Supervisions certificates

This is to certify that Goutam Das a student of B.Com.

Honors in Accounting & Finance of
…………………… College under the University of
Calcutta has worked under my supervision and
guidance for his project report with the title A Case
Study of the Indian Aviation
Industry with Special Focus on Disinvestment which he
is submitting, is genuine and original work to the best
of my knowledge

Signature
…………………………
(Associated professor of commerce)
Prabhu Jagatbandhu College

…………..Students declaration
I hereby declare that the project work with the title A CASE STUDY OF
THE INDIAN AVIATION INDUSTRY WITH SPECIAL FOCUS ON
DISINVESTMENT submitted by me for the partial fulfillment of the

pg. 1
degree of B.Com Honors in Accounting & Finance under the
University of Calcutta is my original work and has not been submitted
earlier to any other university/ institute for the fulfillment of the
requirement for any course of study.

I also declare that no Chapter of this project manuscript is whole or in

part has been incorporated in this report from any earlier work done
by others or by me. However, extracts of any literature which has
been used for this report has been duly acknowledged providing
details of such literature in the reference.

Signature

Acknowledgement
Special thanks to those people without whose help regarding
this project report name A Case Study of the Indian Aviation
Industry with Special Focus on Disinvestment

pg. 2
Was impossible to be set up for presentation.
First of all I would like to thank the department of commerce
of Prabhu Jagatbandhu College for helping me in preparation
of this project. The name of whom comes at first regarding
this matter is …………………….. an associated professor in
commerce under whose guideline this project has got its
structure. I am also grateful to ………… other professors of
commerce. Thank to all of them.

Content
CHAPTER I
A. Introduction 5

SWOT analysis 8

Competition with Other Domestic Airlines 10

B. Objective of the project 12

pg. 3
 C. Research methodology 12

D. Limitations of the study 14

CHAPTER II
A. Conceptual framework 15

B. International scenarios 17

C. National scenarios 18

CHAPTER III
A. Presentation of data and analysis 19

B. Findings 31

CHAPTER IV
A. Conclusion 32

B. Recommendation 33

C. Bibliography 34

D. Annexure 35

CHAPTER I

pg. 4
 A. INTRODUCTION

Introduction
Air-India was founded in 1932 as startup airline by JRD TATA. It
eventually grew an international airline owned by the Indian
government. It was first established as TATA air services and it was
based out of a small place at the Juhu air strip in Mumbai. The first
schedule service was inaugurated in June 1932 by JRD TATA, flying
mail along with some passengers from Karachi to Mumbai via

pg. 5
Ahmadabad, in his very first year of operation TATA air services went
to fly 2,57,495 km, with carrying 155 passengers and transporting
over 10 tones of mail. By 1939 routes had been extended to
Trivandrum, Chennai, Delhi, Colombo, Lahore, and the intermediate
points. After the Second World War in 1946 TATA airlines was
converted into a public company and renamed as Air-India limited. In
1948 inaugurate international services between Mumbai and London
via Cairo and Geneva. Thus Air-India International limited was
formed. This was the Air-India’s first international venture. The air
corporations Act, 1953 nationalize all air transports and established
of air corporation, to fascinate the acquisition of existence airline
companies and make better provisions for the operations of air
transport of the country, this led to creation of two corporations,
one for domestic service called Indian airlines corporation operation
and another for international services called Air-India international
corporation. JRD appointed the first chairman of this company. In the
following decade the Indian flagship carrier extended its
international routes to all continents and expanded its cargo
operations as well, in 1962 Air-India became the first airline in the
world to won a fleet exclusively of jet aircraft setting the bench

Mark for innovation and quality service, to gain competitive

advantage.

