ORGANIZATIONAL STRUCTURE,
DESIGN AND CHANGE
(BOB2BD22-3)
Group Project Report
Air India: A Homecoming Saga
Submitted to: Prof. Ankit
Submitted by: Group 6 - Section E
Adarsh Goyal
BD22004
Agrima Mehandiratta
BD22008
Aman Chawla
BD22010
Chandramouli S
BD22016
Mohit Pandey
BD22030
R. Nivedhitha
BD22037
Rupav Tiwari
BD22039
Saumyata Pranay
BD22045
Subhadarshini Mullick
BD22053
Vaibhav Aggarwal
BD22057
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As Campbell Wilson sipped his morning espresso, he looked back at how his life had changed
over the past 1.5 year. In June’22, Wilson was appointed the CEO of Air India. Having previously
lead Scoot, a low-cost Singapore based air carrier, Wilson had high hopes riding on him to build
another world class airline.
In the past months, he had made major changes in the structure of the organization, however they
were far from relaunching the airline post makeover. Tata had recently decided to merge Vistara
with Air India: aiming to have one full-service airline and one low-cost airline. Wilson was to
announce this news to the media in a press release today evening. Situations were tense as he
contemplated how the public would receive this new development.
CURRENT SCENARIO AT TATA-AIR INDIA
After 69 years as a government-owned enterprise, Air India and Air India Express were welcomed
back into the Tata group in January 2022. Tata Sons acquired a 100% stake in Air India on 27th
January 2022 through its fully owned subsidiary Talace Private Limited. The acquisition was
approved by the Competition Commission of India (CCI). Tata Sons acquired a 100% stake in Air
India on 27th January 2022 through its fully owned subsidiary Talace Private Limited. The
acquisition was approved by the Competition Commission of India (CCI).
Under the umbrella of Vihaan.AI, the current management of Air India is pursuing the five-year
transformation roadmap to position the company as a leading global airline with a heart for India.
Vihaan. The five-year transformational roadmap for AI at Air India includes significant
milestones. It will concentrate on establishing a newly redesigned client proposition, massively
expanding both its network and fleet, and enhancing dependability and on-time performance.
Together with making major investments in the top industry talent, the airline will also embrace a
leadership role in technology, sustainability, and innovation. Vihaan. AI aims to put Air India on
a road to consistent development, financial success, and market dominance.
ABOUT TATA GROUP
The Tata Group is one of India's oldest and most respected business conglomerates, with a history
dating back to 1868. Founded by Jamsetji Tata, also referred to as the "father of Indian industry".
Each Tata company operates independently under the guidance and control of its own board of
directors and shareholders. Tata Sons, the Tata holding company, is 66% owned by philanthropic
trusts, with the bulk of the business primarily owned by the Tata family.
Originally founded as a commercial company in 1917, Tata Sons specialized in the lucrative opium
and tea trade with China and Mongolia before transitioning from operating businesses directly to
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serving as the leading holding company of the Tata Group. On February 21, 2017, Natarajan
Chandrasekaran was appointed Chairman of Tata Sons. In 2017, the business converted from a
public limited company to a private one. Former executive chairman Cyrus Mistry challenged both
of these rulings in court.
Since its formation, the group has now diversified into various industries, including steel,
automobiles, information technology, defense, construction, communications, and aviation. In
1932, the Tata Group founded Air India, which was then known as Tata Airlines. Even after Air
India's nationalization in 1953, the Tata Group remained active in the Indian aviation industry and
launched AirAsia India and Vistara Airlines in collaboration with other partners.
Fig.1 Vintage photograph of an Air
India plane
ABOUT AIR INDIA
Before Nationalization
Founded as Tata Air Services in the year 1932 by J.R.D. Tata of the Tata Sons, it was later renamed
to Tata Airlines. Tata won a contract in the April of 1932 to carry mail for Imperial Airways
(British Commercial airline), which marked the formation of an aviation department within the
Tata Sons. They started operations with two single engine de Havilland Puss Moths.
Fig.2 de Havilland DH.80A Puss
Moth G-ABLS first registered in
1931.
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The airline flew 160,000 miles (260,000 km) in its first year of operation, transporting 155
passengers and 9.72 tonnes (10.71 tonnes) of mail while earning a profit of 60,000 (US$750). With
a six-seater Miles Merlin, the airline launched its first domestic route from Bombay to Trivandrum.
It received a new name in 1938: Tata Air Services, which was followed by Tata Airlines. In 1938,
Delhi and Colombo in Ceylon (now Sri Lanka) were added as destinations.
On July 29, 1946, Air India changed its name to Tata Airlines, which thereafter became a public
limited company. The Government of India purchased 49% of the airline in 1948 following Indian
independence in 1947. (Refer to Exhibit 1 to view the present details about Air India)
Nationalization
Even though the company's founder J. R. D. Tata, would continue to serve as Chairman until 1977,
the Indian government passed the Air Companies Act in 1953 and bought a controlling share in
the carrier from Tata Sons. As part of a restructuring, the business was given the new name Air
India International Limited, and the domestic services were given to Indian Airlines, another stateowned airline. The airline began offering services to Rome, Paris, Düsseldorf, and Nairobi in
Kenya between 1948 and 1950. The airline started operating flights to Bangkok, Hong Kong,
Tokyo, and Singapore after receiving its first Lockheed Constellation L-1049. This move was
aimed at consolidating the Indian aviation industry under state control and promoting the
development of civil aviation in India.
