Air India

2014Air India:

“Air India is proud to be a member of this prestigious airline Alliance. From today, we open up a

completely different world for our passengers, who can now travel to over 1,300 destinations

right across the network and enjoy world-class service, better connectivity and seamless travel

wherever they go.”

- Mr. Rohit Nandan, Chairman & Managing Director, Air India1

On 11 July 2014, Air India finally joined the Star Alliance, the world’s largest2 airline alliance,

over 6 years after the two entities contractually agreed to it. While the membership lends

credibility to AI’s operational standards and allows it to rub shoulders with leading airlines,

including five of the world’s top 103, the long delay, however, highlights the fact that all is

indeed not well with India’s flag carrier.

Introduction

AI was established in 1938 as Tata Airlines, by the late Mr. J.R.D. Tata, one of India’s most

respected business leaders and former chairman of the eponymous Tata Group, the salt-to-

software business conglomerate which reported revenues of $103 b in 2013-144. In 1946, it was

rechristened as Air India and a year after India’s independence, in 1948, the Government

acquired 49% stake5 and in return, conferred upon it the status of being the nation’s flag carrier

under the name Air India International.

1 “Air India Joins Star Alliance”, http://www.staralliance.com/en/press/ai-joining-prp/2 “The Three Global Alliances That Rule the Skies”, http://www.thenational.ae/business/industry-insights/aviation/the-three-global-aviation-alliances-that-rule-the-skies3 “And the World’s Best Airline is…”, http://www.cnn.com/2014/07/15/travel/the-worlds-best-airline-is-/4 “Tata Group Financials”, http://www.tata.com/htm/Group_Investor_GroupFinancials.htm5 Wikipedia, http://en.wikipedia.org/wiki/Air_India

In 1953 AI was nationalized and after 15 years as a private airline, the ownership and control of

AI passed into Government hands. In the same year, eight other regional domestic airlines were

nationalized and merged to form Indian Airlines (IA), which was to be AI’s domestic

counterpart.

In an interesting arrangement which highlights Mr. Tata’s credibility and the sagacity of Mr.

Jawaharlal Nehru, India’s first Prime Minister, the former was appointed as AI Chairman, a post

that he held until 1978.

An alumnus of the Harrow School and pre-eminent freedom fighter, Mr. Nehru is widely

considered to be the architect6 of the modern Indian state and institutionalized a Fabian

socialism inspired mixed economy, with central planning and import substitution. Faced with

the triple challenges of acute poverty, widespread sociocultural divisions and poor economic

ecosystem, he believed State intervention to be the only way forward. AI thus became part of a

large group of Government owned and controlled organizations, collectively termed as Public

Sector Undertakings (PSU)7, which generated goods and services ranging from watches and

bread to aircraft and ships.

PSUs were at the heart of Mr. Nehru’s plans to help achieve self-sufficiency and drive economic

growth while also facilitating the achievement of social justice and national interest related

objectives by the Government. The organizations were staffed through individual recruitment

programs while the leadership was Government appointed and borrowed heavily from India’s

6 “Nehru: The Real Architect of Modern India”, http://www.asianage.com/columnists/nehru-real-architect-modern-india-0287 Wikipedia, http://en.wikipedia.org/wiki/Public_Sector_Undertakings_in_India

bureaucracy. An outsider such as Mr. Tata heading AI, therefore, was an exception rather than

the norm but one that worked wonderfully well for the small airline of the young country.

Halcyon Days

Until the 1970s, AI was one of the most successful

airlines in Asia and had several first to its credit, such

as the first Asian airline to operate from New York (in

1960) and the world’s first all-jet airliner (in 1962). The

airline’s elegant livery, young fleet, quirky marketing

campaigns (refer illustrative example on right) and

warm Indian hospitality were its biggest strengths. On

a lighter note, AI’s success can also be gauged from

the fact that some of its air hostesses, a key ingredient

in the airline’s successful operational mix, “were universally envied” and went on to “marry rich

men or to become famous in their own right”8. In this period, AI grew its fleet and operations

consistently to become the world’s 15th largest airline in terms of passenger-kilometers9 while

continuing to remain in the black.

In 1978, a year after the formation of India’s first non-Congress government, Mr. J.R.D. Tata

was unceremoniously replaced as the AI Chairman. While he was reinstated in 1980 when the

8 “How in-flight glamour was downgraded from business class to coach”, http://www.livemint.com/Opinion/GMo34Hp1FeEs2eNjdDWNrM/How-inflight-glamour-was-downgraded-from-business-class-to.html9 “Air India Company Profile”, http://www.referenceforbusiness.com/history2/34/Air-India-Limited.html

Congress returned to power under the leadership of Mrs. Indira Gandhi, Mr. Nehru’s daughter,

AI’s best years were already in the past.