It was Air-India who first stated the computerized reservation service

in India in the year 2005. In the year 1990 Air-India in association
with Indian airlines and Indian air force, created a world record by
evacuating 1,11,000 people from Oman in Jordan to Mumbai, in
59days just before the gulf war broke out in the middle east. It was

pg. 6
the largest evacuation effort by a single civilian airline. Air-India
pioneers the countries aviation sector and its history is cinnamons
with the history of civil aviation in India, now that the government is
planning for disinvestment of Air-India. This is also be noted that Air-
India is facing huge losses in present days due to certain reasons
which are mentioned later on this project. Still we can hope
betterment of the oldest airline of India if it goes to the right hand.

SWOT Analysis of Air-India

pg. 7
 1. Air India has been the largest air
carrier in India in terms of traffic volume
and company assets.

Strength 2. It owns the most updated fleet and

competent repairs and maintenance
expertise.

3. Its information systems are advanced

and compatible with its operation and
service.

4. It has a good reputation in

both international and domestic markets,
quality service and the age-old Goodwill
that has still kept it alive in the interests
of the rescue operators

5. Has financial backing of the

Government

1. Air India is operating across broad

international and domestic markets
competing with world leading giant
Weakness airlines as well as local small operators.
This lack of clarity on the strategic
direction largely dilutes its capabilities
and confuses its brand within markets.

2. Low profitability and utilization of
capacity

3. Growing Competitor base and entry of

Low-Cost Carriers  (LCC’s)

4. The airline’s high-cost structure and

the compulsions of being a public sector
unit are the reasons and it had been
making a loss and shall continue to make
losses for some more quarters

1. India airline industry is growing faster

Opportunities and will continue to grow as the GDP
increases, and the trend is predicted to
continue once the slowdown recedes.

2. Worldwide deregulations make the

skies more accessible; the route
agreement is easier to be achieved. The
number of foreign visitors and investors
to India is increasing rapidly.

pg. 8
 3. Complementary industry like tourism
will increase demand for airline service.
The Civil Aviation Ministry’s strong
regulation and protection provides
opportunities for consolidation and
optimization.

4. Customers are getting wealthier, tend

to be less price-conscious and prefer to
choose quality service over cost.

5. Best time for introducing LCC’s

1. Air India faces imminent aggressive

competition from world leading airlines
and price wars triggered by domestic
Threats players.

2. The Indian Railway Ministry has

dramatically improved speed and
services in their medium/long distant
routes, attracting passengers away from
air service, with prices almost at par with
the low cost carriers

Competition With Other Domestic

Airlines
Competitors:
 Jet Airways (Est.: 1992)
pg. 9
 Go Air (Est.: 2005)
 Spicejet Airways (Est.: 2004)
 Indigo Airways (Est.: 2006)
 Vistara Airways (Est.: 2013)

In 2014 Air-India lost 62.8 billion rupees while Indigo made

almost rupees 5 billion.
The same story in 2015 and 2016 where Air-India made huge
losses and Indigo airlines and even Jet airways making a profit in
2016. Inspite of such huge losses Air-India survived only because
of a Rupees 420 billion grant given by the previous UPA
Government in 2012, but it seems to have spent all of it and still
owes 500 billion

Rupees in bank, that means Air-India needs approximately Rs.

300 billion just to survive

pg. 10
Air-India’s staff of 16,000 handles only 15% market share while
Indigo has double the market share at over 36% with a marginally
lesser staff of 14,000. Mention all data of other airlines.

OBJECTIVE OF THE STUDY

Main objectives
1. To understand why Air-India lost its Goodwill.

pg. 11
2. To understand why Air-India is making huge losses
over the past decades.
3. To understand grievance of passenger.
4. To understand how to improve its service services.
5. To find out that, why they think the disinvestment of
this airline will be beneficiary for it.

RESEARCH METHODOLOGY
Research design: - research design is the framework of
research methods and techniques chosen by a researcher.
The design allows researchers to hone in on research
methods that are suitable for the subject matter and set up
their studies for success.

Sample design:
Population: The project was done on the Kolkata region
(Netaji Subhash Chandra Bose International Airport)/
(CCU)

pg. 12
Sample unit: The sampling unit is passengers of Air-
India.