Re-privatization attempts for Air India was launched in 2000–2001. A completely owned low-cost
subsidiary of Air India called Air-India Express began service between Indian cities and the
Middle East and Southeast Asia in May 2004. Before 2007, Indian Airlines flew short-haul local
and international flights, whereas Air India focused more on long-haul international travel. (Refer
to Exhibit 4 to view the structure of Air India during nationalization)
Privatization
The Indian government approved the privatization of Air India on June 28, 2017. The government
released an Expression of Interest (EOI) in March 2018 to sell a 76% share in Air India and the
budget carrier Air India Express. As the Government hoped to finish the selling process by the end
of 2018, a bid had to be submitted by mid-May, and the new owner would have to take on a debt
of 33,392 crores (US$4.2 billion). However, no private companies showed interest in purchasing
the indebted airline.
In late 2019, the Government decided to sell a 100% stake in the airline, and preparations for this
sale began. The government launched the Expression of Interest (EOI) to solicit bids on January
27, 2020. This time, the government opted to sell 100% of Air India, 100% of its low-cost carrier
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Air India Express, and 50% of AISATS. The government had already reduced its debt and
liabilities by over 30,000 crores (US$3.8 billion) to attract more bids.
After issuing fresh tenders in September 2021, ultimately, on October 8, 2021, Air India, its lowcost airline Air India Express, and 50% of AISATS, a ground handling firm, were sold to Talace
Private Limited, a Tata Sons' SPV (Special Purpose Vehicle), for 18,000 crores (US$2.3 billion).
The airline was formally transferred to Tata Group on January 27, 2022.
Natarajan Chandrasekaran, the head of Tata Sons, was chosen to lead the airline in March 2022.
Campbell Wilson was named Air India's CEO and MD later in May 2022 by Tata Sons. (Refer to
Exhibit 5 to view the structure of Air India during privatization)
ABOUT INDIAN AIRLINES
In 2007, the airline received its first Boeing 777 after merging with Indian Airlines to form Air
India Limited. In 2006–07, Air India and Indian Airlines collectively lost 7.7 billion rupees ($96
million), and by March 2009, the total losses had increased to 72 billion rupees ($900 million). In
March 2012, the government invested 32 billion (about $400 million) in Air India.
Due to high operational costs, the airline shut down the Frankfurt hub on October 30, 2010. Less
profitable routes were discontinued in 2010, and the airline planned to establish a new hub in Dubai
for its international operations. The Corporate Affairs Ministry ordered research in 2012, and it
suggested that Air India be partially privatized. (Refer to Exhibit 6 for the fleet of Air India)
ABOUT AIRASIA INDIA AND VISTARA
In order to start operating in India, AirAsia Bhd submitted an application to the Indian Foreign
Investment Promotion Board (FIPB) in February 2013, when the Indian government permitted a
foreign direct investment of up to 49% in airlines. AirAsia announced in March 2013 that it would
create a joint venture with Tata Sons. Bangalore served as its main operating location as it started
operations in June 2014, becoming India’s first foreign airline subsidiary.
AirAsia Bhd first sold its 32.67% stake to Tata Sons for $37.7 million in 2020, and then after Tata
Sons acquired Air India Limited in 2021, AirAsia Bhd sold its final 16.33% stake to Air India.
Tata Sons now wholly own the airline and have announced a merger with Air India Express.
AirAsia India was changed to AIX Connect in December 2022.
Founded in 2013, Vistara Airlines is a full-service airline in India that is a joint venture between
the Tata Group and Singapore Airlines. Prior to this, the two companies had a failed attempt in the
mid-1990s to launch a full-service carrier in India. The airline began operations in 2015 and has
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quickly gained popularity among travelers in the country. Vistara Airlines had its first international
service to Singapore on 6th August 2019 and became the first Indian airline to operate a wide-body
Boeing 787-9 in February 2020.
Sources speculated on the likelihood of a Vistara and Air India merger following the Tata group's
acquisition of Air India in January 2022. The union of two airlines into one airline was officially
announced by Tata Group and Singapore Airlines in November 2022. Singapore Airlines will
acquire a share in the airline that might reach 25.1% under the merger plan. By March 2024, the
merger should be finished.
Fig.3 Air Asia and Vistara Airlines Aircrafts
GOVERNMENT OF INDIA
The Indian government has played a significant role in the history of Air India and the Indian
aviation industry as a whole. The government nationalized Air India in 1953 as part of its efforts
to consolidate the Indian aviation industry under state control.
Ajit Singh, who was the civil aviation minister in 2013, said privatization was essential for the
airline's existence. The BJP and CPI(M)-led opposition, however, attacked the ruling party and
criticized this decision. The equity infusion of 300 billion rupees ($3.8 billion), which was
supposed to be made gradually over the course of eight years, was scheduled to be delayed by the
Indian government in 2013.
The Ministry of Civil Aviation is a government department responsible for the regulation and
development of civil aviation in India. The ministry has played a crucial role in shaping the Indian
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aviation industry, from the nationalization of Air India in 1953 to the recent approval of the airline's
sale to the Tata Group.