1978 thus witnessed the second major Government intervention in AI’s affairs, after the 1953

takeover, and would become a sign of things to come, as AI’s performance dips to new lows.

Turbulent Decades

The 1980s were a tough period for AI, as it grappled with the global economic downturn, rising

fuel prices and falling tourist traffic to India (due to militancy and security issues). These factors

and increased competition from European and American airlines prompted AI to cut prices,

which eventually led it to become heavily dependent on “ethnic traffic” – quite a fall for a

former airline choice on even the competitive London-NYC sector. This was compounded by the

1985 crash of AI’s return flight from Montreal, which was brought down by a bomb – the first-

ever bombing of a 747 jumbo jet.

An often overlooked chapter in AI’s history is the chairmanship of Mr. Rajan Jetley, during Mr.

Rajiv Gandhi’s prime ministerial tenure. Mr. Gandhi, a qualified pilot himself and Mr. Nehru’s

grandson, was India’s youngest ever prime minister and sought to revitalize India’s institutions

and the economy, by bringing in young professionals and new ideas. The experiment with Mr.

Jetley, a US-educated management professional, however, did not last, as Mr. Gandhi himself

lost the 1989 elections and the country’s political landscape underwent a sea change with the

dawn of coalition politics. Consequently, the 1990s witnessed eight Ministers of Civil Aviation

(MCA)10, under whose jurisdiction AI functioned since 1963, resulting in myopic planning and

poor oversight.

Opening Up

1991 is a landmark year in the history of independent India, as it heralded the era of

liberalization, mainly in response to a balance of payments crisis precipitated by the first Gulf

War and the fall of the erstwhile Soviet Union.

As a result of this marked shift in economic policy, several sectors began to be gradually opened

up to both domestic private players as well as international corporations. With the passage of

the Air Corporations Act in 1994, private airlines were allowed to offer scheduled domestic air

services in India and, by 1995, 24% of the market had been captured by six private airlines 11, viz.

Damania Aiways, East West, Jet Airways, ModiLuft, Sahara Airlines and Skyline NEPC. By the end

of the 20th century, however, all the new domestic airlines, with the exception of Jet Airways

and Air Sahara, had gone belly up. Presented below is a summary of the key factors12 leading to

this development:

Internal External

With the exception of ModiLuft and Sahara, the new airlines were entrepreneurial and not backed by conglomerates with deep pockets

High fuel costs (ATF cost $1.7 per gallon in India compared to $0.6 on average globally)

Under capitalization coupled with poor management prevented them from

Regulation regarding servicing distant and often unprofitable routes and poor support

10 Wikipedia, http://en.wikipedia.org/wiki/Minister_of_Civil_Aviation_(India)11 Chronology of Events in the Indian Civil Aviation Sector, http://www.apaoindia.com/?page_id=18512 R.T. Krishnan, “The Indian Airline Industry in 2008“, http://www.iimb.ernet.in/~rishi/Indian%20Airline%20Industry%20in%202008%20v2.0.pdf

developing economies of scale and sustainable business practices

infrastructure at airports

While there was understandably little interest in aviation after the failed takeoffs of the new

airlines, the coming together of the two private incumbent players and the MCA’s vested

interest in safeguarding IA, prevented the Tata Group-Singapore Airlines joint venture, first

proposed in 1997, from taking off13.

Meanwhile, robust and continued economic growth had led to a new, growing customer

segment for the airline industry – value travelers – which was vastly different from the

seasoned business travelers – the airlines’ main customers and key source of revenues.

To cater to the changing and growing market, the Low Cost Carrier (LCC) phenomenon entered

India in the form of Air Deccan. Launched in 2003, the airline revolutionized air travel with its

“no frills, low fares” approach which soon inspired other players: GoAir, IndiGo and SpiceJet.

Together with Jet Airways, which had taken over Air Sahara, and the full service Kingfisher

Airlines, a recent entrant, the three LCCs constituted the private end of the domestic market.

