Air India Case Study – Why Air India Failed ?

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air india case study – why air india failed ?

Air India Case Study

air india case study – why air india failed ?

Hi friends. You won’t believe but there was a time when Air India used to be considered as the world’s best airline. The level of luxury, food, decoration was world-class that even Singapore Air Lines has been inspired by Air India. But today time is different. After the losses of millions, the government is forced to sell (privatize) Air India. Here is the Air India case study.

Let’s see, how Air India came into this condition and how once it was one of the greatest airlines in the world?

The beginning of Air India case study.

This story is not only about the history of Air India but also about the history of the whole Indian Aviation Industry.

After Right brothers, in 1911 a French pilot Henri Pequet had flew the first airplane in India. The flight lasted for 15 minutes from Allahabad to Naini carried thousands of letters. Yes, you read it right. It was India’s first flight carrying the mails for Maha Kumbha Mela.

20 years after this, on 5 Oct 1932, J.R.D. Tata (Jahangir Ratanji Dadabhoy Tata) flew the first Air India flight from Karachi to Mumbai. At that time, it was called Tata Air Lines. But the journey to this milestone was not easy. He had to struggle a lot.

3 Years before, J.R.D. Tata became the first Indian pilot to acquire the license. Flying plane was his passion and dream. He had even participated in contests. He flew the plane from India to England.

The dream of Tata Airlines.

But he had one more dream. The dream of civil aviation in India. Civil aviation means a common of the country should have the opportunity to fly. But it wasn’t an easy task. It required the help of the government and at that, there was the British Government in India. The government was not that helpful as they found no profit in giving the subsidy to J.R.D. Tata for Air India.

air india case study
The dream of Tata Airlines.

At that time Sir Dorabji Tata was one of the wealthy people who had agreed to invest in J.R.D. Tata’s dream. Tata tried hard to convince the government but the government rejected all of his offers. Then Tata told the government that they don’t need any money. They will donate their services to the government. They just need permission and a few aircraft. The British government agreed and this is how Air India had born.

After this first flight of Tata Air Lines fled from Karachi to Bombay weighing the 25 KG letters and obviously, J.R.D. Tata piloted this flight.

In the same year, Tata Airlines had started the domestic flight for passengers. Hear Madras to Bombay return ticket had cost of Rs 256/- only.

In 1946, Tata Airlines has renamed Air India and in the same year, it became a public limited company where a common man could invest his money by buying shares.

When Government came into the picture.

In 1948, where India was independent and the new government had bought 49% shares of the company. 

At the same time J.R.D. Tata started Air India International.

AIR INDIA CASE STUDY
When Government came into the picture.

The next big change happened in 1953, which was disheartening for J.R.D. Tata. The government had decided to nationalize all the airline sectors in India. The government had merged 8 domestic airlines into 1 and created the Indian Air Lines.

Nationalizing all the major industries in the country was one of the main policies of the Nehru Government. Their motto was to support and progress the industries. But there were high chances of losing opportunities for industrialists and investors. No industrialist was happy with this decision including J.R.D. Tata.

This part of the story is very interesting as J.R.D. Tata and Pandit Nehru were good friends. Both of them used to admire each other. But when the government passed the Air Corporation Act, 1953, J.R.D. Tata opposed it. He was against this act.

Whenever J.R.D. Tata tried to talk to Pandit Nehru about this act, Nehru never entertained J.R.D. Tata. After that Pandit Nehru wrote a letter to J.R.D. Tata explains why this decision is necessary for the progress of the country.

J.R.D. Tata couldn’t do anything and Air India finally has been nationalized. But J.R.D. Tata was still connected to Air India. He was the chairman of Air India and became the director of Indian Airlines.

Air India in 1950 and 1960.

air india case study
Air India in 1950 and 1960.

‘Caviar on ice, the finest steaks, champagne, the menu prepared by the chefs of the Taj Hotel, grand lounges this was the description when you travel by Air India in the 1950s or 1960s. Air India is also referred to as ‘the palace of the sky’ because of its luxury, food, design as early I told you that even Singapore Airlines was inspired by Air India and mostly the credit goes to J.R.D. Tata.

J.R.D. Tata used to travel himself by Air India and he used to make sure that everything in the Airline is good. In case he found an imperfection in the plane, then he would go himself correct it. J.R.D. Tata was himself a great personality.