FINANCES
Profits & Losses
Air India's finances changed dramatically in the previous fiscal year, with revenues increasing by
more than 60% while losses increased. The airline's new owners, who took over in January of this
year, are working hard to restore profitability after years of neglect as a state carrier by
implementing a number of changes in the airline's operations. (Refer to Exhibit 11 for income
statement)
According to the latest regulatory filings, Air India generated approximately $2.5 billion in
revenue in the previous fiscal year, up from $1.5 billion in FY 21. To mitigate the impact of the
COVID pandemic, the airline implemented measures such as across-the-board salary and
allowance cuts, suspension of all post-retirement contractual engagements, introduction of the
concept of a shorter working week, and encouraging employees to use its leave without pay
scheme.
Despite these efforts, the airline's losses increased by a third, from $883 million in FY 21 to $1.2
billion in the most recent fiscal year, indicating that significant work remains to be done before
the airline can fully recover. (Refer to Exhibit 12 and Exhibit 13 for balance sheet and cash flow
statements)
Nonetheless, Air India has made some progress, as evidenced by a 73.5% increase in load factor
and an 80% increase in passenger carry to 11.5 million.
The Road Ahead
Following the Tata Group's acquisition of Air India earlier this year, the airline is expected to make
additional efforts to improve its performance. Campbell Wilson, the airline's new CEO, has
prioritized improving the airline's on-time performance to meet international standards, with the
relevant departments reporting directly to him.
Under Wilson's leadership, the airline intends to improve operational efficiency and become more
customer centric. Air India's fleet strategy has already changed dramatically, with new aircraft
orders and plans to reintroduce grounded planes.
In order to meet immediate fleet needs, the airline raised the retirement age for qualified pilots and
offered voluntary retirement to some employees. Over the last six months, the Tata Group has
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implemented a number of measures to streamline Air India's operations and restore its financial
health.
Future Financial Scope
Because of the positive changes brought about by the Tata Group's ownership, Air India, including
its low-cost subsidiary Air India Express, may see a consolidated profit at the end of the current
fiscal year. Despite the fact that Air India alone is expected to lose around 24 billion, the group as
a whole is expected to turn profitable before interest, tax, depreciation, and amortization.
The airline's revenue has increased significantly under the Tata Group, with revenue of around 31
billion expected in December 2022. Furthermore, the airline's yield has increased from 4.5 in 2020
to 6.5 in 2021. While significant investment is still required, Air India's transformation is expected
to yield positive results in the coming years.
Although Air India's finances have improved under the ownership of the Tata Group, the airline is
still expected to post a loss for the current financial year. The costs of refurbishing the airline's
fleet and interiors, as well as the need for further improvements in customer service and on-time
performance, are expected to affect the airline's financials. However, the Tata Group has
committed to a long-term plan for the airline's transformation, with a timeline of around five years
to address most of its issues. Despite facing several challenges, Air India has made significant
progress in the last year, with improvements in revenue, fleet optimization, and employee
recruitment. The airline's management is hopeful that the next financial year will see even better
results.
STRATEGIC TROUBLES AT AIR INDIA
Air India faced several issues before the Tatas acquired it most of which erupted due to strategic
failures of the company. Air India was plagued with financial issues, including mounting debts,
losses, and low profitability. Even then it decided to take decisions which they couldn’t financially
support. Air India's management was also criticized for being inefficient, bureaucratic, and slow
to respond to market changes. The airline was slow to adopt new technologies and processes,
leading to delays and inefficiencies in its operations.
In the 2000s, private airlines such as Jet Airways, IndiGo, SpiceJet, and GoAir entered the Indian
market, and they quickly gained market share by offering competitive fares, better services, and
newer aircraft. These budget airlines provided customers with a better alternative, making Air
India's shortcomings more apparent. Moreover, Air India was losing on its “premium airline” tag
as the airline failed to invest in training its staff and upgrading its in-flight services, leading to a
decline in the quality of service. Following was a decline in customer satisfaction and loyalty, and
eventually, Air India lost its market share.
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In 2006, Air India signed a deal worth Rs. 49,000 crore (approximately $7.7 billion) to purchase
68 new aircraft from Boeing and Airbus. The deal included 27 Boeing 787 Dreamliners and 41
Airbus A320 family aircraft. The purchase was part of Air India's efforts to modernize its fleet and
improve its operational efficiency. The new aircraft were expected to replace Air India's aging
fleet. However, the delivery of the new aircraft was delayed due to various reasons, including
production delays by the manufacturers and issues related to Air India's finances. As a result, Air
India was not able to realize the full benefits of the new planes, and the airline's financial problems
continued to worsen. It looked like leasing would have been a more financially viable option here.
Apart from this, Air India kept launching new international routes to meet the demand for the
routes, the competition from other airlines, and Air India's operational efficiency. While the airline
may have generated additional revenue from the new, it is worth noting that Air India had been
struggling with financial losses and high operating costs have been cited as one of the reasons for
its poor financial performance. Even the fuel prices were on the rise, hence, how far the decision
was sustainable is the question.
In 2007, Air India and Indian Airlines, the two state-owned airlines in India, were merged to form
a single entity, Air India Limited. The merger was intended to improve the efficiency and
competitiveness of the two airlines, reduce duplication of services, and improve profitability. One
of the key challenges of the merger was the integration of the two airlines' operations, systems,
and staff. The two airlines had different organizational structures, cultures, and processes, which
made the integration complex and challenging. The airline employed more staff than it needed,
which led to a decrease in efficiency and an increase in expenses. The merger led to a significant
increase in the combined entity's debt, which further exacerbated its financial problems.
