INTRODUCTION AIR INDIA

Air India is India’s national Airline. Air India’s history can be traced to October 15,

1932. On this day J.R.D. Tata, the father of Civil Aviation in India and founder of

Air India, took off from Drigh Road Airport, Karachi, in a tiny, light single-engine de

Havilland Puss Moth on his flight to Mumbai via Ahmedabad. Air India was earlier

known as Tata Airlines. At the time of its commencement, Tata Airlines consisted

of one Puss Moth, one Leopard Moth, one palm-thatched shed, one whole time

pilot, one part-time engineer, and two apprentice-mechanics. Tata Airlines was

converted into a Public Company under the name of Air India in August 1946. On

March 8, 1948, Air India International Limited was formed to start Air India’s

international operations. On June 8, 1948, Air India started its international

services with a weekly flight from Mumbai to London via Cairo and Geneva with a

Lockheed Constellation aircraft. In early 1950s due to deteriorating financial

condition of various airlines, the Government decided to nationalize air transport.

On August 1, 1953 two autonomous corporations were created. Indian Airlines

was formed with merger of eight domestic airlines to operate domestic services,

while Air India International was established to operate the overseas services. The

word 'International' was dropped in 1962. With effect from March 1, 1994, the

airline has been functioning as Air India Limited. Air India's worldwide network

today covers 44 destinations by operating services with its own aircraft and

through code-shared flights. Important destinations covered by Air India are

Bangkok, Hong Kong, Jakarta, Kuala Lumpur, Osaka, Singapore, Tokyo, Seoul, Dar-

es-Salam, Nairobi, Frankfurt, London, Paris, Birmingham, Abu Dhabi, Al Ain,

Bahrain, Dammam, Doha, Dubai, Jeddah, Muscat, Riyadh, Kuwait, Los Angeles,

Chicago, Newark, New York, and Toronto. Air India’s fleet consists of 38 aircrafts.

These include 12 Boeing 747-400, 1 Boeing 747-400 COMBI, 2 Boeing 747-300

COMBI, 19 Airbus 310-300, and 4 Boeing 777-200

Incorporation

• Established in 1953 under Air Corporations Act

• Became Public Limited Company in 1994

• Registered Office: New Delhi

• Head Office: Mumbai

• Authorized Capital: Rs 500.00 Crores

• Paid-up Capital: Rs 153.84 Crores

INDIAN AIRLINES The erstwhile Indian Airlines Limited or currently known as

Indian, was India’s first state owned domestic airline. Indian Airlines was set up

under the aegis of federal Union Ministry of Civil Aviation and based in New

Delhi. Its main bases were the international airports in Chennai, Mumbai, Kolkata

and New Delhi. It has now been merged with Air India for corporate purposes,

though for now, continues to issue its own tickets.

.Indian Airlines came into being with the enactment of the Air Corporations Act,

1953. It was renamed "Indian" on December 7, 2005. Indian Airlines started its

operations from 1st August, 1953, with a fleet of 99 aircraft and was the outcome

of the merger of seven former independent airlines, namely Deccan Airways,

Airways-India, Bharat Airways, Himalayan Aviation, Kalinga Air Lines, Indian

National Airways and Air Services of India. The year 1964 saw the Indian Airlines

moving into the jet era with the introduction of Caravelle aircraft into its fleet

followed by Boeing 737-200 in the early 1970. Along with its wholly owned

subsidiary Alliance Air, it flies a fleet of 70 aircraft including Airbus A300, Airbus

A320, Airbus A319, Boeing 737, Dornier Do-228, ATR-4, Airbus A319, A320 &

A321. Along with Indian cities, it flies to many foreign destinations which include

Kuwait, Singapore, Oman, UAE, Qatar, Bahrain, Thailand, Singapore, Malaysia,

and Myanmar besides Pakistan, Afghanistan, Nepal, Bangladesh, Sri Lanka and

Maldives.

Indian Airlines Flight free run over the Indian skies ended with the entry of private

carriers after the liberalization of the Indian economy in the early 1990's when

many private airlines like Jet Airways, Air Sahara, East-West Airlines and

ModiLuft entered the fray. The entry of low-cost airlines like Air Deccan,

Kingfisher Airlines and Spice Jet has revolutionized the Indian aviation scenario.