Siblings Unite

It was in 2007, when the

Market was at its peak

(refer image on right) that

MCA approved the merger

of AI and IA, which had

13 “Jet Thwarted Tata Plan to Float Airline in 1997”, http://articles.economictimes.indiatimes.com/2012-04-29/news/31477534_1_civil-aviation-tata-proposal-tata-singapore-airlines

been rebranded as Indian a few years earlier, under the National Aviation Company of India

(NACIL) and with “Air India”14 as the single brand name. The merger, proposed several times

over the years in the run up to the actual announcement, has been criticized for shoddy

implementation and was even red flagged by the Comptroller & Auditor General of India (CAG),

the Government’s internal auditor. The CAG report15 does go on to state the envisaged benefits,

as projected by the external consultant (Accenture):

Estimated net synergy benefits: $136 m (versus integration cost of $33 m)

The integrated footprint would significantly enhance customer proposition and allow

easy entry into one of the three global airline alliances

Optimal utilization of existing resources through improvement in load factors as well as

deploy ‘freed up’ aircraft capacity on alternate routes

Combined fleet strength (~112), which would be the largest in India and comparable to

other airlines in the Region: Emirates (93), Singapore (118), Malaysian (110)

Economies of scale and opportunities for synergy in parking bays and landing slots,

ground handling services (GHS) and maintenance, repair and overhaul (MRO) together

resulting in improved valuation

Despite MCA’s best intentions and in stark

contrast to Accenture’s optimistic

projections, Air India’s performance fell 14 “It’s Air India all over again, but will Maharaja rule?”, http://www.hindustantimes.com/business-news/sectorsaviation/it-s-air-india-all-over-again-but-will-the-maharaja-rule/article1-617394.aspx15 CAG of India, “Performance Audit Report on Civil Aviation in India”, http://saiindia.gov.in/english/home/our_products/audit_report/government_wise/union_audit/recent_reports/union_performance/2011_2012/Civil_%20Performance_Audits/Report_18/chap4.pdf

drastically post the merger (refer image on right). Presented below is a summary of the merger-

related factors that have resulted in AI’s downward slide:

Factor Description

Fleet In 2006-07, AI and IA had executed aircraft acquisition deals with Boeing and Airbus to buy 68 and 43 aircraft, respectively

Delay in merger actualization - systems

Pre-merger, AI and IA were using separate reservations systems and it took them 4 years to offer single code reservation - one of the reasons for the delay in AI’ entry into the Star Alliance

AI and IA continued to operate with separate accounting packages

Delay in merger actualization - policies

AI and IA operated with different HR policies, e.g. AI pilots get fixed pay for 80 hours while IA pilots get paid for actual hours. Several years into the merger, the policies were still not harmonized resulting in two internal units with differing policies

Route Rationalization

As the airline now services domestic and international markets, an extensive rationalization program was carried out and several unprofitable and profitable routes were purged

Lack of capacity AI’s limited operational fleet prevented the full utilization of new bilateral agreements leading to massive ‘flying trade imbalance’

FinancesBoth AI and IA were lossmaking before the merger but the merger and aircraft acquisition led to massive increase in debt, which is estimated to be $4.3 b16

The Great Indian Air Bazaar

Despite minor hiccups17, the Indian civil aviation industry is on a high growth trajectory, driven

by LCCs, modern airports, relaxation of FDI norms in domestic airlines and regional connectivity.

While close to 70%18 of the market belongs to the LCCs, the competition in the full service is

expected to get intense with the launch of Vistara19, a joint venture between the Tata group

16 “Air India debt touches INR 43,777 crore”, http://www.thehindubusinessline.com/industry-and-economy/logistics/air-india-debt-touches-rs-43777-cr/article2656975.ece17 “Will SpiceJet be the Next Kingfisher?”, http://indiatoday.intoday.in/story/spicejet-treading-kingfisher-low-cost-airline-salary/1/381455.html18 ICRA, “Indian Aviation Industry”, http://www.icra.in/Files/ticker/Indian%20Aviation%20Industry%20%28NEW%29.pdf19 “Vistara will create demand where there is none today”, http://forbesindia.com/article/real-issue/vistara-will-create-demand-where-there-is-none-today/39151/1

and Singapore Airlines. “Propensity to fly” is a key metric employed to measure the current

demand and future potential for air services in general and infrastructure requirements

especially in less developed markets. According to a PWC study20, the total resident trips in

India are estimated to rise from 72 m in 2012 to 126 m in 2020, driven by the following key

factors:

- Economic health: stable, continued growth in India’s GDP

- Demographic changes: expanding middle class, growing working population

- Competition: continued LCC growth and launch of new carriers (e.g. Vistara)

- Crises such as wars or terror attacks, however, can strongly alter the favorable projections

The impact of these factors is already visible in the growth trend of air passenger traffic (refer

image on below right) and consequently, the $16 b worth Indian civil aviation market, which is

already amongst the world’s top 10, is projected to rise to the third spot by 202021.