Owing to the financial instability, In 2018, the Indian government announced its plan to divest its
stake in Air India. As part of the divestment process, the government offered to sell a 76% stake
in Air India, while retaining a 24% stake in the airline which was later revised to 26%, while
offering to sell a 74% stake in the airline to potential buyers. However, the divestment process
faced several challenges, including lack of interest from potential buyers, and the government had
to postpone the sale several times. A letter of intent (LoI) from the government confirming the sale
of its 100% stake in loss-making Air India to Tata Group for Rs 18,000 crore was finally released
in October 2021.
ACQUISITION PROCESS BY THE TATAS
The general steps involved in the acquisition process are1. Expression of Interest
2. Bidding
3. Evaluation of bids
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4. Approval from the Cabinet
5. Transfer of Ownership
Since 2014, the Indian government has been sharing their goal to privatize some central PSU’s. In
the summer of 2017, the Cabinet Committee on Economic Affairs (CCEA) showed a green flag
for strategic disinvestment of Air India along with its 5 subsidiaries. In March 2018, the
government offered 76% stake in Air India. Additionally, the agreement would include 100%
stakes of Air India Express and 50% in the ground handling department. But due to the high oil
prices at that time, no bids were received. The government invited investors in 2020 offering full
stakes in the holdings. Several deadline extensions were seen over the year due to terms of the
sales which were focused to reduce the carrier's debt. Despite all the delays, Tata group was a clear
contender. On September 15, 2021, Air India received their final bids by Tata Group and SpiceJet’s
Founder, Ajay Singh. Ultimately it was confirmed that the airline will be returning to Tata group.
On 8th October 2021, the Tata Group won the bid to acquire the heavily indebted Air India for Rs
18,300 crore. After 69 years as a government-owned enterprise, Tata Group welcomed Air India
in January 2022. This transaction covers three entities of AI, namely Air India, Air India Express,
and AI SATS.
Air India which has been a public sector undertaking since 1953, is now 100% owned by Tata
Group, and apart from shares, its control and management were also transferred to Talace.
Air India has finally set Tata to the government controls. After weeks of delay India’s flagship
airline has finally been handed over to the Tata Group. With this Air India is no longer a
government-owned company, it is now owned by the Tata Sons group. In October 2021, the
government had sold Air India to Talace Private Ltd. after a competitive bidding process. Talace
Private Ltd is a subsidiary of the Tata group’s holding company.
The expected timeline for the handover then set was December end, which got extended to January
end due to various pending approvals from global regulators and the finalization of the balance
sheet by the lenders and the airline’s leasers.
Talking to the reporters N. Chandrasekaran said that he was totally delighted that Air India’s
takeover process was finally complete. With this transaction we also have to look at the things that
are going to change in Air India and how it is going to impact the flyers. All the board members
of Air India will resign, and they will be replaced by the nominees of the Tata Group, but some
key members will continue.
Tata group is focusing more on improving on-time performance. This has been criticized by the
flyers of Air India. The group in its new plan has said that the aircraft doors will close 10 minutes
before departure time from now on. There will be in-flight announcements where passengers will
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be addressed as guests. Interestingly, the group also said that the airline may also play a special
recorded message from Group Chairman Ratan Tata.
One of the important components of the in-flight service is meal, the group aims to introduce an
enhanced meal service on flight in a staggered manner. The caterers have already been briefed
about this and they will gradually provide meals and equipment for the service. Delhi-Mumbai and
key gulf routes will be among the first to get this rollout along with flights to the US and UK. This
meal upgrade plan was made by TajSats Airline Catering Service. When serving drinks to
passengers in business class and first class, the crew has been explicitly directed to use high ball
and wine glasses. Additionally, they have also been instructed to utilise porcelain cups in business
and first class and pre-made melamine cups for tea and coffee service in economy class.
Apart from this, the frontline staff, who interact with flyers have been issued new advisories
mentioning new changes. The cabin crew BMI and grooming will be checked when they report
for flights. This is however opposed by the unions. These and some more key points have been
already approved by Sandeep Verma and Megha Singhania of the Tata’s, who will head the inflight
service.
However, with these changes comes certain challenges. There are of course financial challenges
to keep the operations running and to make the business profitable, but the changes are already
facing a backlash from the Air India employees union. Two pilots unions have warned of legal
action over their multiple salary deduction and have projected recoveries. While the pilots union
have complaints about the illegal deductions in the arrears and wander for legal recourse in case
the full amount is not paid to them immediately. The cabin crew association has termed the weight
and body mass index checks at airports as a violation of service conditions. So, while the Tata’s
start a new journey with Air India it has many challenges in front of it.
ORGANIZATIONAL STRUCTURE CHANGE
Air India has undergone significant organizational structure changes to facilitate the government’s
efforts to privatize the airline and make it more competitive for sale.
Before privatization
Air India had a fairly centralized organizational structure with multiple layers of management. The
company was divided into several functional departments and structured into different geographic
regions, each with its own management hierarchy.
