In 1953, the Government of India, under the Air Corporations

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• Operations Management
•  
• case study (20 Marks)
• In 1953, the Government of India, under
  the Air Corporations Act, nationalized and merged
  the eight private airlines that existed then and
  created two State run airlines out of them. One
  was Air India, for serving international
  travelers to and from India, and the other was
  Indian Airlines, dedicated to serving domestic
  passengers. For almost 40 years, these two
  carriers enjoyed a monopolistic position in their
  respective passenger segments. They were
  protected from competition within India by the
  Air Corporations Act which did not permit any
  other airline to provide scheduled services to
  and from or within India. Three distinct phases
  can be identified in the recent industry trends
  and developments.

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• The first phase during 20032007can be
  characterized as one of significant growth in
  demand and capacity (Figure 1). Indias GDP had
  grown at the rate of about 6 in 20002004 but by
  around9 during 20052010.This economic growth had
  a significant impact on commercial aviation in
  India. It boosted business and leisure travel
  (both domestic and international). India was
  becoming a major origin and destination for
  international travel. The second phase started in
  2007, when the industry witnessed a wave of
  consolidations, primarily to stem the tide of red
  ink. Jet Airways too saw its market share and
  profits decline and stock price plummet by 40
  since 2005. Kapil Kaul of the Center for Asia
  Pacific Aviation (1), said, But the aggressive
  expansion of the LCC segment comes at a cost to
  the whole sector.

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• Indias airlines are expected to post a
  combined loss of approximately USD500 million in
  the current financial year ending 31Mar07. During
  the third phase, in 2008, there was a steep fall
  in air travel due to the slowdown in the Indian
  economy, the H1N1 flu scare, and the terrorist
  attacks in Mumbai in November 2008. There was
  excess capacity all around and the airlines
  responded by developing plans to lay off
  employees and by offering deeply discounted fares
  to stimulate demand. Rival airlines Jet Airways
  and Kingfisher formed a strategic alliance for
  code sharing and cutting costs.

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• Answer the following question.
•  
• Q1. Discuss the reasons for national airlines
  losses and debate capacity utilization/allocation
  and pricing.
•  
• Q2. Give your views on the case.

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