Indian has been a pioneer in the aviation scene in India. It was the first airline in

India to introduce the wide-bodied A300 aircraft on the domestic network, the fly-

by-wire A320, walk in flights and easy fares. It flies to 76 destinations - 58 within

India and 18 abroad. It has a total employee strength of around 19,300 employees

along with Alliance Air and carries over 7.5 million passengers annually, along

with Alliance Air. The main base of the Indian airlines are Chatrapati Shivaji

International Airport, Mumbai; Indira Gandhi International Airport, Delhi; Netaji

Subhash Chandra Bose International Airport, Kolkata; Chennai International

Airport, Chennai. After being granted permission from the Government of India,

on 15 July 2007, Indian Airlines and Air India merged and started to operate as a

single entity. Post-merger the new airline will be renamed as Air India. This new

airline is also a member of the Star Alliance, the largest airline alliance. The

government allowed the formation of a few new limited service airlines in the

1970s: Air Works India, Huns Air, and Golden sun Aviation. None of them had

long life spans. Around 1979, IAC dropped the word "Corporation" from its name.

Britain's Financial Times described Indian Airlines as the world's third largest

domestic carrier in the mid-1980s. With business growing at better than ten percent

a year, it was increasing its capacity as part of a plan to merge Indian Airlines with

Air-India, the state's international carrier, two leading young industrialists were

appointed to chair the boards of the two companies in autumn 1986. Neither these

plans nor the new chairmen lasted very long. In 1987, Indian Airlines carried 10

million passengers and earned a profit of Rs630 million ($48 million). However,

the quality of its service was facing criticism, to be heightened by the coming entry

of new carriers into the market.

SHARE CAPITAL 2.1.1 As per the latest audited accounts on March 31, 2006

the capital structure of the Transferor Companies is as under: A. Transferor

Company No 1 – AIR INDIA AUTHORIZED SHARE CAPITAL AMOUNT

42, 56, 36,820 Equity Shares of Rs. 10 each Rs. 425, 66, 38,200/- 74, 36,318

Redeemable Preference Shares Rs. 100 each Rs. 74, 36, 31,800/- Total Rs. 500,

00, 00,000/- ISSUED, SUBSCRIBED & PAID-UP SHARE CAPITAL

AMOUNT

15, 38, 36,427 Equity shares of Rs. 10 each fully paid Rs. 153, 83, 64,270/-5 | P a

g e

As on April 1, 2007 the Authorized Capital, the Issued, Subscribed and Paid up

Share Capital of AI remains the same. B. Transferor Company No 2 – INDIAN

AIRLINES AUTHORIZED SHARE CAPITAL AMOUNT 94, 99, 58,200

Equity Shares of Rs. 10 each Rs. 949, 95, 82,000/- 50, 04,180 Redeemable

Preference Shares Rs.100 each Rs. 50, 04, 18,000/- Total Rs. 1000, 00, 00,000/-

ISSUED, SUBSCRIBED&PAID-UP SHARE CAPITALAMOUNT 43, 21,

36,489 Equity shares of Rs. 10 each fully paid Rs. 432, 13, 64,890/- As on April 1,

2007 the Authorized Capital, the Issued Subscribed and Paid up Share Capital of

IA remains the same As on April 1, 2007 the capital structure of the Transferee

Company is as under:

Mutual Distrust and strong unions The distrust between the two sides of Air

India and Indian Airlines is almost palpable. For sure, many jobs will become

redundant when functions are unified. Many of those appointed are from Indian

Airlines, fuelling resentment among Air India employees. Integration has become a

tightrope walk for the management. Strong opposition from unions against

management’s cost-cutting decisions through their salaries have led to strikes by

the employees/ Increased Competition The flux at the top has led to delays in

decision-making at a time when demand for air travel has dropped around 8-10%

over the last year and competition has heated up in the sector. The national

carrier’s domestic market share has been under pressure ever since budget carriers

and new private airlines took wing. Air India’s domestic market share dropped

from 19.8% in August 2007, when the merger took place, to 13.9% in January

2008 before rising to 17.2% in February 2009. Lower load factor Though the

overall operating performance has been steady, Air India passenger load factor of

63.2%, which was the company’s record, lags the industry average of 75% in

2006-07.The load factor difference is even greater when compared to other low

fares carriers such as Air Deccan. The company’s load factor is decreasing year by

year, in 2005- 06 load factor is 66.2% which is more than present load factor. Air

India load factor is likely to be low because of the much higher frequency operated

on each route. Lower load factor could decrease the company’s margines.

Indian Airlines

In an earnest attempt to pave way for the emergence of a single

entity as India's National Flag carrier, Indian Airlines and Air India, India's

premier airlines were merged to form Air India to provide an integrated

international and domestic footprint, for the advantage of travelers. This

Indian Airlines and Air India merger has brought seamless integration of

domestic and international flights, allowing passengers to check in for their

international flight from any domestic point in India.

Indian Airlines, in its new avtar of Air India can be identified with its key

color as orange and a contemporary graphic representation of a flying

swan with the Konark Chakra placed inside it, the imagery depicting

traditional Indian hospitality and service. 

