AIR TRANSPORT MANAGEMENT- PART II
FIRST PROJECT ASSIGNMENT REPORT ON : “REVIVAL OF A SICK AIRLINE”
The Hind airline incorporated in 1980, employing over 15,000 employees is based at Cape
and Hind operates on major international trunk routes with a concentrated network in the
Middle East with a fleet strength of 60 aircraft comprising mostly of B 747-400, AB
300/310/320 and few B 777. The airline enjoys world-wide traffic rights, and has been
progressively reducing its route networking, resorting to code sharing and other cooperative
arrangements for the past few years.
The Hind airline is making losses past five years and is faced with growing ,inadequacies,
thereby loosing its image day by day. And in this assignment the consultancy company
provided measures to prevent the airline from bankruptcy, and to change its image in the
market . All these measures requires a good quality management so that the airline can
survive and overcome the losses made in five years.
IMPORTANT AREAS TO FOCUS ON AND MAIN ISSUES INVOLVED ARE:
THE AIRLINE HAS WORLD WIDE TRAFFIC RIRHTS : these rights can be used to generate
income from new business model such as tie ups with new players and offer services at the
best price possible so that the customer is delighted . And increase the frequency on the
profitable routes as this should be used as a platform to change the image of the airline.
I. Increasingly being faced with tough competition
II. Aging Fleet and Low Profitability
III.Poor On time performance
IV.Lack of Leadership
V. Unhealthy Industrial Relations
VI. Inadequate Cash Flow
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This is a very important part of the entire revival process, now as the condition of the airline
is not sound financially so we cannot experiment new things at this point of time as
preventing the airline from bankruptcy is our main goal and the balance sheet of the airline
is not strong.
TO BE IMPLEMENTED IMMEDIATELY:
Now cut down few extremely loss making routes and use the aircraft in the profitable routs
as this step will cut down losses and will help the airline to make some profit .
As the Hind airlines have aging fleet of aircraft and then try to make a team and analyse the
status of the aircraft that is cost of operations , now try to lease out such aircraft to the
other airlines so that a guaranteed income is generated .
With these steps the operations can be smooth and there will not be any liquidity problem
in functioning of the airline .
I. INCREASINGLY BEING FACED WITH TOUGH COMPETITION
The Hind airline is facing a tough competition from its rival airline who offer the same
services as the Hind airlines does. Now the Hind airlines should think out of the box and
change its business model so that the customers are delighted with its performance.
The Hind airline should try out some new thing that is ,
1. Make the customer feel his importance that how much an airline cares for him and
what best can it deliver for its customer , this creates a strong customer base and the
customer will be delighted to travel with the Hind airline again in future.
2. There should be fast actions to be taken on the customers complaints
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3. The valuable suggestion of the customers are to be considered and if there is a gap
in service they must be implemented.
4. The hind airline should inform the customer the status of their complaint and the
necessary action taken on their complaint.
5. On demand entertainment channels / movies
6. Easy cab booking during journey
7. Easy ticketing
8. Provide your customers some discounts on the return trips
9. Give your regular customers some points which they can redeem on goods
purchased at well known stores.
II. AGING FLEET AND LOW PROFITABILITY
In the aging fleet the maintenance of the fleet also increases it is not economical to have all
aging fleet of aircraft in the airline portfolio as the maintenance cost is very high when
compared to new aircraft. So it is very important to have a check on the condition of the
fleet of aircraft. In this case the Hind airlines has a fleet strength of 60 aircraft comprising
mostly of B 747-400, AB 300/310/320 and few B 777 . Create a team to analyse the status of
all the aircraft and then based on the result obtained try to sell the aircraft on which the
maintainance will be maximum and lease few aircraft so that the airline will get some liquid
cash in hand and all the new vital changes can be made in the airline without any problem.
With these strategies the cost on the maintenance can be eliminated and a fixed income can
be generated by leasing the aircraft with the money from this operations new aircrafts can
be purchased and maximum output can be achieved thereby resulting in the profit for the
III. POOR ON TIME PERFORMANCE :
Now this is a very vital part , on time performance now most of the airline do not stick to
their schedule based on which they were supposed to operate . The customer does not like
this at all as his vital time is being wasted at the airport and this results in creating a
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negative image of the airline. The delay due to security , maintenance and natural disasters
should not be counted as the safety is the top most on the charts when compared with
other factors .
There must be a proper and satisfactory response from the Hind airlines to the customers if
there are any delay and the airline should compensate to the customer for the delay. This
will also make the customer feel his importance and shows that hoe much an airline cares
for its customer and what best can they do for them.