The below images display the competitive

structure of the domestic and international

markets and are followed by a short operational

profile of the market leaders – Emirates and

IndiGo:

20 PWC, “Propensity to fly in Emerging Economies”, https://www.pwc.com/en_GX/gx/capital-projects-infrastructure/pdf/the_new_normal_for_airport_investment_-_06_propensity_to_fly.pdf21 KPMG, “Indian Aviation Report”, http://www.kpmg.com/IN/en/Press%20Release/Press-Release-Indian-Aviation-Report.pdf

Emirates: Local Advantage, Global Success

“ … seamless global traffic flows and the multiplier effect to [countries’] economies … has been

instrumental in our own growth as an airline … We will not deviate from our hub strategy and

our future aircraft deliveries and orders are predicated on our non-stop services, connecting

city pairs around the globe.”

- Mr. Anand Lakshminarayanan, Divisional VP, Route Planning and Economic, Emirates22

India is the largest country market for the Dubai-based Emirates, which operates 18523

flights per week offering 62,000 seats and ferries

approximately 4.8 m passengers per annum to

and from Dubai to 10 Indian destinations.

Emirates’ impressive figures and its high market

share are a testimony to its hub-and-spoke

22 “Emirates Growth Strategy on Track”, http://www.eglobaltravelmedia.com.au/emirates-growth-strategy-on-track/23 “Emirates Ups Services to India”, http://mobile.emirates.com/MobileAboutEmirates/global/english/emirates_detail_news.xhtml?detail_Id=1672725

model and are reinforced by the fact that most passengers from India actually travel

onward to Europe and the US, via Dubai.

Founded in 1985 with $10 m seed capital (and $88 m in infrastructure support) from the

Dubai government, Emirates is the world’s fourth largest and fastest growing airline24 and

contrary to widely held perceptions, claims to be entirely self-funded25. The following is a

summary of the key success factors contributing to Emirates’ impressive growth and scale:

Factor Description

Geographic advantage

Fully utilized Dubai’s convenient Middle East location to evolve into a global carrier and outdo European and American carriers

Fleet Development

Emirates placed early and large bets - Emirates alone accounts for 30% of total orders – on Airbus A380, the world’s largest and most efficient aircraft. And doing so despite its heavy $400 m price tag gave Emirates unrivalled scale and visibility

Service Differentiation

To compete with the bigger and well entrenched Western rivals, Emirates has invested heavily in this category: first to offer in-flight entertainment across all three classes, first private suites, etc

Marketing

Has leveraged pricing and reach as key strengths:

E.g. Offers direct Lyon-Dubai flight while Air France flies via Paris

E.g. Prices 40% lower than its peers (Oxford Economics analysis)

Knowledge-driven Inflight Service (KIS)

Pursers use tablets to access customer information and their preferences as well as offering flight upgrades

Cargo Mirrors the passenger business in growth and scale thus offering a strong, alternative revenue stream

24 “Emirates’ Ambitions Worry European Rivals”, http://www.nytimes.com/2011/02/13/business/13emirates.html?pagewanted=all&_r=025 “Airlines and Subsidy: Our Position”, http://www.emirates.com/english/images/Airlines%20and%20subsidy%20-%20our%20position%20new_tcm233-845771.pdf

IndiGo: Oasis of Growth

“…and when we get our work done on time, we become the world’s most powerful economy.

On time. On time is a wonderful thing.”

From the IndiGo Airlines 2010 TV Commercial26

With a “fetish for punctuality”27,

IndiGo has successfully formulated

a winning albeit unconventional

combination: no frills operations

and loyal business customers.

Moreover, it’s quirky and focused

marketing (refer illustrative image

on right) also makes it a big hit with the younger customers and the leisure crowd. This reflects

in its continuous, fast-paced growth when it launched operations in 2006. The promoters of

IndiGo, InterGlobe Enterprises – an operations partner and service provider for Galileo, the

global airline reservation system – and Mr. Rakesh Gangwal, the former head of US Airways,

together provide the airline two key strengths: meticulous operations and innovative and

sustainable strategies. IndiGo connects 31 Indian cities and five overseas destinations with its

79 aircraft. The following is a summary of the key success factors contributing to IndiGo’s

impressive growth and scale:

