Group Assignment

Performance Based Management and Balanced Scorecard of Air India

Submitted for the partial fullfilment of the course

Corporate Performance Management
Term IV, PGP, IIM Indore

Submitted to: Prof. V K Gupta

Submitted by:
Ramya V

2014PGP292

Sindhu S

2014PGP365

V Veena

2014PGP409

PGP 2, IIM Indore

Date: 25/8/2015

Contents

Introduction.....................................................................................................2
Vision...............................................................................................................3
Mission.............................................................................................................3
Organisational Structure..................................................................................4
SWOT Analysis.................................................................................................5
Performance Based Management....................................................................6
Balanced Scorecard at Air India.......................................................................7
Action Plan.......................................................................................................8
Strategy Mapping..........................................................................................11
References.....................................................................................................12

1 | Page

Introduction
Air India is a part of the Air India Limited Company, a Government of
India Entreprise. Headquartered in New Delhi, the airline is third largest in
India (after Indigo and Jet Airways) , serving domestic and international
airports.Stiff competition from private carriers, labour trouble , poor financial
performance and service led to the decline of Air India from being the largest
operator in the subcontinent . Air India has two major domestic hubs
at Indira Gandhi International Airport and Chhatrapati Shivaji International
Airport, and secondary hubs at Netaji Subhas Chandra Bose International
Airport, Kolkata and Chennai International Airport. The airline formerly
operated a hub at Frankfurt Airport which was terminated on account of high
costs. However, another international hub is being planned at the Dubai
International Airport.
In 2012 the company was running at a loss of Rs.75,597.4 million,
when the cabinet approved a Financial Restructuring Plan (FRP) and a
Turnaround Plan (TAP) in April 2012 to restructure the working capital debt as
also to provide Equity Infusion over a period up to FY 2021 based on
regulatory support. The Government also laid down specific targets to be
achieved in terms of on time performance, load factors, yields, aircraft
utilisation, hiving off non-core business, induction of new aircraft, route
rationalisation, reduction of cash losses, etc. as per Chaimans message in
the annual report for 2012-2013.

Vision
To be the leader in Indian aviation and Indias Ambassador to the
world.

Mission
2 | Page

Leadership
Customer

Provide safe, reliable and on-time services

Deliver the highest quality of service around the world

Be the epitome of Indian hospitality

Processes

Continuously improve standards of safety and efficiency

Operate and maintain a young and modern fleet

Provide the best and most efficient network

Create economic value

People

To be the employer of choice

Build a highly motivated and professional team

Maintain highest degree of transparency and ethics

Be a responsible corporate citizen

Indias Ambassador

Be Indias flag carrier in spirit and action

Provide seamless travel within India and the world

Connect Indians worldwide

Values

Zeal to excel and zest for change

Integrity and fairness in all matters

Respect for dignity and potential of individuals

Strict adherence to commitments

Ensure speed of response

3 | Page

Foster learning, creativity and team-work

Organisational Structure
Chairman &
Managing
Director

Joint Managing
Director

Director Commercial

Director - Finance

Director - HR

Director Operations

Executive
Directors

Executive
Directors

Executive
Directors

Executive
Directors - Ops,
Training & Flight
Safety

General Manager
Cargo

Regional General
Managers

Regional General
Managers

Regional General
Managers

General Manger
Catering

General Manager
- Engineering

Regional General
Managers

General Manager
- Flight Safety

Figure 1. Organisational Structure

4 | Page

Figure 1 depicts the structure of the top management of Air India. The
company has a Departmental Structure. The organisation-wide performance
management tool must cater to all departments.

SWOT Analysis
Strengths

Weaknesses

Joint ventures with airport

terminal services (Total ground
handling revenues 4,966.6
million).

Fluctuating jet fuel prices

Stagnant cargo demand

Low accountability

Largest fleet size in India

Low capacity utilisation

Government backing

Opportunities

Threats

Expected passenger demand

expansion 5 to 6 % due to:
increase in foreign tourists and
investor visits to India and
customers getting wealthier
and less price conscious.

Competition from private

players

Railway has dramatically

improved speed & service in
their medium/long routes.

Shrinking customer loyalty

Non-cooperation of employee
union

Performance Based Management

Performancebased management is a systematic approach to performance
improvement through an ongoing process of establishing strategic
performance objectives; measuring performance; collecting, analyzing,
5 | Page

reviewing, and reporting performance data; and using that data to drive
improvement.
Various steps involved in a performance based management model are:

Gathering inputs
Selecting activities
Setting targets
Measuring outcomes

The framework of Performance Based Management is as shown in figure 2.

Figure 2. Source: Performance Based Management by Cathy Iles

Performance based management can be achieved in different ways.

Balanced Score Card (BSC) is one tool used that helps the management
implement performance based management across the organisation. It
analysis performance from four perspectives such as financial, customer,
process, knowledge and Growth and links these four perspectives to the
ultimate goal of the company by setting targets and listing out measures.

6 | Page

Balanced Scorecard at Air India

The nature of the Airline Industry is cyclical. Demand fluctuates seasonally.