Indian Airlines or the new Air India has an improved frequent flier programs

Indian Airlines Sector

Air India connects 146 international and domestic destinations around the

world, including 12 gateways in India with Air India Express, which is a

fully-owned subsidiary of Air India. Some destinations are through code

share. With the commencement of the merger, all sectors covered by the

erstwhile Indian Airlines are now covered by Air India. AI has a network that

spans from Asia to America covering Gulf, Africa and Europe. In all, it

covers 89 destinations ? 49 within India and 40 abroad. AI flies to various

destinations in India, which include important cities like Delhi, Bangalore,

Mumbai, Kolkata, Lucknow, Hyderabad, Pune, and Chennai along with

regional destinations like Ahmedabad, Gorakhpur, Allahabad,

Bhubaneshwar, Ranchi and others. For cheap airfares and great deals on

international and domestic air tickets, including popular.

Indian Airlines Fleet

Air India, together, has a fleet of more than 200 aircrafts, which includes 3

wide bodied airbus A300s, 47 fly-by-wire airbus A320s, 3 Airbus A319s, 11

Boeing 737s, 2 Dornier Do-228 aircraft, 4 ATR-42 and others. Air India has

placed orders for 67 new aircrafts, which includes 4 Boeing 777-200LR's,

12 Boeing 777-300LR's, 27 Boeing 787-8's, 15 A321 Airbuses and 9 A319

Airbuses. 

The new fleet has brought in a product and service level, that is the best in

class, which includes in-flight entertainment, better seats and enhanced in-

flight service. A combined schedule enables better connectivity to the

largest international airline in India as well as improved service to various

domestic points in India.

Indian Airlines Baggage Rules

According to Indian Airlines baggage policy, luggage of different weights

are permissible for different classes – Economy (20 kgs), Executive Class

(30 kgs) and First Class (40 kgs). Linear luggage dimensions for checked

shouldn’t exceed more than 158 cms. Indian airlines cabin baggage policy

restricts the cabin baggage size to 115 cms and its weight to 8 kgs. Also, it

must be noted that infants travelling on an Indian airlines flight are allowed

10 kgs of baggage. However they aren't entitled to a seat.

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'Air India merger on paper only'

By: Bipin Kumar

Singh

Date:  2012-

02-01

Place: Delh

i

Sources within aviation

ministry react to Justice

Dharmadhikari's report

that mentions five years

after Air India and Indian

Airlines were merged into a

single entity, both airlines

continue to function separately with few

steps being taken to form a single unit

Justice DM Dharmadhikari, with his three-

member panel, submitted their report on the

integration of the Air India employees with

erstwhile Indian Airline employees to Civil

Aviation minister Ajit Singh yesterday, five years

after the two airlines were merged with each

other. 

Fresh Findings: (Retired) Justice Dharmadhikari

presents the report on 

Air India HR issues to the Union Minister for Civil

Aviation Ajit Singh, in 

New Delhi yesterday.

According to top sources inside the civil aviation

ministry, the 100-page report has mentioned

that since 2007 when the two state-run airlines

merged, the two have not functioned as a single

entity.

The findings reflected that five years on, no

concrete steps have been taken towards staff

integration or for operations. "Justice DM

Dharmadhikari, submitted his report on Tuesday.

On the basis of its findings it has made some

serious recommendations on various aspects

including staff integration in the country's

national carrier. 

The report has categorically asked Air India

management to focus on staff integration on the

basis of recommendations made," said a ministry

official on condition of anonymity.

Sources inside Air India too agree with the

findings of the report stating that both the

airlines function as two different entities. "The

merger is only on paper not in operation. On the

ground despite being merged, the airline

functions as two different entities. In fact, the

pilots from the Indian Pilots Guild (IPG) that

operate Air India flights continue to operate on

the Boeing aircraft while Indian Airline pilots from

the Indian Commercial Pilots Association (ICPA)

operate on the Airbus fleet. Not a single pilot has

been changed and it's the same story with cabin

crewmembers and personnel from other

departments. Moreover, Air India staff work for

five days whereas Indian Airlines staff members

work for six days," said a source. 

When MiD DAY contacted Justice Dharmadhikari,

he refused to comment. "I am busy with

something, I cannot talk now," he said. While

Civil Aviation Minister Ajit Singh said, "We've

received the report. We'll study the

recommendations and do whatever that needs to

be done."

Expertspeak

Captain Mohan Ranganathan, a former Air India

pilot and aviation expert said, "I believe that no

concrete step was taken by the management to

address the problems including staff integration,

which further increased the problem. The

mismanagement increased after the merger and

the people who were responsible for the entire

mess were never held accountable."