The Maharaja of Air India

air india case study
The Maharaja of Air India

If we are talking about Air India and then not to mention its mascot ‘ Maharaja’ is not fair. You must have seen this photo at bus stops, postcards, posters, banners, and advertisements also. It was conceptualized in 1946 by Bobby Kooka who was the commercial director of the airlines. Over the years Maharaja has been portrayed in the different-different cultures to show that Air India takes their passengers to various countries.

The Art of Air India.

Air India was not only an airline but was also a representation of the Indian culture, food, hospitality, and artworks. If you know Air India had a collection of 8000 artworks. Paintings, sculptures, glasses. This collection they have collected over the last 60 years.

At that time there were very few International airlines existed and the competition was stiff. The Airlines needed to stand out and that’s why their advertisement department has decided to make Air India the representation of the Indian culture. Air India commissioned all the world-famous artists to make the artwork for Air India.

air india case study
1. Salvadoe Dali, 2. The baby elephant sent to Dali, 3. The Ashtray

 Like in 1967 they commissioned the world-renowned artist Salvador Dali to make a special ashtray for Air India customers. He didn’t ask for the payment of this in money, but he asked for a baby elephant in return as payment. Then Air India sent a baby elephant from Banglore to Geneva.

These are the stories that make Air India special in its time. Their customer was very loyal to airlines.

why air india failed ?

Air India and Indian Airlines had bear losses of around 800 crores. As both the companies were Government-owned public units, the Government had to bear this loss. They merged both of these units and it was still making the losses continuously.

air india case study
why air India failed ?

But why? What were the reasons behind the failure of Air India?

There were several reasons for it but a few reasons were clear and facts based. For example, when this merger took place the government made a big investment of 440 billion rupees in the airline. They purchased new aircraft, also the company hired more unnecessary crew members and their salary expenses had increased, pilots went on strike to demand fair salary and the company had to face revenue losses.

In the upcoming year, more bad decisions had been taken by the Government and the revenue of the company decreased every year. New international airlines were entering the market hence passengers had more options to fly.

They also decided to open up more routes so that they give their customers more routes to fly but it was loss-making.

Government and Management conflicts in Air India.

air india case study
Jitendra Bhargava, former executive director – Air India

Jitendra Bhargava, former executive director of the company said that the management had been begun in 1970 when the people in the top management changed. Then the recruitment process was not that strict and also the cabin crew was not well trained. As the in-flight service standards fell, passengers started to look for other options.

There were a lot of management and government disagreement has been seen but it was a government company. So the government dominated. For example, the Government spent crores on advertising where management was opposing this idea as the company has to face losses.

Nationalization VS Privatization.

air india case study
Nationalization VS Privatization.

So, it was the debate on privatization. As Air India was a government company then all the authorities were in the hands of the politicians and government babus who do not know airlines business, management, they didn’t have any motivation to run the airline company and that’s why they failed to make the right decisions.

As people say “Ek Baar government job mil jaye, life set hai” then work as you wish, while in the private job you must have to work hard to impress your boss and achieve anything in your career. So how Air India could become successful?

The fact is the airline was already nationalized in 1950 and it worked well till 1970. It was the world’s best and top-class airline. This is because the management at that time was working properly. J. R. D. Tata himself used to handle it. He had found this company and hence he had the motivation to keep this company in top shape.

Tata acquired Air India October 2021.

air india case study
Tata acquired Air India October 2021.

In 2017, the government has decided to privatize Air India. Till 31 March 2021, the company has made losses of around 700 billion rupees. Year on year this burden of losses was increasing so that it was becoming difficult government to sell this company.

Finally on 8 Oct 2021, the government successfully managed to sell the company in 180 billion rupees to Tata. This decision is seen as a celebration as the company went back to its original owner (The Tatas).

Now the time will tell the result of this decision. Whether they will take this company to the mars again.

But in the end, today we see the world’s best airlines like Singapore Airlines, Emirates, Etihad Airlines, Japan Airways, Lufthansa, in this long list, you will find both nationalized and private airlines which are doing good.

Conclusion

But in the end, today we see the world’s best airlines like Singapore Airlines, Emirates, Etihad Airlines, Japan Airways, Lufthansa, in this long list, you will find both nationalized and private airlines which are doing good.

This story of Air India is less about nationalization vs privatization and is more about good decisions vs bad decisions which you can see in both the nationalized and private companies also.

In my opinion, it doesn’t matter whether the company is private or nationalized. It’s all about good decision-making and good management.

Here are your thoughts on Air India case study. Let me know in the comments below. Thank you.

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air india case study – why air india failed ?

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