At the top of the hierarchy was the Board of Directors consisting of a Chairman and Managing
Director. A group of Executive directors managed various functional areas of the airline. Beneath
the director , each department was headed by a senior manager. The functional departments
included:
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1. Flight operations
The Flight Operations department was responsible for managing all aspects of the airline's flight
operations, including flight planning, crew scheduling, and safety. This department was typically
headed by a Chief of Flight Operations, who reported directly to the Managing Director of the
airline. The Chief of Flight Operations was responsible for overseeing the following subdepartments:
1. Flight Planning: This sub-department was responsible for creating flight plans for all
flights, including routes, fuel consumption, and other necessary details.
2. Crew Scheduling: This sub-department was responsible for scheduling the airline's pilots,
flight attendants, and other crew members, ensuring that each flight had enough crew
members.
3. Flight Safety: This sub-department was responsible for ensuring that all flights complied
with safety regulations and best practices. This sub-department included Safety Officers,
who were responsible for investigating any incidents or accidents that occurred during
flights.
2. Engineering
The Engineering department was responsible for maintaining and repairing the airline's aircraft, as
well as procuring spare parts and equipment. The department was typically headed by a Chief
Engineer, who reported to the Managing Director. The Chief Engineer was responsible for
overseeing the following sub-departments:
1. Maintenance: This sub-department was responsible for performing regular maintenance
checks on the airline's aircraft, as well as repairs and overhauls as needed.
2. Technical Services: This sub-department was responsible for managing the airline's
technical documentation, including maintenance manuals and repair procedures.
3. Procurement: This sub-department was responsible for procuring spare parts, equipment,
and other supplies needed to maintain the airline's aircraft.
3. Sales and Marketing
The Sales and Marketing department of Air India was responsible for promoting the airline's
services and generating revenue. The department was headed by several regional managers, along
with managers under the heading different teams. It consisted of the following sub-departments
and teams:
1. Sales: This team was responsible for selling tickets and travel packages to customers, both
directly and through travel agents.
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2. Marketing: This team was responsible for developing marketing campaigns, advertising,
and promotions to attract customers.
3. Revenue Management: This team was responsible for managing the pricing and inventory
of seats on flights, to maximize revenue.
4. Customer Service: This team was responsible for ensuring that customers received
excellent service, both before and after their flights.
4. Finance
The Finance department of Air India was responsible for managing the airline's financial
operations. Chief Financial Officer headed the function and had multiple managers heading the
following sub-departments and teams:
1. Accounting: This team was responsible for maintaining accurate records of all financial
transactions, including accounts payable and accounts receivable.
2. Budgeting and Forecasting: This team was responsible for developing and managing the
airline's budgets and financial forecasts.
3. Treasury: This team was responsible for managing the airline's cash flows, investments,
and foreign exchange transactions.
4. Taxation: This team was responsible for ensuring that the airline complied with all tax laws
and regulations. (Refer to Exhibit 14 for the future in finances)
5. Human Resources
The Human Resources department of Air India was responsible for managing the airline's human
resources policies and procedures. The function was headed by multiple general managers from
the following sub-departments and teams:
1. Recruitment: This team was responsible for hiring new employees, including pilots, cabin
crew, and ground staff.
2. Training and Development: This team was responsible for providing training and
development programs for employees, to enhance their skills and performance.
3. Compensation and Benefits: This team was responsible for managing employee
compensation and benefits, including salaries, bonuses, and insurance.
4. Employee Relations: This team was responsible for managing employee relations and
addressing any employee grievances.
After Privatization
After privatization, Air India's organizational structure underwent significant changes to adapt to
the requirements of the new ownership structure. Air India appointed a Chief Restructuring Officer
to oversee the restructuring process and ensure the airline's financial and operational viability.
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Here are some of the key differences in Air India's organizational structure before and after
privatization:
1. Flatter management structure with fewer layers of management
2. Division of the company into separate entities such as Air India, Air India Express, Air
India Engineering Services Limited (AIESL), and Air India Air Transport Services Limited
(AIATSL)
3. Separate management teams for each entity with more autonomy and decision-making
power
4. Reduction in workforce: As part of the restructuring process, Air India also implemented
a Voluntary Retirement Scheme (VRS) for its employees, resulting in a significant
reduction in the workforce.
5. Outsourcing of services: Air India has outsourced several services, such as ground handling
and engineering, to third-party vendors to reduce costs and improve service quality.
Why were these changes required?
Organizational structure changes were required for Air India before and after privatization for
several reasons, including:
1. Financial sustainability: Air India was facing financial challenges due to high debt,
declining revenues, and increasing competition. Organizational structure changes were
required to reduce costs, improve efficiencies, and enhance profitability.
2. Improved governance: Air India's governance structure was often criticized for being
opaque and non-transparent. Organizational structure changes were required to improve
governance and transparency, build trust with stakeholders, and reduce the risk of
corruption.
3. Better alignment with market needs: Air India's organizational structure was not well
aligned with the changing market dynamics and customer needs. Organizational structure
changes were required to make Air India more responsive to market demands and customer
preferences, which would help it to remain competitive and increase its market share.
4. Improved decision-making: Air India's highly centralized decision-making structure was
often criticized for being slow and bureaucratic. Organizational structure changes were
required to make decision-making faster, more efficient, and more agile, which would help
Air India to respond more effectively to changing business conditions.