26 “IndiGo Commercial 2010”, https://www.youtube.com/watch?v=alkHIx_v8CQ27 “Hwo Rahul Bhatia Built InterGlobe and IndiGo Into A Class Act”, http://www.forbes.com/sites/naazneenkarmali/2014/09/24/how-rahul-bhatia-built-interglobe-group-and-its-airline-indigo-into-a-class-act/

Factor Description

Bulk Orders and Uniform Fleet

IndiGo’s Airbus aircraft orders were 100, 180 and 250 units in 2005, 2011 and 2014, respectively, each being India’s highest civil aviation order of its time

Large orders and uniform (Airbus) fleet give it huge bargaining power, operational flexibility and economies of scale

Sale and Leaseback

IndiGo doesn’t “own” any of its aircraft – they are all sold to other vendors and leased back allowing it remain asset light and lock in arbitrage profits

Its shorter (6 years) lease period allows for a young and relatively trouble-free fleet albeit at a slightly higher cost

Operational Excellence

Intensive operations planning: ordered 100 aircraft a year before commencing operations but had utilization plan ready for each

On time

Has invested in – and fully leveraged – “on time” as a performance measure as well as a marketing device

Related outcome: minimal penalties (due to delays) and optimum resource utilization

Marketing

To cut through the competitive clutter, has smartly positioned itself on its strengths: cleanliness, young fleet, on time, low fares

Recognizes that passengers are a captive albeit temporal audience and has thus developed a strong brand personality for clear and targeted communication

Air India: Issues & ImplicationsThe huge market paints a mixed picture for AI: while the

airline is registering growth despite sub-optimal capacity

utilization, swifter rivals such as IndiGo are already

better equipped to capitalize on future opportunities.

With a view to revitalize the airline in the face of rising competition, Govt. of India announced a

$5 b aid package in 201228 and a steady albeit slow turnaround is taking shape at the airline.

Nevertheless, several issues continue to plague the airline and presented below is a summary

of these issues29:

Issue Implications

Unprofitable Routes Of the 189 operational routes, only 12 meet total costs and over 95 do not even meet cash costs

Poor Resource Deployment

Share of operation to total aircraft as well as operational aircraft utilization below Industry average

Poor mapping of pilots to aircraft types, union issues, pending AI-IA merger issues are all causing internal systemic issues

Piecemeal recapitalization

In FY13, however, $250 m shortfall in committed Govt. funds forced AI to borrow (more debt) at 11-12%30

B787 Troubles The long haul aircraft was critical to AI’s turnaround but has been grounded frequently due to technical issues

Prioritization Issues

AI is facing a capacity crunch on domestic routes while overseas routes contribute to 80-90% of its losses

Having already cut down overseas operations to a large extent, any further withdrawal would make it tough to claw its way back

Uncertain Policy Environment

While this affects all players, the relaxation of the 5/20 rule (an Indian airline needs 5 years of experience and at least 20 aircraft to fly overseas) will further eat into AI’s pie

28 “Rs 30,000 cr bailout package for Air India”, http://www.thehindu.com/news/national/rs-30000crore-bailout-plan-for-air-india/article3306795.ece29 CAPA, “Decisive Action Required On Future of Air India”, http://www.capaindia.com/PDFs/Decisive-action-required-on-future-of-Air-India.pdf30 “Govt Infuses Over Rs 13,000 CR INTO Air India, bailout at Rs 14,600 cr”, http://timesofindia.indiatimes.com/business/Govt-infuses-over-Rs-1300cr-into-Air-India-bailout-at-14600cr/articleshow/34757842.cms

Privatize or Perish?For several years now, the Government has been presented with the option to privatize31 Air

India and “cut its losses” and to get out of a business it cannot manage. Presented below is a

summary of the benefits and costs of a move to privatize Air India in its current state:

Benefits Costs

Even in its current form, an outright sale or even a stake sale will fetch the Government huge revenues

AI’s key properties alone are worth over $1 b

With AI’s performance improving, a sale now would be premature and significantly undervalue the airline

Post sale, MCA can focus on the real work: regulation, sector development, infrastructure investment, etc and thus generate immense value

AI’s turnaround plans, currently underway, would be disrupted and perhaps even discontinued

Government disinvestment (or sale) is perceived as pro-reform and will be rewarded with improved foreign investment inflows

MCA lacks the ability to value and assign bilateral flying rights, prime landing slots, etc and this will be a serious issue in the absence of a ‘default’ national flag carrier

Enhanced sales, net profits, employment and customer proposition, based on the privatization experience of other countries32

