CAPSTONE PROJECT

WINTER CONSULTING
2022 - AIR INDIA GROWTH STRATEGY
SANU SOURAV
IIT GUWAHATI
 Problem Statement 2: Air India Growth Strategy (Type: Growth/M&A)

INDEX
CONTENT PAGE NO.

• BACKGROUND •3
• WHAT HAPPENED YET? • 4-7
• HOW IT CAN BE IMPROVED • 8-11
• Q-1 (SWOT ANALYSIS) • 12-15
• Q-2 (MARKET RESEARCH) • 16-19
• Q-3 (GROWTH STRATEGY) • 20-22
• Q-4 (CURRENT STATUS) • 23
• Q-5 (GUESSTIMATE) • 24
• APPENDIX • 25-26

2
 Background
• India's first commercial airline, TATA Airlines, was founded by the business tycoon and former
TATA Group Chairman JRD Tata in 1932.
• The company later went public and was renamed Air India, the country's national airline, in
1946. The Indian government nationalised the private airline in 1953, ran it with taxpayer
money, repeatedly underwrote losses after 2007, and put the national carrier up for sale, which
had accumulated debt exceeding Rs 50,000 crore and other liabilities by then.
• The government decided to hold on to 24% of the equity in the airline. It did not receive a single
bid. Air India was back on the strategic sale table in January 2022. The government said it
would offload 100% of its stake in the company this time.
• TATA Sons clinched the deal, and after 68 years, on 27th January 2022, Air India was
welcomed back to the TATA Company. 3
WHERE DID IT GO WRONG?

4
 THE TIME OF JRD TATA
• Besides business, JRD TATA had a love for flying
airlines, and had a mission for civil aviation in
India.
• On many flights, he used to travel personally, as
a piolet or as a passenger, so that he could
personally check the quality standards.

AIR INDIA WAS A BRAND KNOWN FOR ITS-

WORLD CLASS MAHARAJA-

CHAMPAGNE
LUXURY LIKE MOTIFS

FASCINATING CONTINENTAL FOOD

INDIAN ARCHITECTURE PREPARED BY CHIEFS OF TAJ
& PAINTINGS HOTEL 5
1978, Government Removed, JRD TATA from board of Air
India and Airlines.

After Government intervention, A bureaucracy from nationalists were

Under Government, Air India had
Political Equations ran Air India, NOT controlling the airlines, which
256 employees, which were 2.56
having Technical Expertise and had no understanding of flying plane
times the global standard.
Business Acumen. like it was under JRD Tata.

In 2007, Air India was under a loss

Salary, pension,
of 770 crores. Government merge, Air Despite being in huge losses, the
health benefits, luxuries, free food,
India and Indian Airlines, formed management took decision to buy
accommodation, and free flight
a new entity new planes worth 44,000 crore
tickets were costing way too
called 'National Aviation Company of rupees, wasting Tax-payers money.
much for the employees.
India Limited'.

Gradually the regular strikes of pilots

Government treated Air India as a and staff, flight delays, unfriendly
matter of pride and prestige NOT as and unwelcoming staff attitude, and
Business. lack of service became the new brand
of Air India.

6
 Foreign Airlines like,
American
Air India was not capable Air India was not even
Airlines, Singapore
of competing with foreign capable to compete in
Airlines, MEA
international airlines. domestic markets.
started acquire Indian
Market.

8th October 2021

Tata Sons acquire 100% stakes of
Air India through its Subsidiary Talace Pvt Ltd.

PRESENTATION TITLE 7
HOW CAN THE COMPANY IMPROVED?

1 2 3 4 5
Dramatically Merger of Air Improvement Improving Aggressively
gowing its India and in technology, reliability and
hiring
network and Vistara sustainability, on-time
fleet and innovation performance industry
Growing the Revamping customer Increasing efficiency
talent
international routes experience and profitability

8
First, we need to address the accumulated grievances and issues
that have historically been holding the airline back.
Investing in systems, people, aircraft, training, internal products.

Address the cost structure,

automate, and take Removing extra staffs
advantage of artificial and piolets and hiring
intelligence, and modern industry talents
systems

Cultural shift
Removing sarkari mindset where decisions were taken
slowly, now those decisions should be taken swiftly.
9
 Air India and Vistara could
Attract more passengers
emerge as one big full-service
through new revenue
carrier while Air Asia India
management systems and
and Air India Express could
new destinations and
emerge as the low-cost arm
improve loyalty programes
with both domestic and
and partnerships
international operations

Sign leases and letters for new aircraft to expand its

current fleet sixe of 128 aircraft and Air India Express
has a fleet size of 25 aircraft

10
CUSTOMER COMFORT
Services from other TATA
High Item priority Companies
-Punctuality, Reliability, Trustworthy -Catering services from TajSATS
-Seats, Entertainment services -Accommodation, the Indian Hotels
Company (Taj).

