Case study of Air India, why Air India failed? The fall of world’s best Airline, Air India’s history(1)

Case study of Air India

Case study of Air India. Hello friends, you won’t believe it but there was a time when Air India was considered one of the best airlines in the world.

The level of luxury travel and world class food and the interior decoration of the planes was so amazing that even Singapore Airlines took inspiration from Air India but today the situation is so terrible that after hundreds of millions in losses, the government is forced to sell off this airline to privatize it, why did it happen exactly? And how did Air India became an exalted airline at one point in time?

Let’s get to know the interesting story of Air India. This is not the story of only Air India’s history, rather the history of the country’s civil aviation. 1903 was the year, when the wright brothers flew the first airplane of the world. About 8 years later in 1911, the first airplane was flown in India, it’s pilot was a Frenchman Henry piquet, the fight from Allahabad to Naini lasted 15 minutes and carried thousands of letters. You heard it right, the first flight in India was actually carrying mail, it was carrying letters for the Maha Kumbh fair.

About 20 years later on 15th October 1932, Jehangir Ratanji Dadabhoy(JRD) Tata flew the first Air India plane from Karachi to Mumbai. Then it was not called Air India, its name was Tata Airlines at that time, his fight was very historic but it wasn’t easy for him to achieve this, he had to go through many struggles.

Case study of Air India, why Air India failed? The fall of world's best Airline, Air India's history(1)
why Air India failed?

3 years before this, JRD Tata become the first Indian to acquire a flying license, flying planes was his passion, it was his dream. In fact, he had even participated in a contest in which he flew an airplane from India to England but he had another dream to bring civil aviation to India.

Civil aviation meant giving the commoners the opportunity to fly in an airplane but it wasn’t easy to do this. To do this, cooperation from the government was needed but during the 1930s, India was under British Raj and the British government was obviously not very helpful.

As you can imagine, they saw no profits in paying JRD Tata or giving him subsidies to enable him to fly his domestic planes in the country but at that time, Sir Dorabji Tata was a prominent person and he agreed to invest in JRD Tata’s dreams.

Tata tried a lot to make the British government agreeable but the government rejected all of this offers and the one day he went to the British government and told them that they didn’t need their money and they would donate their services, they only wanted some aircraft and permission to fly those aircraft and finally, the British government agreed to it and this the Tata Airlines was born in India.

After the first Tata Airlines flight was flown from Karachi to Bombay carrying letter weighing 25kg and obviously, JRD Tata piloted this fight. In the same year, Tata Airlines started domestic flight operation for the passenger, Tata Airlines flew 2,57,495 km, carrying 155 passenger and more than 10 tones of mail.

It is believed that since these planes were tiny, there were times when passenger had to sometimes even sit on mail bags, at this time a Bombay to Madras return ticket cost about Rs 256, you can imagine how much it would’ve been in today’s money.

1946 was the year when Tata Airlines was renamed Air India, in the same year, Air India became a public limited company means a company in which even you and I can purchase shares and in 1948, when India was already independent then the new Indian government bought 49% shares of Air India. At the same time, JRD Tata started Air India international for international flights.

Air India’s history

The next major change was in 1953, it was a disheartening event for JRD Tata, the Indian government decided that the entire airline sector of India would be nationalized, meaning all the Indian airlines companies would become government owned.

The government then merged 8 domestic airlines into 1 and Indian Airlines was thus created. The domestic wing of Air India was one of these 8 companies. Additionally, the government had also nationalized Air India international and it became a public sector unit means owned by the government.

Nationalizing major sectors in the 1950s was a major policy of the Nehru Government, the objective of the government was to support these industries so that there could be progress in the country but it also meant that the private businessmen and investors lost their opportunities, as you can imagine, the industrialist and the large businessman in the country were not happy with this decision including JRD Tata.

This part of the story is very interesting because JRD Tata and Pandit Jawaharlal Nehru were good friends. Nehru always encouraged scientific progress in the country and was very happy to see how Air India had changed civil aviation in India and JRD Tata also admired Pandit Jawaharlal Nehru a lot but when the Indian Parliament passed the Air Corporation act, 1953 and Indian Airlines and Air India international were set up after nationalization of the entire airline industry.

Eight formerly independent domestic airlines; Deccan Airways, Airways India, Bharat Airways, Himalayan aviation, Kalinga Airlines, Indian national Airways, Air India, Air services of India was merged. JRD Tata saw it as a betrayal, he clearly disagreed with pandit Nehru’s this decision. JRD Tata’s opinion on nationalization was always against it.

“Nationalization is industries, the way it is done those considerations made me oppose the nationalization on industries. Though, quite accepting the fact that some industries and some activities must be done by the state.”

JRD Tata

Whenever JRD Tata Tried to talk about it with his friend Nehru, Nehru would look the other way. Later pandit Nehru wrote a letter explaining why the decision was taken, he said that the Congress party wanted to do it for over 20 years but couldn’t do it.

