AIR INDIA: BACK ON THE
RUNWAY
ROAD TO RECOVERY
08/29/13 SURESH SRINIVASAN @ myBskool 1
AIR INDIA: BACK ON THE RUNWAY
WHAT WENT WRONG ??
 10 DAY STRIKE IN 2011 –FLIGHTS CANCELLED – REVENUES LOST
 ON TIME PERR...
3 REASONS AIRLINES MERGE
Additional revenue/assets
Increased connectivity and presence (size) lead to additional
revenue...
Examples of Areas of Potential Cost Synergies From a
Merger
Rental Expense (other than aircraft)
Combining space, ground...
Key Merger Considerations
Mergers involve four fundamental
challenges
Different systems
Different fleet types
Workforce...
Merger/Fragmentation Models
Two Structural Merger Models
The full operational integration model with employees
merged
No o...
The Labor Element
Labor is the key element in determining successful
integration of merging companies
Labor laws need to...
The Labor Element
Why is Labor Integration So Important To AirlineWhy is Labor Integration So Important To Airline
Consol...
The Labor Element
Merging Seniority Lists and collective agreementsMerging Seniority Lists and collective agreements
Dif...
The Labor Element -Pilots
Need to review legal framework to protectNeed to review legal framework to protect
pilots inter...
The Labor Element –Pilots Phase 2
Develop Transition Agreement covering the followingDevelop Transition Agreement coverin...
The Labor Element – Transition Agreement
Seniority Integration Process and Procedure
Designation of Merger Representativ...
The Labor Element – Transition Agreement..contd
Company Acceptance and Implementation of the
Seniority List
Process to N...
The Labor Element – Post Integration
Implementation of final integratedImplementation of final integrated
seniority lists...
The hurdles not recognized in a nut shell – 3 Main :
IGNORES THE COMPLEX LABOR DIMENSIONS
THE ACQUIRER DOES NOT UNDERSTA...
The NEW CEO’s Checklist – 3 Main :
 Customers
Operations..and
Integration of labor/management
08/29/13 SURESH SRINIVASA...
The AIRLINE MERGER INTEGRATION: 2 PART
08/29/13 SURESH SRINIVASAN @ myBskool 17
The AIRLINE MERGER INTEGRATION: LAST PART
08/29/13 SURESH SRINIVASAN @ myBskool 18
The PARTNER SELECTION
08/29/13 SURESH SRINIVASAN @ myBskool 19
The PARTNER SELECTION
08/29/13 SURESH SRINIVASAN @ myBskool 20
3. Realize Significant efficiencies and Economics of Scale
08/29/13 SURESH SRINIVASAN @ myBskool 21
MERGER INTEGRATION TEAM
STRUCTURE - Proposal
08/29/13 SURESH SRINIVASAN @ myBskool 22
MERGER INTEGRATION TEAM STRUCTURE - Proposal
08/29/13 SURESH SRINIVASAN @ myBskool 23
FIRST 100 DAYS - Phased Integration Approach
08/29/13 SURESH SRINIVASAN @ myBskool 24
FIRST 100 DAYS - Drivers Of Revenue Synergies
Conditions under which Mergers work??Conditions under which Mergers work??
• Bring in Labor as early as possible.
• Recogn...
Conditions under which Mergers work??Conditions under which Mergers work??
• Passenger point of view:
• Cabin interior cha...
Conditions under which Mergers work??Conditions under which Mergers work??
• Employee point of view:
• Retaining the STARS...
08/29/13 SURESH SRINIVASAN @ myBskool 28
KEY PERFORMANCE INDICATORS –TO LOOK OUT FORKEY PERFORMANCE INDICATORS –TO LOOK OU...
AIR INDIA: BACK ON THE RUNWAY
WHAT AI IS GOING TO DO RIGHT ??
 REPLACE 19 PLANES THAT ARE MORE THEN 20 YRSOLDREPLACE 19 P...
AIR INDIA: BACK ON THE
RUNWAY
ROAD TO RECOVERY
•HEADHEAD YEARYEAR REVENUE (Rs)REVENUE (Rs)
in croresin crores
•REVENUE 201...
AIR INDIA: BACK ON THE
RUNWAY
ROAD TO RECOVERY
•HEADHEAD YEARYEAR REVENUE (Rs)REVENUE (Rs)
in croresin crores
•EBITDA 2010...
AIR INDIA: BACK ON THE
RUNWAY
ROAD TO RECOVERY
•HEADHEAD YEARYEAR REVENUE (Rs)REVENUE (Rs)
in croresin crores
•NET LOSSES ...
AIR INDIA: BACK ON THE
RUNWAY
ROAD TO RECOVERY
• MARKET SHARE AS ON MAY 2013MARKET SHARE AS ON MAY 2013
• AIRLINEAIRLINE M...
AIR INDIA: BACK ON THE
RUNWAY
ROAD TO RECOVERY
• EARN MORE, SPEND LESS IN YEARS TO COMEEARN MORE, SPEND LESS IN YEARS TO C...
AIR INDIA: BACK ON THE
RUNWAY
ROAD TO RECOVERY
• COMPETITON – FUTURE ???COMPETITON – FUTURE ???
•JET DEAL WITH EITHAD AIRW...
AIR INDIA: BACK ON THE
RUNWAY
ROAD TO RECOVERY
THANK YOUTHANK YOU
suresh@myBskool.comsuresh@myBskool.com
•http://www.mybsk...
Upcoming SlideShare
Loading in …5
×