Overall, the organizational structure changes were required to help Air India become more
efficient, competitive, and sustainable in the long run. The changes were aimed at making Air
India more responsive to market dynamics, customer needs, and changing business conditions,
which would help it to remain viable and profitable in the long run. (Refer to Exhibit 2 and Exhibit
3 to view the key persons around the acquisition)
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FUTURE ORGANIZATIONAL SCOPE
The Tata Group's purchase of Air India represents an important turning point in the development
of the aviation sector in India. Notwithstanding the numerous strategic setbacks that Air India had
over the years, the Tata Group recognized a chance to save the airline and take advantage of the
aviation industry's growing potential in India. The acquisition procedure was difficult and
complicated, involving careful consideration of operational, financial, and legal aspects.
Although it will take a lot of time and money, the acquisition's impact on organizational structure
has the potential to result in considerable cost savings and synergies. With a higher market share
and a stronger brand, the new combined company will be better able to compete with both domestic
and foreign competition.
Although promising, Air India's future under the Tata Group's ownership is not without challenges
and difficulties. The new business must constantly adapt and innovate given the aviation industry's
intense competition and quick transition. The aviation industry is also significantly impacted by
government laws and regulations, so the new business will need to carefully navigate these
complications.
To accomplish its strategic objectives and generate value for its stakeholders, the new business
will need to successfully negotiate the cultural, structural, human resource, information
technology, and customer experience aspects of the merger as well as developing its own
strategies. Although there will be many difficulties, there are also many possible advantages to the
merger.
Ultimately, the homecoming of Air India to the TATA Group is a risky and clever decision that
has the potential to revolutionize the Indian aviation sector. It will take careful planning,
organization, and execution to successfully integrate Air India into the operations of the Tata
Group. Nonetheless, there are enormous potential advantages of this combination for both
businesses, their stakeholders, aviation consumers, and the Indian economy.
As the news of the merger with Vistara made headlines worldwide, Campbell Wilson wondered
what the future held. Will Air India team face new challenges yet again before being successfully
relaunched in the Indian market?
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EXHIBITS
EXHIBIT 1: ABOUT AIR INDIA BRAND
EXHIBIT 2: BOARD OF DIRECTORS, AIR INDIA
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EXHIBIT 3: KEY ACTORS
S.no.
1
Key Actors
Positions Held
Chairman of Tata Sons
N. Chandrasekaran
2
Campbell Wilson
CEO and MD of Air India
3
Nipun Aggarwal
Chief Commercial and
Transformation officer
4
Suresh Datt Tripathi
Chief Human Resource
Officer
5
Vinod Hejmadi
Chief Financial Officer
Description
Key role in the decision-making
process leading up to the acquisition of
Air India, including overseeing the due
diligence process and negotiating the
terms of the deal.
The airline could benefit from his prior
experience of having built an airline
brand in Asia. 26 years of aviation
industry expertise across both full
service and low-cost airlines
Now holds the responsibilities to
maximize revenue for the airline,
including routes, loyalty, revenue
management and so on
Responsibility of reducing the
contractual staff for the airline
according
to
the
five-year
transformation plan VIHAAN AI.
Main agenda is to fix what is currently
wrong with the airline to make it
profitable in the long run.
EXHIBIT 4: AIR INDIA STRUCTURE AFTER NATIONALIZATION
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EXHIBIT 5: AIR INDIA STRUCTURE AFTER RE-PRIVATIZATION
EXHIBIT 6: AIR INDIA FLEET
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EXHIBIT 7: MARKET SHARE OF MAJOR AIRLINES IN INDIA IN FY 2022, BASED
ON INTERNATIONAL TRAFFIC.
EXHIBIT 8: TOTAL NO. OF PASSENGERS TRAVELING FROM AND TO INDIA IN
FY2021, BY DOMESTIC CARRIERS (IN THOUSANDS)
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EXHIBIT 9: MARKET SHARE OF AIRLINES ACROSS INDIA IN FY 2022, BY
PASSENGERS CARRIED
EXHIBIT 10: THE HOMECOMING SAGA OF AIR INDIA - A TIMELINE.