Captain D S Mathur former MD of Air India said,

"First of all there was no need to do it as both

airlines were owned by the government. Instead

they should have made it a holding company

bringing the two airlines under the same

umbrella where the two airlines would have

operated with two different tasks."

Air India (AI) has sustained huge losses in the last three years and

is getting crushed under aRs. 40,000 crore debt. Staff indiscipline,

mismanagement and ministerial malfeasance have all done in an

airline. It was one of the best aviation companies in the world

even after nationalization.

Today, however, indiscipline is rife and has manifested itself as

poor on-time performance (65.5% against industry average of

85%) and the highest cancellation rate (2.9% against industry

average of 1.2%) for domestic flights. Mismanagement was quite

apparent when the airline went in for expansion of its fleet even

as it did not have money to pay its staff, resorting to Marie

Antoinette’s eating the cake option. The staff union’s claim that AI

was stripped of profitable routes and convenient timings of its

flights to favour private airlines, by ministerial mandate, does look

genuine and needs further investigation. Thus, AI’s pathetic

performance highlights the axiom that running business is not the

business of government.

Graphics by Jayachandran/Mint

Recent data (2010) shows that

both AI and Jet Airways had

comparable revenues of

about Rs. 10,000 crore. Both had

around 100 aircraft. But Jet had a

operating loss of Rs.550 crore. while AI had a operating loss

of Rs. 3,000 crore. Jet has around 13,000 employees, and

spends Rs. 1,300 crore on them, while AI has 29,630 employees

and spends Rs.3,400 crore on them. Salaries as reported by

industry source for a cabin crew member in Jet

average Rs. 30,000 a month; for AI it is Rs. 40,000 a month. Jet

spends Rs. 3,200 crore on fuel while AI, for the same revenue,

spends Rs. 5,000 crore.

AI has been engaging a plethora of consultants: Booz Allen

Hamilton to suggest cost-cutting; three other foreign firms for

operational restructuring and a Texas-based technology company

Sabre Holdings Corp. to help redraw its flight network and save on

fuel costs. It appointed SBI Capital Markets for financial

restructuring and Deloitte Consulting to advise on macro issues

and review restructuring. With such heavy reliance on

consultants, the internal management, down from the CMD (a

bureaucrat, not an airline professional) was weak. Bringing

outside professionals—as chief operating officer and chief of

training—at high salaries, but under a bureaucrat CMD, also did

not help, and AI’s losses continued to grow.

The merger of AI with domestic carrier Indian Airlines (IA)—

incidentally the better of the two—was, probably, a mistake in

retrospect. In September 2006, Accenture was hired, and it

suggested a merger on the ground that “consolidation can help

companies increase efficiency and scale and serve customers

more effectively”. It added that “the key to realizing these

advantages, however, is planning for pre- and post-merger

activities and integration”. That the pay disparity between the

higher-paid AI and the lower-paid IA staff should have been

smoothed out seems to have escaped the attention of both

consultants and the company, though Accenture seems to have

covered itself with a caveat in this direction.

AI’s unpunctuality record has taken a toll on its business class

flyers with business folks, with fixed meeting schedules, deserting

it in droves and opting for other punctual airlines. The low-cost

airline IndiGo boasts the best punctuality ratings; and it is one of

the few profitable ones. Interestingly, Singapore Airlines, also a

national carrier, has a premium even over many other private

international airlines because of its punctuality, cleanliness and

efficiency of service. Of course AI, too, charges rates higher than

competitors, but that is because it is insensitive to its demand

since it is a spoilt child of the government, which funds its

inefficiency. AI reciprocates the favour by delaying departures for

government VIPs and reserving seats in the first row of business

and economy class for pass-holding politicians, much to the

chagrin of paying customers.

For an international airline, its Web booking portal is awful, its use

of the entertainment system indifferent, its frequent flyer

programme management highly flawed with a number of

mistakes and irrationalities and its customer sensitivity poor.

From online ticket booking to seat allotments (some are always

reserved for a politician and other “influential persons”) to

seniority (age)-based assignment of on-flight service personnel on

luxury routes, AI continues to lag its private sector counterparts.

Having said these, it must be said that once in the air, it is really

one of the most loveable airlines. Its food is good, leg space is

better and in-flight service quite hospitable. It has lower than the

average number of complaints; IndiGo and GoAir have

significantly higher number of complaints. Its pilots are safe and

achieve smooth landing.

What is the remedy? Immediately, sell its real estate property in

prime locations and raise money. Next, professionalize the

management and bring in private sector business practices,

including removing job security.