So if a Hind airlines wants an edge over its competitors then it should adopt on time
performance. As this will help the Hind airline to create a new market and add on
customer. This will also have a good and best positive impact on the customer and will
definitely improve the image of the airline .
IV. LACK OF LEADERSHIP
If the airline need to survive in the tough competition then it should have a good CEO who
knows his jobs and is the best at it as he can make a airline reach at the top and can help the
Hind airline to get a competitive edge over its rival airlines. He should have a excellent
leadership qualities in his with which he can motivate the employee and can get the best
out of his employee . Failing on these leadership qualities the airline can never survive .
The CEO of the Hind airline should be such that he encourages his employee and pays them
well as per their performance as the good image can be created by having a good quality
staff in the Hind airline . Then only the airline can overcome its bad image which was
created since years .
VI. INADEQUATE CASH FLOW
All the suggestion in order to be implemented need cash and the present financial situation
of the airline is not stable as it is making huge losses from five years . There are few suitable
options for the Hind airline to raise money for the smooth operations, they are as follows
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1. Public Offer : the Hind airline can raise money from the stock market
2. Selling its stake to the corporate or individuals
3. Raising loans against the asserts which they have
4. Selling the some of the aircraft which has a huge amount on maintaining it
5. Operate more on the profit making route
6. Lease out some of the aircraft instead of making losses
These steps will help the Hind airline to overcome its inadequate cash flow problem and the
vital changes in the operating model can be made with the ease .
V. UNHEALTHY INDUSTRIAL RELATIONS
TRY TO MAKE GOOD RELATIONS WITH DOMESTIC AIRLINE :
Now this will benefit both the parties (airlines) a WIN –WIN situation , the joint venture
between the airline will help the airline in the following ways
a. No airline at the same time to the same destination as this divides the customers
between the airlines . There must be mutual understanding between the airlines so
that maximum number of passengers at one go and the other airline operates form
other place and gets the same benefits . Now this will give them good margins along
with strong market share and reduces the risk of loss and helps maintain their share
in the market.
b. Price : there must be mutual understanding between the airline that there must not
be a major difference in the price of the ticket for the same services .
Example : If a new airline starts its operations from A to B , now the airline does not
have a customer base at which it can rely on so the new airline reduces the price of
the ticket and the difference is more then the existing operators are forced to
operate at lower margins . This reduces their operation margins .
c. Take over : if there is a smaller airline operating at few places then the major players
try to takeover them and increase their network and fleet . This reduces the
competition between the new airlines and the existing ones.
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d. Increase the number of operations as the airline trips increases the operating cost on
the crew also comes down and the margins will improve.
e. If the airline has its own ground handling, ticketing, MRO, etc facility it can lease out
the services to the new airlines and generate addition income without any
investment . The new airline will get access to a well trained staff at the best price .
SUGGESTION / CONCLUSION :
As the Hind airline is making huge losses the changes in the business model are necessary
and must , cut down few extremely loss making routes and use the aircraft in the profitable
routs as this step will cut down losses and will help the airline to make some profit . The
Hind airlines have aging fleet of aircraft and then try to make a team and analyse the status
of the aircraft that is cost of operations , now try to lease out such aircraft to the other
airlines so that a guaranteed income is generated .The airline is facing a tough competition
from its rival airline who offer the same services as the Hind airlines does. Now the Hind
airlines should think out of the box and change its business model so that the customers are
delighted with its performance. Make the customer feel his importance that how much an
airline cares for him and what best can it deliver for its customer , this creates a strong
customer base and the customer will be delighted to travel with the Hind airline again in
future. There should be fast actions to be taken on the customers complaints, the valuable
suggestion of the customers are to be considered and if there is a gap in service they must
be implemented.The hind airline should inform the customer the status of their complaint
and the necessary action taken on their complaint.
The airline should adopt on time performance in its business model and there must be
satisfactory response for delay. Delays caused by the maintenance, security and natural
disaster should be exempted and other than that if the delay is caused by some other
reason then the damages must be paid to the customer.A good leader can change the game
for the airline and can help to get an competitive edge over the rival airlines and can get the
best out of the staff . The leader should motivate and encourage the staff to perform well
and based on the performance of the staff they should be paid .
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With the methods like stake sale, quality institutional placement , loans , lease or sale of
aircraft etc are some of the ways to sort out the inadequate cash flow problem . And new
aircraft should be purchased and maximum can be gained from them while maintain then is
not so expensive when compared to others in the fleet . Adopt a systematic plan and try to
buy new aircrafts of the same fleet as it gets easy to train the staff and helps to cut the cost .
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