Sample size: The sample size of this project is 30

passenger of Air-India.

Data collection method:

(A) Primary data: Primary data was collected by means
of questionnaires, discussion, etc.

(B) Secondary data: Secondary data collected by

referring to various books, newspapers, journals and
internet (details in bibliography)

Data source- Primary, Secondary.

Data approaches- Questionnaire.
Sample size- 30 respondents.
No. of questions- 11.

pg. 13
 Limitations of the study
 TIME: - There was time constraint for the study
work given to me. While doing survey, I got
limited time period for its completion.
 PLACE: - The survey was made on the basis of
Netaji Subhash Chandra Bose Airport, so this
project has a place limitation. The findings of the
survey will differ place by place.

 PRIMARY DATA: - The respond of some of the

consumers was not up to mark. So the survey may
give the based result.
 SAMPLING: - The sample size taken for each of
the survey in this project was very less and
limited.
 FINANCIAL STRUCTURE:- The financial
structure of the society is always in motion. The
findings found out through this project will be
changed after 6 months or 1 year for sure.
 MONEY: - I did not have much money. So lots of
things remained uncovered. If I had enough
money I could have made it more relevant.

pg. 14
CHAPTER II
A. Conceptual framework
Once upon a time Air-India was known as an idol for many airlines.
Many airlines inspired by Air-India. In 1960 Air-India became the first
Asian airline to be on Jet age. But now Air-India has more than
50,000 crore loans and losses, However government invested more
than 26,000 crore to Air-India over past few decades. In the year
2014 Air-India lost Rs. 62.8 billion and the number of losses have
been increasing every year.

The most important reason of the Air-India failure is that the

decision to merge with Indian airlines under Air-India limited in the
year 2007. In the financial year Air-India and Indian airline had
combined losses of 120 million USD. After the merger, combined
losses went up to 1.1 billion USD by March 2009. This is a truly
incredible raise up in numbers, by 2011 (Two years later) Air-India
had accumulated some 6.7 million of debt and an operating loss on
top of this of 3.5 billion USD.

After the merger of Air-India and Indian airlines, the total employees
increases more than 30,000, that means 214 employees for a single
plane, where 161 employees per plane for Singapore airlines, and
172 employees per plane for British Airways. That mean Air-India
spend extra salary to their employees, almost 20% of cost of Air-India
was distributed to their employees.

Before merger of Air-India and Indian airlines, they both order for
new planes separately. In the year 2004 Air-India order 50 new
planes which cost more than 46000 crore. And 18 more planes
ordered for charters

pg. 15
(Use for the VVIP, s). Buying so many new planes without having
proper route planning. Indian airlines order 43 new planes before
merger. So after merger Air-India ltd. has so many planes without
having any flight plan and route plan.

Air-India used Airbus and Boeing both aircrafts that increases the
operating and maintaining cost.

Air-India runs 370 flights everyday in which 250 flights runs

domestically and 120 runs internationally, but only 9 routes are
profitable ( 3 International and 6 domestic).

In the year 2014 Air-India lost 62.8 billion rupees, and the losses
increases every year. On April 2017 Air-India had to take a loan to
pay salaries to its employees, it showed that they were caught in
what is known as death trap, a death trap is a situation where
interest payment for a loan is always higher than earnings, so every
year when has to borrow more to pay previous borrowers. It is not
feasible for the government to continue to operate Air-India by
infusing taxpayers, money into it even as the carrier ’s accumulated
losses grow bigger with every passing year”. Now the Government
decided to sell 100% share of Air-India. Civil aviation minister
Hardeep Singh Puri informed the Rajya Sabha that the airline might
have to shut down if the government’s second attempt to privatize it
fails.