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EXHIBIT 11: INCOME STATEMENT OF AIR INDIA (TEN MILLION INR)
Period
2022
2021
2020
2019
Total operating revenue
19,816
12,104
28,524
26,431
Net sales revenue
17,105
10,343
27,711
25,509
Administrative expenses
-9,046
-5,765
-14,771 -14,931
Raw materials and consumables used
-6,730
-2,536
-9,399
-10,034
Employee benefit expense
-2,329
-2,256
-3,225
-3,005
Wages and salaries
-2,329
-2,256
-3,225
-3,005
Advertising costs
-50.09
-36.69
-88.43
-84.08
Other costs by nature
-428.82 -201.07 -594.78 -551.12
Depreciation, amortization and impairment charges
-4,188
-4,452
-4,292
-1,588
Net other operating result
2,711
1,761
813.83
921.76
Other operating income
2,711
1,761
813.83
921.76
Operating profit (EBIT)
-2,956
-3,143
-3,846
-3,764
EBITDA
1,232
1,309
445.71
-2,176
Financial result
-3,872
-3,836
-3,919
-4,711
Finance Expenses
-3,872
-3,836
-3,919
-4,711
Interest expense
-3,872
-3,836
-3,919
-4,711
Profit before income tax
-6,828
-6,979
-7,766
-8,475
Income tax
-199
-38.14
0
0
Profit after income tax
-7,027
-7,017
-7,766
-8,475
Other Extraordinary Items
-2,570
-59.55
-194.32 -81.56
Net Profit (Loss) for the Period
-9,557
-7,017
-7,766
-8,475
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EXHIBIT 12: BALANCE SHEET OF AIR INDIA (TEN MILLION INR)
Period
2022
2021
2020
2019
Total assets
49,260
63,317
71,742
52,352
Non-current assets
39,165
40,907
46,875
26,993
Property, plant and equipment
36,827
40,001
45,857
25,966
Construction in progress
0
1.26
101.36
73.92
Intangible assets and goodwill
0.18
1.41
6.43
19.47
Long-term financial assets
2,338
903.34
910.3
933.07
Other non-current financial assets
2,338
903.34
910.3
933.07
Current assets
10,095
22,410
24,867
25,359
Inventories
642.73
662.66
947.13
806.38
Other inventories
642.73
662.66
947.13
806.38
Trade and other receivables
1,532
1,137
1,376
1,992
Current trade receivables
1,532
1,137
1,376
1,992
Cash and Cash Equivalents
2,165
1,235
1,310
843.23
Cash at banks and on hand
2,165
1,235
1,310
843.23
Other current assets
5,756
19,376
21,234
21,718
Total equity and liabilities
49,260
63,317
71,742
52,352
Total equity
-54,142
-44,545
-15,612
-29,546
Equity attributable to owners of the parent
-54,142
-44,545
-15,612
-29,546
Issued capital
32,665
32,665
32,665
32,665
Ordinary shares
32,665
32,665
32,665
32,665
Other reserves
-86,807
-77,210
-48,277
-62,211
Total liabilities
1,03,402
1,07,862
87,354
81,898
Non-current liabilities
84,801
36,228
30,599
36,010
Non-current loans and borrowings
84,801
36,228
30,599
36,010
Current liabilities
18,600
71,634
56,755
45,888
Trade and other payables
2,928
9,272
10,093
8,204
Provisions for other liabilities and charges
2,522
3,892
3,975
3,039
Other current liabilities
13,150
58,471
42,687
34,645
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EXHIBIT 13: CASH FLOW STATEMENT OF AIR INDIA (TEN MILLION INR)
Period
2022
2021
2020
2019
Net cash flow from (used in) operating activities
-8,759
586.09
5,292
-1,084
Net profit
-9,358
-6,979
-7,766
-8,475
Cash generated from operations
598.77
7,565
13,058
7,391
Adjustments for: Other adjustments
598.77
7,565
13,058
7,391
Net cash flow from (used in) investing activities
-12,480
255.36
-1,457
-953.2
Other investing activity cash flows
-12,480
255.36
-1,457
-953.2
Net cash flow from (used in) financing activities
22,113
-940.3
-3,425
2,130
Other financing activity cash flow
22,113
-940.3
-3,425
2,130
Net increase (decrease) in cash and cash equivalents
874.56
-98.83
409.9
93.36
Cash at the beginning of period
529.41
624.84
245
188.6
Exchange gain (loss) on cash and cash equivalents
-0.6
3.4
-30.09
-36.74
Cash at the end of the period
1,403
529.41
624.8
245.22
Free cash flow
-8,759
586.09
5,292
-1,084
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EXHIBIT 14: LIMITLESS: AIR INDIA PUSHING FOR THE SKIES.
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References
1. https://www.tata.com/newsroom/business/air-india-vistara-consolidation#
2. https://www.indiatoday.in/business/story/air-india-tata-sons-group-employees-customers1905978-2022-01-28
3. http://www.ch-aviation.com/portal/airline/AI
4. http://www.economist.com/node/21559372
5. https://www.financialexpress.com/industry/air-india-sale-disinvestment-privatisation-live-bidwinner-winning-bidder-announcement-ratan-tata-ajay-singh/2346403/
6. http://www.airindia.in/board-of-directors.htm
7. https://www.britannica.com/topic/Tata-Group
8. http://articles.economictimes.indiatimes.com/2013-02-22/news/37242259_1_air-asia-jointventure-low-cost-airline
9. https://www.businesstraveller.com/business-travel/2022/02/24/vistara-plans-to-increase-staffstrength-to-5000-employees-this-year/
10. http://india.gov.in/sectors/transport/ministry_civilaviation.php.
11. https://www.businesstoday.in/industry/aviation/story/campbell-wilson-appointed-ceo-md-of-airindia-333321-2022-05-12
12. https://www.tata.com/newsroom/business/air-india-campbellwilson#:~:text=Mr%20Wilson%20holds%20a%20Master,the%20highly%20respected%20Tata%2
0group.
