas offices where the NACIL does not

operate.

It was also decided to strengthen the NACIL Board of Directors by taking in experts in finance,

law, hospitality, information technology and other relevant fields.

A committee of Secretaries, chaired by the Cabinet Secretary and including the Finance

Secretary and the Civil Aviation Secretary, will closely monitor the turnaround plan of NACIL.

Air India to shift Mumbai hub to Delhi's T3, cut costs by a third:

The airline signed a deal with Delhi International Airport (DIAL), a consortium that operates

New Delhis Indira Gandhi International Airport, to designate T3 as its hub.

Air India will bring passengers from all over the country to Delhi to fly them to overseas

destinations. While the airline will get discounts on airport charges depending on the volume of

passengers, DIAL will benefit from its association with the carrier that operates the largest

number of international flights into and out of the country.

Air India is yet to release its audited results for the fiscal 2009-10, but it is expected to post a loss

of about Rs 5,400 crore on revenues of around Rs 15,000 crore. It has accumulated losses of over

Rs 8,000 crore as of December 2009. Airports charge airlines for takeoffs, landing, parking, use

of aerobridges and terminal. The savings will be vital for loss-making Air India, which plans to

build a hub and spoke model befitting a national carrier that will have over 150 aircraft in a fewyears.

Air India to implement SAP ERP package for better efficiency:

The Air India Board approved the implementation of the SAP Enterprise Resource Planning

(ERP) project.

The implementation of the ERP project is in line with the business objectives and strategy of the


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company for effecting a turnaround.

SAP is the largest provider of ERP solutions world-wide and has been preferred by more than

115 airlines.

SAP solutions support the core business of airlines in passenger services planning and

development and also MRO (maintenance, repair and overhaul) functions.

The implementation of the SAP ERP package would help Air India in strategic decision-making,

monitoring and control systems, the release said.

Besides, integration of key business functions in the erstwhile Indian Airlines and Air India, the

package would also help in seamless integration with other systems and ensuring availability and

consolidation of critical data and information.

At the same time, the airline could aim for improved profitability by availability of real-time

information on route network and profitability.

It would also help in reduction in costs especially in inventories across various areas.

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Brand Makeover for Air India