B. International scenario:

pg. 16
In international market Air-India was not much impactful as other
airlines. Air-India covers 45 international destinations and almost all
of them runs with losses. Air-India gets tough competition from
other International airlines. Air-India didn’t have new fuel efficient
planes like A380, A390 and Boeing 787-9. The airline still use old
planes which are not fast and fuel efficient. The airline didn’t
upgrade their planes because of their continuous losses. Now in a
day’s international passengers are liked to fly in a well repudiated
airline like Qatar Airways, Emirates, Singapore Airways because of
their top class hospitality, and not only First class and Business class
but also in Economy class at a reasonable price, in this case Air-India,
it didn’t performing well, that means the Air-India’s International
flights runs with minimum passengers every day. But the fuel
consumption is same, whether flights are full or empty. So it is the
major reason why Air-India didn’t survive in International market.

pg. 17
 C. National Scenario:
In India we saw a different scenario, where Air-India serves
maximum destinations domestically, even at the rural points of India,
the other India airlines (Indigo, Spicejet, Go air, Vistara, Air Asia)
didn’t. Performing in rural India is also a reason of making such huge
loss because in rural area there is not much possibility in Airlines.
The possible reasons for the loss of Air-India are listed below.

1. The cost of the ticket of Air-India is quite high than other airlines.
But no passengers want to pay much money for a 3-4 hours flight.

2. Air-India’s most flights are running delayed, where other airlines

are quite punctual.

3. In Air-India most of the cabin crews’ age is more than 35 and their
hospitality is not good enough, although it is the Government based
airline, so we didn’t expect much out of it. On other hand there is
younger crew with good hospitality in other airlines.

pg. 18
 CHAPTER III
A. Presentation of data and analysis

Part-I
Questionnaires asked to Air-India

Sample size: 30 respondents

pg. 19
Q- 1. How frequently do you use Air-India?

Frequency No. of persons Percentage (%)

1-3 time in a month 15 50.00

4-6 time in a month 9 30.00

7-10 time in a month 4 13.33

11-15 times in a month 2 6.67

50
45
40
35
30
25
20
15 No. of persons
10 Percentage (%)
5
0
th th th th
on on on on
am am am am
n n n in
ei ei ei es
tim tim tim tim
3 6 10
1- 4- 7- -1
5
1 1

Interpretation: - The above diagram shows that 50% of the passengers are flying
with Air-India 1-3 times in a month.

pg. 20
Q- 2. What other airlines do you use along with Air-India?

Name Airlines No. of persons Percentage (%)

Vistara Airlines 6 20.00

Indigo Airlines 11 36.67

Go Airways 8 26.67

Spicejet Airline 5 16.67

40

35

30

25
No. of persons
20
Percentage (%)
15

10

0
Vistara Airlines Indigo Airlines Go Airways Spicejet Airline

Interpretation: - The above diagram shows that 36.67% passengers like to use
Indigo Airline along with Ai-India.

pg. 21
Q- 3. Are you satisfied using Air-India?

Answer No. of persons Percentage (%)

Yes 7 23.33

No 23 76.67

80

70

60

50
Yes
40 No

30

20

10

0
No. of persons Percentage (%)

Interpretation: - The above diagram shows that 76.67% passengers are not being
satisfied using Air-India.

pg. 22
Q- 4. Which facility satisfies you the most towards Air-India?

Facilities No. of persons Percentage (%)

In-flight entertainment 4 13.33

In-flight meal service 14 46.67

Comfortable seats 5 16.67

Quick check-in 7 23.33

50
45
40
35
30
25
20
15 No. of persons
10 Percentage (%)
5
0
t ts
en v ice ea -in
in
m er e s hick
la s bl c
erta e r ta ick
t tm
t en h m
fo Qu
g
gh fli Co
fli In
In

Interpretation: - The above diagram shows that 46.67% of passengers are satisfied
by the in-flight meal service on Air-India.

pg. 23
Q- 5. Which is the thing you don’t like in Air-India?

Particulars No. of persons Percentage (%)

Crew behavior 10 33.33

In-flight washroom 8 26.67

Dirty cabin 7 23.33

In-flight meal quality 5 16.67

35

30

25

20
No. of persons
Percentage (%)
15

10

0
Crew behaviour Inflight washroom Dirty cabin Inflight meal quality

Interpretation: - The above diagram shows that 33.33% passengers don’t like the
crew behavior of Air-India.