Air India - Management Case Study (MBA) | Online Mini MBA (Free)

3,764 views
3,564 views

Published on

Course - Online Mini MBA (Free)
Register - http://www.mybskool.com/100-day-mini-mba.php?course=FreeCourse

Air India - Management Case Study (MBA) from myBskool

Faculty - Suresh Srinivassan
Online Management (MBA) courses in India
http://www.mybskool.com
info@mybskool.com
+91-87545 99124

Published in: Education, Business, Technology
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
3,764
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
250
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide

Air India - Management Case Study (MBA) | Online Mini MBA (Free)

  1. 1. AIR INDIA: BACK ON THE RUNWAY ROAD TO RECOVERY 08/29/13 SURESH SRINIVASAN @ myBskool 1
  2. 2. AIR INDIA: BACK ON THE RUNWAY WHAT WENT WRONG ??  10 DAY STRIKE IN 2011 –FLIGHTS CANCELLED – REVENUES LOST  ON TIME PERRFORMANCE WAS BELOW 80 %  AI –IA MERGER HAPPENED IN 2007  INTENSE COMPETITION, WORSENING OPERATIONAL PERFORMANCE MASSIVE AIRCRAFT PURCHAES, ILL CONCEIVED MERGER  TOTAL LOSSES – Rs 20000 Cr & DEBT BURDEN – Rs 43000 CrTOTAL LOSSES – Rs 20000 Cr & DEBT BURDEN – Rs 43000 Cr  MR ROHIT NANDAN – “ No point in focusing on Market Share @ the cost of Profitability”….. 08/29/13 SURESH SRINIVASAN @ myBskool 2
  3. 3. 3 REASONS AIRLINES MERGE Additional revenue/assets Increased connectivity and presence (size) lead to additional revenue – additional value from: Larger carriers achieve a disproportionate share of revenue (S-Curve) Better schedule optimization Less pricing competition Improved operating efficiencies Strategic Acquisition 08/29/13 SURESH SRINIVASAN @ myBskool 3
  4. 4. Examples of Areas of Potential Cost Synergies From a Merger Rental Expense (other than aircraft) Combining space, ground equipment, etc. General and Administrative Expenses Combining office space, joint purchasing of supplies, etc. Labor costs for aircraft & traffic handling Combining of redundant staff 08/29/13 SURESH SRINIVASAN @ myBskool 4
  5. 5. Key Merger Considerations Mergers involve four fundamental challenges Different systems Different fleet types Workforce integration issues Cultural differences 08/29/13 SURESH SRINIVASAN @ myBskool 5
  6. 6. Merger/Fragmentation Models Two Structural Merger Models The full operational integration model with employees merged No operational integration. A holding company with operational entities (the double breasting model) Fragmentation Models involving the sale of part of anFragmentation Models involving the sale of part of an airlineairline A transaction between two carriers involving assets only A transaction between carriers involving assets and people 08/29/13 SURESH SRINIVASAN @ myBskool 6
  7. 7. The Labor Element Labor is the key element in determining successful integration of merging companies Labor laws need to be understood and applied across borders for this to happen Merging companies have to include labor in the process As a participant, with input into the process, not as an observer Without labor as a player, consolidation will not succeed 08/29/13 SURESH SRINIVASAN @ myBskool 7
