Presentation on air India

1. Presented by : Group -4
Saurabh Pathak ( 2021SMN6639)
Ramesh V (2021SMN6651)
Saurav Kumar ( 2021SMN6643)
Sunny Kumar (2021SMN6658)

2. Index
Background of Air India
Overview of the Aviation industry
Air India Organization structure
Financial crises of Air India –Analysis
Measures to Improve Performance of
Air India
Financial Projections of Air India
Cash flow projection: D/E ratio, NPV, IRR
Bidding Process & Key challenges
 Conclusion

3. Brief History & Background
 Tata Airlines started the first scheduled airmail service in India on October 15,
1932, with J.R.D.
 Tata flying a D.H. Puss Moth carrying the postal mail of Imperial Airways, from
Karachi to Juhu, Mumbai, via Ahmedabad. In the airline’s first full year of
operations, it flew 155 passengers and 10.71 tonnes of mail over 160,000
miles.
 To emphasize its new civilian status and its role as a public utility, Tata Airlines
was converted into a Public Limited Company on 29 July 1946 and renamed
Air India.
 At the end of 1947, Air India submitted a plan to the Government for the
formation of Air India Fina International Limited with the government
participation to operate international services. The plan was approved and Air
India International launched its first service to London via Cairo and Geneva
on 8 June 1948 with Constellation aircraft.

4. Overview of Aviation
 India was the seventh largest and the second-most populous country in the world.
India's aviation sector is one of the world's fastest expanding. The Indian aviation industry
has seen fast development as a result of the deregulation of the sector.
 The domestic aviation sector is dominated by private airlines, which account for over 75% of
the market.
 Air India is reaching out to more than 30 countries globally in addition to domestic locations.
 Air India commands more than 16% market share through its international operations.
 Air India along with its wholly-owned Kochi based subsidiary Air India Express Limited (AIEL)
compete with companies like -
1. Indigo
2. Jet Airways
3. Go Air
4. Air Asia
5. Jet Airways
6. SpiceJet

5. Privately held all-service airlines and low-budged carriers
The market share of major airlines, based on international traffic in FY-2019)

6. Air India Organization Structure

7. Analysis: Financial Crises of Air India

8. Measures to Improve Performance of Air India
1. Plan to turnaround performance-
 Rationalization of Human Resources
 Close monitoring of overtime allowances
 Focus on the sale of business class seats.
 Reducing cost of capital.
 Rationalization of certain loss-making routes and Induction of brand new
fleet on several domestic & international routes by increasing passenger
appel.
 Phasing out old fleet and consequent reduction in maintenance cost.
 Reduction of contractual employment & outsourced agencies.
 Increase in passenger, cargo, excess baggage revenue through aggressive
sales & marketing strategy ( 7P’s )
 Reduction in Cabin Crew Hotel Cost by shifting to lower-priced hotels.

9. 2. Infusion of Additional Equity -
The Govt. of India infused Equity Capital of Rs.39750.0 Million
during 2018-19.
The paid-up capital as on 31 March 2019 is Rs.32665.21 Million.
3. Going Concern- Financial Restructuring Plan (FRP) approved in 2012 and then under
the revival plan in FY 2018-19 which has helped the Company to improve its operating and
financial performance. company expects a substantial improvement in its operational and
financial performance in the near future and hence the accounts have been prepared on a
'Going Concern' basis
“The interest on these loans from 1 October 2018 will be met by AIAHL for which Rs.13,000.0
Million was provided in the budget.”.

10. Financial Projections of Air India
 Air India’s bankers had provided Duke Air with summary financial projections in order
to determine an appropriate discount rate, NPV, and how sensitive the overall IRR was
to each input. These financial projections reflected the fact that Air India would require
huge capital expenditures during the first few years of acquisition. These capital
expenditures were required to increase the fleet size and to modernize the fleet.
However, these expenditures were also expected to catalyst Air India’s revenues.
 Projections were based on the assumption that debt to equity ratio for Air India would
remain at 4 after year 2012
 The high leverage was a cause of concern. However, the leverage is due to the low cost
of debt and the involvement of the government.