13. https://www.airindia.in/about-airindia.htm
14. https://livefromalounge.com/tata-group-rolls-out-leadership-changes-at-air-india/
15. https://www.business-standard.com/article/companies/air-india-in-talks-with-aircraft-makers-tobuy-planes-cfo-vinod-hejmadi-122101401093_1.html
16. The new Air India is a work in progress. The Tatas will get it right sooner rather than later
(theprint.in)
17. Air India Air India Toto Spend $400 Million To Refurbish Its Boeing 777s and 787s
(simpleflying.com) Spend $400 Million To Refurbish Its Boeing 777s and 787s (simpleflying.com)
18. Sentiments and business: What Air India acquisition means for Tatas - Times of India
(indiatimes.com)
19. Air India is like a startup as it’s being reinvented, says CEO Campbell Wilson - The Economic Times
(indiatimes.com)
20. Air India, Campbell Wilson: Exclusive: He Air India, Campbell Wilson: Exclusive: HeAir India,
Campbell Wilson: Exclusive: He and Maybe She - Air India CEO's Big Hint Onon Mascot
(ndtv.com)ndand Maybe She - Air India CEO's Big Hint On Mascot (ndtv.com) Maybe She - Air
India CEO's Big Hint On Mascot (ndtv.com)
21. Tata Group lists plans for second year of Air India under its wings | Business Tata GroTata Group
lists plans for second year of Air India under its wings | Business News,TheNews, The Indian
Expressup lists plans for second year of Air India under its wings | Business News,TheNews, Th
Indian Express Indian Express
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CASE ANALYSIS
Changes in the past year
Jan 27, ‘22, Tata Group took over Air India. Since then, the airline has taken several measures to
improve its performance. These include launching flights on 16 international routes, hiring 1,200
people, doubling average daily revenue, and clearing the backlog of refunds. While not all are
positive, the airline has faced issues ranging from pilots’ discontent to inept handling of certain
sensitive matters. The Directorate General of Civil Aviation (DGCA) has imposed a fine of Rs 30
lakh on Air India & suspended the license of the pilot-in-command for 3 months in the Air India
peeing case which occurred in the month of Nov ‘22.
Decision Problem – What Organizational Structure should Tata-Air India adopt in upcoming
mergers with Air Asia and Vistara Airlines? Should Tata-Air India even consider and
organizational structure change? Why?
Factors to consider for organizational structure change :
1.
2.
3.
4.
5.
6.
Define the business goals.
Assess the strengths and weaknesses of each company.
Identify redundancies.
Establish a new organizational structure.
Communicate the changes.
Implement the new structure.
Importance
1.
2.
3.
4.
5.
Alignment of operations
Consolidation of Resources
Cultural Alignment
Customer Experiences
Regulatory Compliances
Suggested Organizational Structures based on the above
As Air Asia and Vistara Airlines are completely new mergers, Air India should adopt a divisional
structure during the initial stages of the merger. This will allow Air Asia and Vistara to act as
separate entities operating under the Air India umbrella.
Problems addressed with this change.
The change will result in smooth transformation for both these organizations. This will give
employees a chance to adapt to the change and accept the merged culture of both organizations.
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Further , it will also allow customers to align themselves with the expectations posed by the
companies as a merged entity as opposed to when they were separate.
Once the teething period of the transformation has been overcome, an overall flatter hierarchical
management structure may be deployed for long-term integration of all merged entities.
Problems created with this change.
Any merger at this scale will lead to a lot of operational and cultural differences. It will be
imperative for the management to seek ways to address and incorporate these changes to ensure a
smooth transition for the employees of the 2 new companies.
The management of all the 3 companies have to be aligned to the vision of Air India and be able
to guide their existing teams to work in coordination with Air India teams.
SUGGESTED OPERATIONAL CHANGES FOR TATA-AIR INDIA
The team at Air India is led by the new CEO & MD Campbell Wilson, insists on reinventing the
former national carrier into startup organizational culture. This despite him grappling with a
myriad of legacy issues on a daily basis as he straddles the task of reinventing the airline to take it
back to its days of glory. Wilson believed that deep cultural changes need to be made for Air India,
under the Tata Group. He has been making tactical moves since January 2022, and embarked on
refurbishing its fleet, website, operations, revenue, and data management, and even staff.
Mascot and brand Image
The CEO has emphasized the need for retention of the legacy image by Air India in the form of
“The Maharaj” who has been showcased to have a mustache and turbaned look. He also has added
that there will be modifications/additions in the form of a female mascot as well as considerations
from the successful airline Vistara which would be merged with Air India in 2024.
CHANGES IN THE UPCOMING YEAR
Air India intends to transform their entire fleet with a massive budget of $400 million under their
Vihaan.AI program. They currently include 27 Boeing 787s and 13 Boeing 777s. The nature of
overhauling includes changes to the cabin interiors, inflight entertainment across all classes to
ensure a revamped image. Passengers have often posted their unpleasant experiences on social
media, but the airline has not made any noticeable changes to its cabins in years. Earlier this year,
India’s aviation regulator, the DGCA, also asked Air India to fix its shabby interiors after a
passenger complained about dirty seats and broken armrests.
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An introduction to the premium economy cabins on both the fleets will try to pull in a customer
segment. All of this is supposed to reach the market at the earliest by mid-2024. Air India has
engaged with JPA Design and Trendworks; 2 London based product design companies who
specialize in cabin interior design elements.
Air India will face a tough fight with IndiGo in the domestic sectors primarily between AirAsia &
Air India Express versus Indigo. However, smart management will help Air India regain its
superiority in this. It will face greater challenges on international routes, especially when it tries to
lure away premium passengers (who have been the profit center for every airline) from the likes
of Emirates (considered to be a golden standard). Emirates, Qatar Airways, and Etihad Airways
have already established themselves as influential players in the Middle East region and have a
considerable market share in India. Air India must work hard to attract passengers from these
airlines and establish itself as a competitive regional player. With a massive fleet of modern and
cost-efficient aircraft, Air India should be well-positioned to shift the lead and bring sizable
competition to the Middle East aviation giants.
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