  8. 8. The Labor Element Why is Labor Integration So Important To AirlineWhy is Labor Integration So Important To Airline Consolidations?Consolidations? Airline labor, especially pilots, are highly skilled and longAirline labor, especially pilots, are highly skilled and long training cycles make labor a valuable assettraining cycles make labor a valuable asset Airline labor unions often deal directly with the customerAirline labor unions often deal directly with the customer Labor costs are a large enough portion of expenses to have aLabor costs are a large enough portion of expenses to have a major impact on cost structuremajor impact on cost structure Labor issues can often lengthen consolidation timeline andLabor issues can often lengthen consolidation timeline and financially weaken the merged companyfinancially weaken the merged company 08/29/13 SURESH SRINIVASAN @ myBskool 8
  9. 9. The Labor Element Merging Seniority Lists and collective agreementsMerging Seniority Lists and collective agreements Difficult and sensitive processDifficult and sensitive process ALPA has a “Merger Policy” that is intended to:ALPA has a “Merger Policy” that is intended to: Preserve jobsPreserve jobs Avoid windfalls to either groupAvoid windfalls to either group Maintain or improve pre-merger working conditionsMaintain or improve pre-merger working conditions Minimize detrimental changes to career expectationsMinimize detrimental changes to career expectations 08/29/13 SURESH SRINIVASAN @ myBskool 9
  10. 10. The Labor Element -Pilots Need to review legal framework to protectNeed to review legal framework to protect pilots interestspilots interests Engage in bi-lateral negotiations withEngage in bi-lateral negotiations with management, as necessarymanagement, as necessary Meet and Develop Protocol of CooperationMeet and Develop Protocol of Cooperation between pilot groupsbetween pilot groups 08/29/13 SURESH SRINIVASAN @ myBskool 10
  11. 11. The Labor Element –Pilots Phase 2 Develop Transition Agreement covering the followingDevelop Transition Agreement covering the following terms:terms: Status of Pilot Signatory Unions and Collective AgreementsStatus of Pilot Signatory Unions and Collective Agreements at _____ and _____ during this Agreementat _____ and _____ during this Agreement Separation of Aircraft and Personnel during this AgreementSeparation of Aircraft and Personnel during this Agreement See Attachment ASee Attachment A No Layoff of Pilots during Term of this AgreementNo Layoff of Pilots during Term of this Agreement New Hires during Term of this AgreementNew Hires during Term of this Agreement New Aircraft during the Term of this AgreementNew Aircraft during the Term of this Agreement 08/29/13 SURESH SRINIVASAN @ myBskool 11
  12. 12. The Labor Element – Transition Agreement Seniority Integration Process and Procedure Designation of Merger Representatives Preparation of Employment Data Exchange of Employment Data Negotiations/Mediation/Arbitration Relative Position on Pre-Merger Lists Maintained Preservation of Rights Reimbursement of Merger-Related Expenses 08/29/13 SURESH SRINIVASAN @ myBskool 12