However, investment and capacity planning has to be undertaken for the
long term. This means that they face seasons when they are face losses
financially and are running on an excess capacity (unused capacity is high).
On implementing a Balanced Scorecard to evaluate the performance of the
organisation, it gives the top management a holistic view of the
organisations health helps set targets and define measures for evaluating
the progress towards strategic goals.
Air India is facing turbulent times now, with competitors like IndiGo, Jet
Airways and Spice Jet eating up its domestic market share. The company is
deep debt and there have been calls to divest. The existing employee union
does not allow for privatization of the organisation. As Air India struggles
through this mess, using a balanced scorecard will give clarity to its goals
and help focus the managements efforts towards achieving the companys
vision.
Balanced scorecard has been implemented in several airlines, such as the
Southwest Airlines in the US. Southwest Airline is a US based low-cost airline
company and is also the world's largest no-frills airline. It has one of the
largest fleet in the world. It runs more than 3200 flights every day. Southwest
is also a very profitable airline, having posted profits for 37 years
consecutively.
A similar balanced scorecard for Air India would be implementable.

Action Plan
We have identified
implementation:
Step 1:

7 | Page

the following steps

for the balanced scorecard

Define the companys Vision, Mission, and the Core Goals to be achieved by
the Balanced Scorecard.
Step 2:
List the objectives to be achieved under these 4 broad perspectives

Financial;

Customer;

Process;

Knowledge and Growth.

Step 3:

List out initiatives to meet the objectives identified in Step 2. Set specific
targets to achieve by the end of the financial year and identify measures or
KPIs to quantify the performance of these initiatives.

Initiatives to achieve the goals under the financial perspective are:

Rationalisation of loss making routes;

Return of leased aircraft;
Induction of brand new fleet on several domestic & international
routes; thereby;increasing passenger appeal;
Introduction of non-stop services to USA & Canada;
Phasing out old fleet and consequent reduction of maintenance cost.

Initiatives to achieve the goals under the customer perspective are:

Establishment
operations

8 | Page

of

hubs

to

integrate

domestic

and

international

Central Planning & Control System

manager to manage and publish
manager, codeshare manager etc. for
Additional baggage allowance
Extra flying miles
Extend prioritised check-in services
airports)
Customising in-flight food menu
On-time flights
Increase code share agreements

(CPCS): It consists of schedule

schedule, slot manager, fleet
optimal operations.

(currently available in selected

Initiatives to achieve the goals under the process perspective are:

Reduce no. of layovers;

On-time departure;
Reduction in consumption by setting up a Fuel Council & Fuel Manager;
Direct routing and maintenance;
Green initiatives.

Initiatives to achieve the goals under the process perspective are:

Training and development;

Improve work environment;
Dropping charges against labour union members;
Publish ebook of knowledge;
Salary revision;
Team bonding activities.

Step 3:

Once the goals are defined and initiatives are decided upon. It is necessary
to decide who undertakes what initiative and up to what extent.
Step 4:
Lastly, the actual performance outcomes must be measured against the
target. Corrective measures must be taken to address shortcomings in the
Balanced Scorecard.

9 | Page

Over the past few years, Air India has successfully undertaken and
accomplished the below mentioned initiatives:
(Source: Air India Annual Report 2013)

Implementation of the recommendations made by IATA Group of Fuel

Efficiency Gap Analysis (FEGA).
Setting up of an Integrated Operational Control Centre (IOCC) in Delhi
for close monitoring of the turnaround time of various aircraft in the
fleet to optimize aircraft utilization
Curtailment of overtime and certain staff perks and relocation of
officers from abroad to India
Closure of some foreign stations including offline offices
Increase in passenger, cargo, excess baggage revenue through
aggressive sales & marketing strategy including a separate Cell for
attracting Government traffic
Introduction of Common Code through a common Passenger Service
System (PSS)
Seamless connectivity on domestic & international flights.
Implementation of Quickwin IT Solutions including upgrade of Revenue
Management System, introduction of SAP-ERP throughout the network
Establishment of Hub Control & Networking / Crew Scheduling System.
Deferment of B777-300 aircraft deliveries
Cabinet Note on Operationalization of Subsidiary Companies like
AIATSL & AIESL and hiving-off the GH & Engineering / MRO activities to
these Subsidiary Companies including at certain location to AI SATS
JV,submitted to the Ministry
Shifting of the Hub from FRA to DEL T3, the state-of-art technology
airport effective Winter 2010
Upgradation of FFP and Introduction of several marketing initiatives
including Companion Free Schemes,Apex fare, GOI packages, Preferred
Agents Partnership, Promotion of web bookings and other promotional
schemes like AI Holidays, etc.

10 | P a g e

Strategy Mapping

Figure 3. Strategy Map

The strategy map shows how the different strategic objectives of the
company are linked to create shareholder value. Upon improving relations
with labour union and providing training and development to employees,
process efficiency is bound to increase. Once fuel efficiency, operational
efficiency and asset utilization is achieved, the organization is able to provide
better customer service and establish loyalty amongst customers.
Upon, improving customer satisfaction, Air India would ultimately make its
shareholders happy. The ultimate goal of the company is to become the
leader in India Aviation. This can be achieved through such strategic
mapping.

11 | P a g e

References
1. http://www.airindia.in/writereaddata/Portal/FinancialReport/1_229_1_An
nual_Report_of_Hotel_Corporation_of_India_Limited.pdf
2. www.ukessays.com
3. Management discussion and analysis report of Air India
4. Performance Based Management by Cathy Iles

12 | P a g e