Loss of a key crisis management tool33

Pride: Indian owned and/or operated airline may go on to perform well at the global scale under efficient management

Pride: Lack of a national flag carrier (in the case of an outright scale)

The move will receive wide support from India’s widespread and influential diaspora

The opinion of the influential Hindu Right wing, currently in power, is ambiguous and could put any such move in a limbo

31 “Air India: A Case for Privatization”, http://www.livemint.com/Opinion/Z9VCpNaxdXZHByIeRBcTjI/Air-India-a-case-for-privatization.html32 Mahdy Al-Jazzaf, “Impact of Privatization on Airlines Performance: An Empirical Analysis”, http://www.sciencedirect.com/science/article/pii/S0969699798000362#33 K.P. Fabian, “Biggest Ever Air Evacuation In History”, http://www.associationdiplomats.org/publications/ifaj/Vol7/7.1/ORAL%20HISTORY.pdf

MCA: The Red HerringSolving the AI problem without addressing its parent entity, the Ministry of Civil Aviation,

headed by the MCA, will be ineffective and incomplete. A glance at AI’s rich and long history

will simply reveal that its golden years have been when the Ministry was non-existent, and

more pertinently, when it was led by a professional and autonomous body.

The airlines and mobile telecom sectors were opened up almost at the same time – mid 1990s –

in India. The similarity ends there though as not only is Telecom better regulated but has also

thrown up several success stories, including that of Airtel, which is not only India’s largest

telecom company but also the world’s third largest with presence across “20 countries in South

Asia, Africa and the Channel Islands”34. Like in the case of aviation, India is also one of the

largest telecom markets worldwide but this sector is not hit by constant bankruptcies and

continued lossmaking by key players.

Another key similarity between the two sectors is the presence of the Government as a player:

Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telecom Nigam Limited (MTNL) are the

two State-owned telecom entities providing fixed line and mobile telephone services. While the

matter services the key markets of Delhi and Mumbai, the former operates in the rest of the

country. Both entities, however, despite prolonged market presence and strong customer

relationships as well as exciting starts, could not keep up with their savvier private

counterparts.

In the context of civil aviation, the following key measures are required not just for AI but for

the overall sector:

34 Wikipedia, “http://en.wikipedia.org/wiki/Bharti_Airtel”

- Creation of a strong independent regulator or the framework for effective self-regulation

- India’s taxation and fuel pricing regime should be liberalized and made more Industry and

passenger friendly

- Bilateral flying rights are akin to telecom spectrum and ought to be treated as such:

o Commercialization, via auctions, wherever feasible

o Strategic allocation, for critical markets

- Modernization of the Airports Authority of India (AAI), the Ministry’s airport infrastructure

services division

AI: The Way Forward

Status quo, for AI, will only mean certain albeit delayed change in ownership and control as any

future shock, be it political, financial or eternal, may halt its slow turnaround process and push

the MCA to take up extreme measures. For economic – improved valuations and enhanced

customer value proposition leading to stronger cash flows – as well as strategic – national flag

carrier to support India’s regional superpower ambitions35 - reasons, therefore, AI needs to

undergo a critical and decisive shift.

In conclusion, this paper presents two execution methods to achieve the following objectives:

- Sustainable turnaround with measurable targets and greater accountability

- Minimizing MCA interference (using a combination of legal and structural measures)

- Value maximization

35 “Project Mausam: India’s Answer to China’s ‘Maritime Silk Road’”, http://thediplomat.com/2014/09/project-mausam-indias-answer-to-chinas-maritime-silk-road/

Salient Features:

- Strategic airline partner, holding 26% stake, to bring in operational expertise and

significant partnership opportunities

- Ideally a European carrier, to facilitate the evolution of a twin-hub model with the two

partner airlines enjoying sixth freedom rights in each country

- Specific allocation of stock to retail investors to promote sense of ownership as well as

an attempt at building allegiance

- The diffused ownership structure, with Board representation for the shareholders, will

result in investor-centric initiatives as well as increased accountability

- As an investor – and not sole proprietor – the Ministry’s perspective would also change

from merely a deision-maker to a business facilitator, benefiting the entire Industry

Salient Features:

- Creates a listed holding company with controlling albeit varying stake in select

transportation-related Government entities

- Cutting across Ministries and bureaucracy, the Holding company would be professionally

managed though Government owned

- Given its breadth of operations, the Company’s susceptibility to Ministerial interference

would be low and autonomy high

- As a corporation, the Holding entity would have clear accountability and operate under

corporate laws