Bringing, old motifs like Maharaja

and Indian Culture back to life.

Seats
-Using Tata Technologies to build design some of the obsolete or out-of-stock
aircraft seat components or other components in aircraft (by) doing 3D
design and manufacturing from scratch so that we can accelerate repair of seats,
-For future same problems, keep supply of spares to keep repairing things that
continue to break.
11
 1
It has good reputation in both international and domestic markets.​

SWOT ANALYSIS
It has a fleet size of 127 airplanes which cover 102 destinations, including 57 domestic,
travels to 33 countries, spanning 4 continents.

STRENGTHS
After privatization, it is once again back in hands of TATA Inc. Who also own Vistara
and Air Asia, all combines TATA has market share of 21%.​

It is known by its old times and motifs like Maharaja are brand image of Air
India which makes it different than other airlines. It also has an image of
National value and National Carrier.​

It understands value of marketing and promotes on T.V. ads and different social media.​

Its information systems are advanced and compatible with its operation and service.​
12

After the payment of 18,000 crore to the Government of India, the company's
debt is now Government's obligation.
PRESENTATION TITLE 12
 1
There were issues for Air India with its employees. It seems to have complicated issues with
SWOT ANALYSIS employees and due to this, there were many issues over the years.

Air India has exceeded financial losses over many years. It has been accumulating it annually
and this is a great weakness for the brand.
WEAKNESSES
Air India’s high-cost structure and its compulsion entry to the public sector unit is the main
reason for its loss and it is predicted that the loss will continue for some more time.

Air India operates through large international and domestic markets, competing with leading
world-class giant airlines as well as small local operators. This lack of clarification about the
strategic path dilutes its strengths in large measure and confuses its brand within markets.

Low productivity, low power usage.

Growing Competitor base and low-cost carrier entry (LCC’s)

13 13
13
 1
The company can benefit from expansion of routes and international destinations.
SWOT ANALYSIS
Customers are more affluent, tend to be less price-conscious, and choose quality
service over cost.
OPPORTUNITIES
The demand for tourism is strong worldwide. Airline industry de-regulation also makes
airlines more open to the global skies than ever before. Both the demand for tourism
and the deregulation definitely provide prospects for international growth for Air India.

Solving internal issues regarding workforce can hugely boost image and operations.

Dedicated set of customers can boost Air India's business.

India ‘s airline industry is growing faster and will continue to expand as GDP increases,
and it is expected that the trend will continue until the slowdown falls.

14
HGK14
 1
The market share of Air India is declining for the past few years. Other
SWOT ANALYSIS competitive airlines are taking advantage of the decreasing market share of
Air India

Air India’s operational cost is more, which includes fuel cost, safety protocol
THREATS cost, and many other variable costs.

The Covid-19 pandemic has impacted the airline industry to a large extent.
This has become a serious threat for Air India as there were no travelers
during this time.

Air India faces aggressive competition from the world-leading airlines and its
price wars impact the domestic market. It also faces competition from
domestic players.

The Indian Railway Ministry has significantly increased speed and reliability
on its medium to long-distance routes, drawing passengers away from air
reliability, with rates nearly equal to those of low-cost carriers

15 15
15
Conduct extensive market research of the aviation Industry, but not limited
2
to competitor analysis and finding the target audience.

India is the world's third-largest civil aviation market (as of January 2018). It recorded air traffic of 131
million passengers in 2016, of which 100 million were domestic passengers. The market is also
estimated to have 800 aircraft by 2020.

OVERALL MARKET
Indigo flew ahead of other airlines during
November with a 55.7 per cent share of the
domestic aviation sector, while Vistara secured
the second slot with a market share of 9.3 per
cent.
Air India was in the third position with 10.63
lakh passengers and a 9.1 per cent market
share. Similarly, Go Air, with 8.70 lakh
passengers, had a market share of 7.5 per cent
during November.
16
 2
SEGMENTATION STRATEGY
Elements like age, sex, and
psychographics/distinctive demographics assume
a significant part in gathering the populace based
on comparable qualities in the business of this
company, in particular. Air India utilizes a blend of
socioeconomics, psychographics, and geographic
division systems.