Q- 6. Do you know Air-India going to be disinvested?

pg. 24
Answer No. of persons Percentage (%)

Yes 11 35.48

No 19 63.33

70

60

50

40 Yes
No
30

20

10

0
No. of persons Persentage (%)

Interpretation: - The above diagram shows that 63.33% passengers are did not
know that the Air-India is going for disinvestment.

Q- 7. Do you thing after privatization of Air-India the facility

will improve?

pg. 25
Answer No. of persons Percentage (%)

yes 19 63.33

No 11 36.67

70

60

50

40 yes
No
30

20

10

0
No. presons Persentage (%)

Interpretation: - The above diagram shows that 63.33% passengers think that after
privatization of Air-India the facility will improve.

Q- 8. Which facility you would like to improve after

privatization?

pg. 26
Facilities No. of persons Percentage (%)

Better meal option 4 13.33

More legroom between seats 6 20.00

New crews with good behavior 9 30.00

Clean and hygienic cabin 11 36.67

40
35
30
25
20
15
10
5 No. of persons
0 Persentage (%)
s

n
n

r
at
tio

bi
vio
se

ca
op

ha
n

ic
ee

be
l

gin
ea

tw
rm

od

hy
be

go
tte

d
om

an
ith
Be

ro

n
sw

ea
eg

Cl
ew
el

cr
or
M

w
Ne

Interpretation: - the above diagram shows that 36.67% passengers want Air-India
to clean and hygienic cabin after privatization of Air-India.

Q- 9. How many stars (2 to 5) you like to give Air-India?

pg. 27
Rating No. of persons Percentage (%)

5 star 0 0

4 star 7 23.33

3 star 13 43.33

2 star 10 33.33

45

40

35

30

25
No. ofpersons
20 Persentage (%)

15

10

0
5 star 4 star 3 star 2 star

Interpretation: - The above diagram shows that 43.33% passengers give Air-India 3
star rating.

Q- 10. Do you think privatization of Air-India will result in

improvement in service and efficiency?

pg. 28
 Opinions No. of persons Percentage (%)

Yes 11 36.67

No 19 63.33

70

60

50

40 Yes
No
30

20

10

0
No. of persons Persentage (%)

Interpretation: - The above diagram shows that 63.33% passengers think that
privatization of Air-India will result in improvement in service and efficiency.

Q- 11. What is the reason behind huge loss of Air-India?

pg. 29
Reasons No. of persons Percentage (%)

Merger with Indian Airlines 17 56.67

Market competition 13 43.33

60

50

40

Marger with Indian Airlines

30 Market competision

20

10

0
No.of persons Persentaage (%)

Interpretation: - The above diagram shows that 56.67% passengers think that
merger with Indian airlines is the reason behind huge loss of Air-India.

B. FINDINGS
Findings of data analysis

pg. 30
1. 50% of the passengers are flying with Air-India 1-3 times in a
month.

2. 36.67% passengers like to use Indigo Airline along with Ai-India.

3. 76.67% passengers are not being satisfied using Air-India.

4. 46.67% of passengers are satisfied by the in-flight meal service

on Air-India.

5. 33.33% passengers don’t like the crew behavior of Air-India.

6. 63.33% passengers are did not know that the Air-India is going
for disinvested.

7. 63.33% passengers think that after privatization of Air-India the

facility will improve.

8. 36.67% passengers want Air-India to clean and hygienic cabin

after privatization of Air-India.

9. 43.33% passengers give Air-India 3 star rating.

10. 63.33% passengers think that privatization of Air-India will

result in improvement in service and efficiency.

11. 56.67% passengers think that merger with Indian airlines is the
reason behind huge loss of Air-India.