Nehru said that this was not a very big priority of the government, but there was a slow discussion on it many times. He said that the government was not moving in this direction due to financial problems. The government was not actually against Air India but Nehru did feel that it would be better for the country to nationalize.

Even though JRD Tata was against it but he couldn’t do anything against the government’s decision, Air India was finally nationalized but one thing that needs mentioning, JRD Tata still remained a part of Air India. When Air India was nationalized in 1953, Tata was retained as chairman, a position that he held until 1978.

In 1991 he stepped down from Tata Sons at age 87; the more than 80 companies that constituted the Tata Group empire generated approximately $4 billion annually. Caviar on ice, the finest steaks, champagne, a menu prepared by the chefs of Taj hotel, grand lounges, designed by the artist of Shanti Niketan.

Had you travelled in Air India in the 1950s and 1960s then description such as these would have been used for your journey. Air India was known as a ‘Palace in the sky’ as I told you, luxury travel, world class food, such that international airlines like Singapore Airlines took inspiration from Air India, the credit for these goes largely to JRD Tata.

It’s said that they would fly in Air India’s flights to ensure that the services ran efficiently, if he saw any imperfections like a dirty corner, he went and cleaned it himself. Air India’s fame is perhaps incomplete without its mascot this Maharajah. You would have seen this photo everywhere in Air India on postcards, stationery and even in advertisements.

Did you know that Maharajah was conceptualized in 1946 by Bobby Kooka. The commercial director of the airline then over the years, Maharajah is depicted in other cultures and countries showing that Air India carries its passenger all over the world. During the 1960s and 1970s, Air India wasn’t merely an airline, it was representation of India. Air India was associated with hospitality, Indian culture, food and even art.

Taking about art, did you know about Air India’s art collections of more than 8000 works?  Painting, textiles, sculptures, glass paintings, they have collected this collection over the last 60 years and this was a calculated move. The thing if that there were not many international airlines at that time so the airlines competing against Air India were giving it a stiff competition.

Why Air India failed?

Let’s talk about why did Air India fail in the last 20 – 30 years? In 2007, Air India and Indian bore losses worth 5.41 billion and 2.31 billion respectively but since birth airlines were government owned public sectors units so this loss of the airlines had to be borne by the government.

The government then decided to merge both airlines into one, hoping that these would creases but instead this combined company, National aviation Co. of India Ltd incurred losses as well. Why was it so? Why were the airlines at a loss?

Some of the reasons are quite straightforward and fact based for example, when this merger took place before this merger the government had acquired a large fleet of airlines of various specification and sizes and it cost 440 billion.

Basically, the government had purchased new airplanes additionally the expenses on the salaries also increased and there were even strikes by the pilots demanding fair salaries because of this, the company had to incur revenue loss because the planes could not fly due to the pilots being on strike and the operations of the company were affected.

This cost the government a lot, in the upcoming years, some more bad decision was made by the government regarding Air India like the revenue from the passengers was decreasing year on year because the passenger had more options to fly by way of the new international airlines.

So, Air India decided to open up more flights on new international routes expecting more passenger to fly Air India but the new international routes turned out to be loss making.

Apart from this, it is said that the Air India had hired excessive crew members, there was no need to hire the number of people they had hired so the salaries were being paid unnecessarily leading to the wastage of even more money.

Jitendra Bhargava, the former executive director of the company day says that management problems in Air India has begun in the 1970s, the top management was changed in these years. He said that before the charge in management the cabin crew members were rigorously trained, inflight services used to be the top priority of Air India and that’s why everyone preferred Air India but after this change, the cabin crew weren’t trained properly and the process of recruitment wasn’t as strict.

The company started hiring people without proper screening leading to an increase in expenses and a fall in the standards. When the standards of in-flight services started falling so the passenger obviously started looking at other airlines.

In the next few decades there were even disagreements between the government and Air India’s management but since Air India was a public sector unit, a government company so Air India’s management had to abide by the government’s direction at the end.

For example, in 2007 the government spend millions of Air India’s money on advertising even though the management believed that money should not be wasted on it at that time and incur losses due to it.

Although anther point to note here is that the nationalization of Air India had already taken place in the early 1950s and till the 1970s, the airline was flying quite well. Perhaps because the top management was working well and was motivated, JRD Tata was handling it himself who had founded the airline so he had the motivation to keep the airline in top shape, perhaps that’s why Air India story is less about the success and failures of privatization versus nationalization and more about improper management and bad decision making.

In 2017, the government decided to privatize Air India. By 31st March 2020, Air India’s had accumulated losses of over 700 billion in total. This burden kept on increasing every year to the extent that the government found it increasingly difficult to sell this Airlines but finally on 8th October 2021, the government was successful solid off this airline to Tata for 180 billion. This decision is seen as big celebration because the airline have returned to their original owners again, the Tata’s.

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