11. Financial Projections of AI’s Subsidiary

12. Cash Flow Projections

13. Cash Flow statement

14. AI Balance sheet

15. P&L Statement

16. Current Assets
Current ratio =
Current liabilities
62811.0
Current ratio = = 0.2061
304606.9
Financial Analysis..
59637.1
Current ratio = = 0.18981
314152.1
59292.8
Current ratio = = 0.1344
440905.9
54374.4
Current ratio = = 0.0846
642417.1
53393.2
Current ratio = = 0.1012
527576.4
2019
2018
2017

17. Current Assets – Inventories – Prepaid expenses
Acid test ratio =
Current liabilities
59637 – 10846 – 147.5
Acid test ratio = = 0.1548
314152
Financial Analysis..
62811 – 13794 – 220.5
Acid test ratio = = 0.1602
304604
59292 – 9032 – 121.9
Acid test ratio = = 0.1137
440906
54374 – 8063 – 145.8
Acid test ratio = = 0.0718
642417
53392 – 9471.3 – 175.5
Acid test ratio = = 0.0829
527576
2019
2018
2017

18. Equity share capital & Liabilities

19. EAT + Interest – Tax savings on Interest
Return on assets (ROA) = X 100
Average total assets
EAT + Interest – Tax savings on Interest
Return on capital employed (ROCE) = X 100
Average total shareholder’s equity
EAT
Return on total shareholders’ equity = X 100
Average shareholders funds
EAT
Return on ordinary shareholders’ equity (ROE) = X100
Average equity funds
Financial Analysis..

20. Data on Secured Loans from Bank’s

21. BIDDING PROCESS
 AI’s investment bankers and the divestment commission were holding a
limited auction with approximately a dozen international airlines.
 Duke Air’s four primary competitors were representatives of the three
competing airline alliances. The investment bankers would take all bids
received and narrow them down to a list of two to three finalists based on
the strategic fit and competitiveness of initial bids.
 The bidders had the option to get out of the bidding process before the bids
were finalized. Those airline alliances apparently interested in Air India
included Virgin Atlantic- Singapore Airlines (SIA)-Tatas, British Airways-Jet
Airways, Lufthansa-Sahara Airlines and a group that included Air France,
Delta Airlines and Aero Mexico.
 Air India Rise, Fall and Comeback to Tata

22. Divestment Process and Role of The Ministry of Disinvestment (MODI)

23. Tata Group bid was chosen over Ajay Singh consortium
 Government has been attempting to privatize Air India for years, but it failed to find a suitable buyer.
 Its latest attempt was launched in Jan-2020. To help attract investors it decided to split off part of the airline’s considerable
debt burden into a government-owned holding company created for that purpose.
 The government had planned to require purchasers to take on a fixed amount of Air India’s debt. However, in Oct-2020 the
government altered these terms to allow bidders to propose how much of the debt they would take on as part of an
enterprise value offer.
 Seven expressions of interest were submitted by Dec-2020, but five of these were disqualified as they did not meet
requirements. A formal request for proposals was issued in Mar-2021. The deadline for formal bids was 15-Sep-2021, after a
three-month extension due to the COVID-19 crisis.
 The two contenders were Tata Group and a consortium led by SpiceJet backer Ajay Singh, although Tata Group was widely
considered to be the favorite.
 Tata’s bid set an enterprise value of INR180 billion, signing a share purchase agreement, with the deal to close by Dec-2021.

24. Air India fleet summary, as of 11-Oct-2021

25. Domestic capacity as measured in weekly seats, 2018-2021

26. key challenges-

27. Conclusion
 The Tata Group's acquisition of Air India was a watershed moment in
India's aviation industry
 The company has a debt of more than Rs 61,500 crores as on date . As a
result, the government would still have to cover around Rs46,000 crores
in debt.
 The government would retain ownership of the land and buildings,
which are valued at over Rs 14,700 crores
 The government's sole benefit may be that they do not have to worry
about operating the firm or any potential debt the corporation may incur.
Finally, Air India has decided to return to the Tatas.

28. Historic Images

29. Thankyou