CHAPTER IV

A. Conclusion

pg. 31
During the survey I was assume that most of the Indians
are addicted towards the low-cost airlines like Indigo,
Spicejet, Vistara, and Air Asia. When I asked one of them
that “why you didn’t want to fly with air-India?”… She said,
“When other airlines providing tickets at such a low cost
with better service, then why should I choose Air-India”.
Somewhere Air-India wants to recover its debt by
increasing its ticket price. But this idea actually didn’t
work at all.
I’m still amazed to know that how Air-India still surviving.
It has no money to pay salaries to its employees, it has no
money to repay its debt, and it has no money to grow the
company.
Merger with Indian airlines is the worst decision taken by
Air-India, if it was not happened in that time; Air-India will
not suffer this much.
Now the Government announced to sell 100% share of
Air-India. We Hope that Air-India will bounce back with its
previous glory.

B. Recommendation
1. Higher levels of operational efficiency by strengthening
management and implementing best practice business processes.

pg. 32
2. Robust organizational and governance reforms to be
implemented by an eminent Board.
3. Differentiated business strategies for each Air-India ’s core
businesses.
4. World-class HR practices to ensure a talented and motivated
workforce.
5. Sale of non-core real estate assets and strategic disinvestment
of subsidiaries such as Air-India Air Transport Services Ltd.
(AIATSL)
6. Air-India are known for very bad customer reputation and the
load factors. Therefore it should have smart network
management with competitive pricing policy. For this Air-India
should need advanced technical and IT tools.
7. Cutting down the loss-making routes, especially some city in
the US, the UK, West and South Asian routes.
8. Learn from world class airlines (like Qatar airlines, Emirates,
Singapore airlines, ANA airlines, Lufthansa airlines) that how they
manage their services.
9. Solving major problems like, providing a clean cabin, clean
laboratory, clean seats, a better and wide entertainment screen,
better headphone, providing a good quality meal to the
passengers.

C. BIBILIOGRAPHY

WEBSITES USED IN STUDY

 www.AirIndia.in
 www.ukessays.com

pg. 33
  www.linkedin.com
 www.wikipedia.com
 www.google.com
 www.indiatimes.com
 www.economictimes.com
 www.livemint.com
 www.business-standerd.com
 www.ndtv.com
 www.howandwhat.net
 www.slideshare.net

NEWSPAPER USED FOR THIS PROJECT:

 New York times

 Bbc world news
 CAN news
 Times of India
 The Telegraph

D.ANNEXURE
Questionnaires asked to Air-India passengers

PRABHU JAGATBANDHU COLLEGE

PASSENGERS THOUGHTS ABOUT AIR-INDIA DISINVESTMENT

Name…………………......

pg. 34
1. How frequently do you use Air-India?
1-3 times in a month……… 4-6 times in a
month…………

7-10 times in a month……….. 11-15 times in a

month………

2. What other airlines do you use along with Air-India?

Vistara Airlines………… Indigo Airlines…………
Go Airlines…………. Spicejet Airlines………….
3. Are you satisfied using Air-India?
Yes……… No………
4. Which facility satisfies you the most towards Air-India?
In-flight Entertainment……… In-flight meal service……….
Comfortable seats……… Quick check-In………..
5. Do you know Air-India going to be disinvested?
Yes……… No………
6. Which is the thing you don’t like in Air-India?
Crew behavior……… In-flight washroom………
Dirty seats……… In-flight meal quality………
7. Do you thing after privatization of Air-India the facility
will improve?
Yes………… No……….

8. Which facility you would like to improve after

privatization?
Better meal option………. More legroom between seats……….

New crew with good behavior………

Clean and hygienic cabin………
9. How many stars you like to give Air-India?
5 stars……… 4 star………
3 stars……… 2 star………
10. Do you think privatization of Air-India will result in
improvement in service and efficiency?

pg. 35
 Yes……… No………
11. What is the reason behind huge loss of Air-India?
Merger with Indian airlines………
Market competition………

pg. 36
THANK YOU

pg. 37