PRODUCT
India is one of the leading airlines in India providing international and
domestic travel services. Air India once had 2 products; passenger and
cargo transport. However, the cargo transport was decommissioned in
2012. It only operates through passenger transport. It uses Boeing and
Airbus planes for the same.
17
 The route of air traffic, the distance, and the number of halts on the way are 2
some of the factors that affect the prices. It follows competitive pricing as
PRICE airlines are a highly competitive space. At the same time, there are two types
of price, within a flight :
•Economy class and
•Business-class
Air India prices airline tickets are easily accessible to middle-class families.
Premium pricing is primarily done to target Business class passengers as they
have a high tendency to pay and avail themselves of premium services.

PROMOTION
By promoting their tagline, “Air India.. Truly Indian”, it sets up a
standard as it is fully controlled by the government. It offers trade
discounts and trade tie-ups to promote its business. Their point of
purchase is ticketing counters at traveling agencies, online
options, tourist packages, etc. 18
2 Population of India: 140 crores

Rich : 10%
Upper : 20%
Middle : 30%
Lower : 40%
Poor : 30%

Let's assume that only Rich + Upper

can only afford to travel on a plane.
=> 30% => 42 crores civilians.

TARGET AUDIENCE
Budget Conscious Travelers − They look for the most inexpensive
airline without knowing much about the different airline
services. Loyal Travelers − They travel frequently and as they
travel frequently with the same airline, the airline offers some
benefits to them and also the miles. 19
19
The root cause of the decline of Air India and use the Growth 3
Strategy framework to devise strategies for its future growth.

• The root cause of decline of Air India was the decision

made by government to bring in a change in the
management.
• Removal of JRD TATA and intervention of government led
its decline.
• A bureaucracy from nationalists were controlling
the airlines, which had no understanding of flying plane
like it was under JRD Tata.

For more check out slide no. 6 20

 3
Growth

Organic Inorganic

Existing New
Revenue Revenue
Sources Sources

Increase
Increase GROWTH STRATEGY
Average
Volume FUNDAMENTALS
Price
21
Organic Inorganic 3

Existing Revenue Sources- Merger of Air India and

• Can offer luxury and royal services Vistara.
on paid basis. • Vistara is a joint venture of Tata
• Improving On Time Performance Sons Private Limited and Singapore
• Hiring best industry talents Airlines Limited (SIA), wherein
Tata Sons holds 51% stake
in partnership and Singapore Airlines
owns 49% stake.

New Revenue Sourses-

• Increase fleet size
• Fresh order of aircraft and engine,
which will have a sizeable number of
narrow-body as well as wide-body
aircraft.
• More number of International
Routes. 22
Now, it's almost a year since TATA acquired Air India. How, after the acquisition by
TATA, is the company performing in terms of the number of customers & revenues
4
generated?

Under Vihaan.AI, Air India has improved its-

The airline posted net revenue of

Air India’s revenue rose 64% in Rs19,815.9 crore during the year
fiscal 2022, but its net loss to March 31, 2022, on a Revenue
swelled by a third, showed latest standalone basis, with a net loss
regulatory filings by the airline of Rs 9,556.5 crore. In FY21, it
that Tata Sons bought from the had reported a net loss of
government earlier this year. Rs7,017.4 crore on revenue of
Rs12,104 crore

During the year, Air India

India’s domestic air
improved its load factor No. Of Customers
passenger traffic grew
to 73.5%, while the
nearly 67%
number of passengers
during the January-June
carried grew over 80% to
period of this year.
11.5 million. 23
GUESSTIMATE- 5
the number of passengers travelling per day on Air India's flights within India.

Population of By Demand Side

India: 140
crores

Rich : 10% Let's assume that only

Upper : 20% Rich + Upper can only
Let's say each civilian So, for a day =>
Middle : 30% afford to travel on a
travels once a year. 42/365 => 11.5 Lakhs.
Lower : 40% plane. => 30% => 42
Poor : 30% crores civilians.

According to market
60% of them are 70
share, Let's 10%
domestic flights => Thousands passengers
of civilians chooses
0.6*1.15 => travel per day on Air
Air India => 11.5/10 =>
69 Thousands. India.
1.15 Lakhs.
24
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0cent

25
Thank You

SANU SOURAV

IIT GUWAHATI
210103097
[email protected]
26