  13. 13. The Labor Element – Transition Agreement..contd Company Acceptance and Implementation of the Seniority List Process to Negotiate Combined Collective Agreement for the Combined Companies Resolution of Disputes arising under this Agreement Enforcement of Arbitration Decisions under this Agreement Mutual assistance during this Agreement Duration of this Agreement 08/29/13 SURESH SRINIVASAN @ myBskool 13
  14. 14. The Labor Element – Post Integration Implementation of final integratedImplementation of final integrated seniority listseniority list Implementation of combined working agreement Establishment of an appropriate UnionEstablishment of an appropriate Union structurestructure 08/29/13 SURESH SRINIVASAN @ myBskool 14
  15. 15. The hurdles not recognized in a nut shell – 3 Main : IGNORES THE COMPLEX LABOR DIMENSIONS THE ACQUIRER DOES NOT UNDERSTAND THE BUSINESS MODEL OF THE ACQUIRED AIRLINE ..and FALL VICTIM TO LAPSES IN PLANNING & EXECUTION 08/29/13 SURESH SRINIVASAN @ myBskool 15
  16. 16. The NEW CEO’s Checklist – 3 Main :  Customers Operations..and Integration of labor/management 08/29/13 SURESH SRINIVASAN @ myBskool 16
  17. 17. The AIRLINE MERGER INTEGRATION: 2 PART 08/29/13 SURESH SRINIVASAN @ myBskool 17
  18. 18. The AIRLINE MERGER INTEGRATION: LAST PART 08/29/13 SURESH SRINIVASAN @ myBskool 18
  19. 19. The PARTNER SELECTION 08/29/13 SURESH SRINIVASAN @ myBskool 19
  20. 20. The PARTNER SELECTION 08/29/13 SURESH SRINIVASAN @ myBskool 20 3. Realize Significant efficiencies and Economics of Scale
  21. 21. 08/29/13 SURESH SRINIVASAN @ myBskool 21 MERGER INTEGRATION TEAM STRUCTURE - Proposal
  22. 22. 08/29/13 SURESH SRINIVASAN @ myBskool 22 MERGER INTEGRATION TEAM STRUCTURE - Proposal
  23. 23. 08/29/13 SURESH SRINIVASAN @ myBskool 23 FIRST 100 DAYS - Phased Integration Approach
  24. 24. 08/29/13 SURESH SRINIVASAN @ myBskool 24 FIRST 100 DAYS - Drivers Of Revenue Synergies
  25. 25. Conditions under which Mergers work??Conditions under which Mergers work?? • Bring in Labor as early as possible. • Recognize & let the Pilots “Own” the Integration issue. • Clear Incentives for Finalizing the deal. • Transparency. • Costs of Incentives are offset by the synergy of Operations. • Quick “Exit Gate” gateways. • ONE Airline feeling. • Compatibility of the 2 Airline’s CRS & IT Systems – ease to passengers/travel agents /Hotels etc • Effective and Interactive “Fleet” and “Operational Systems” Compatibility. 08/29/13 SURESH SRINIVASAN @ myBskool 25
  26. 26. Conditions under which Mergers work??Conditions under which Mergers work?? • Passenger point of view: • Cabin interior changes • Cutlery & Crockery • In-flight Entertainment • Rapid Check –in’s • Rapid Exits • Hassle free bookings & onward connections –Integration of All Airport Operations • Price Stability of tickets • FFP • CVA • Finally..”Under sell & Over Deliver” Strategy !!!Finally..”Under sell & Over Deliver” Strategy !!! 08/29/13 SURESH SRINIVASAN @ myBskool 26
  27. 27. Conditions under which Mergers work??Conditions under which Mergers work?? • Employee point of view: • Retaining the STARS • Giving the top “Stars” freedom to work, take decisions etc • Constant Communication • Use of alternate tools for communication –web sites, meetings, news letters etc • Clear Incentives for TOP Performers • “What’s in it for me” ??...Employees BUY IN Important • Finally..”Under sell & Over Deliver” Strategy !!!Finally..”Under sell & Over Deliver” Strategy !!! 08/29/13 SURESH SRINIVASAN @ myBskool 27
  28. 28. 08/29/13 SURESH SRINIVASAN @ myBskool 28 KEY PERFORMANCE INDICATORS –TO LOOK OUT FORKEY PERFORMANCE INDICATORS –TO LOOK OUT FOR
  29. 29. AIR INDIA: BACK ON THE RUNWAY WHAT AI IS GOING TO DO RIGHT ??  REPLACE 19 PLANES THAT ARE MORE THEN 20 YRSOLDREPLACE 19 PLANES THAT ARE MORE THEN 20 YRSOLD  HIVE OFF GROUND STAFF & ENGG SERVICES AS SEPARATE ENTITIESHIVE OFF GROUND STAFF & ENGG SERVICES AS SEPARATE ENTITIES – SAVINGS OF Rs 1000 Cr– SAVINGS OF Rs 1000 Cr  ANOTHER 5 YEARS, WORKFORCE NOS TO REDUCE TO 17000 FROMANOTHER 5 YEARS, WORKFORCE NOS TO REDUCE TO 17000 FROM 24000 !!!24000 !!!  INDUCTION OF ANOTHER 27 , 787 DREAMLINERS – REDUCE FUELINDUCTION OF ANOTHER 27 , 787 DREAMLINERS – REDUCE FUEL BILL BY 25 %BILL BY 25 %  PHASE OUT 60 % OF 777 WHICH A/C FOR 60 % OF LONG HAUL FLEET 08/29/13 SURESH SRINIVASAN @ myBskool 29
  30. 30. AIR INDIA: BACK ON THE RUNWAY ROAD TO RECOVERY •HEADHEAD YEARYEAR REVENUE (Rs)REVENUE (Rs) in croresin crores •REVENUE 2010/11 14062 2011/12 14713 2012/13 17000 2013/14 19000 * *- Projections 08/29/13 SURESH SRINIVASAN @ myBskool 30
  31. 31. AIR INDIA: BACK ON THE RUNWAY ROAD TO RECOVERY •HEADHEAD YEARYEAR REVENUE (Rs)REVENUE (Rs) in croresin crores •EBITDA 2010/11 -1687 2011/12 -2259 2012/13 + 19 2013/14 +1040 * *- Projections 08/29/13 SURESH SRINIVASAN @ myBskool 31
  32. 32. AIR INDIA: BACK ON THE RUNWAY ROAD TO RECOVERY •HEADHEAD YEARYEAR REVENUE (Rs)REVENUE (Rs) in croresin crores •NET LOSSES 2010/11 (6865) 2011/12 (7559) 2012/13 (5100) 2013/14 (3990) * *- Projections 08/29/13 SURESH SRINIVASAN @ myBskool 32
  33. 33. AIR INDIA: BACK ON THE RUNWAY ROAD TO RECOVERY • MARKET SHARE AS ON MAY 2013MARKET SHARE AS ON MAY 2013 • AIRLINEAIRLINE MARKET SHARE (%)MARKET SHARE (%) • AIR INDIA 19.1 • INDIGO 29.5 •JET + JET LITE 22.5 • SPICEJET 19.8 • GOAIR 09.0 •{ AIR INDIA MKT SHARE IN MAY 2012 WAS 16.2 %}{ AIR INDIA MKT SHARE IN MAY 2012 WAS 16.2 %} 08/29/13 SURESH SRINIVASAN @ myBskool 33
  34. 34. AIR INDIA: BACK ON THE RUNWAY ROAD TO RECOVERY • EARN MORE, SPEND LESS IN YEARS TO COMEEARN MORE, SPEND LESS IN YEARS TO COME • AIMS TO SAVE Rs 300 Cr in INTEREST PAYMENTS • EXPECTS WAGE BILL TO FALL FROM Rs 3500 Cr to Rs 2500 Cr • Wage % to fall from 25 % in 2011/12 to 14 % in 2013/14 • AIMS TO GET Rs 500 Cr FROM REAL ESTATE SALES A YEAR for 10 YEARS • AIMS TO BE CASH POSITIVE FROM 2016/17 & EARN NET PROFIT BY 2019/20 08/29/13 SURESH SRINIVASAN @ myBskool 34
  35. 35. AIR INDIA: BACK ON THE RUNWAY ROAD TO RECOVERY • COMPETITON – FUTURE ???COMPETITON – FUTURE ??? •JET DEAL WITH EITHAD AIRWAYSJET DEAL WITH EITHAD AIRWAYS •AIR ASIA ENTRYAIR ASIA ENTRY •FURTHER TO INTENSIFY IF THE FDI RULES OF 49 % STAKES ARE INCREASEDFURTHER TO INTENSIFY IF THE FDI RULES OF 49 % STAKES ARE INCREASED 08/29/13 SURESH SRINIVASAN @ myBskool 35
  36. 36. AIR INDIA: BACK ON THE RUNWAY ROAD TO RECOVERY THANK YOUTHANK YOU suresh@myBskool.comsuresh@myBskool.com •http://www.mybskool.comhttp://www.mybskool.com 0875459912108754599121 •Questions please – Do not forget to submit your FEEDBACK !!!Questions please – Do not forget to submit your FEEDBACK !!! 08/29/13 SURESH SRINIVASAN @ myBskool 36

×