Background for establishment of Thunderbolt Airlines Private Limited (TAPL). Avian Airlines Inc. is a renowned airline company with a global…

Background for establishment of Thunderbolt Airlines Private Limited (TAPL). Avian Airlines Inc. is a renowned airline company with a global presence, headquartered in New York, United States of America. In the year 2000, Avian Airlines Inc. (AAI) established a branch office in Mumbai to handle its Indian flight operations. The Indian flight operations are handled only at the Mumbai airport. Passengers are either transported from Mumbai to destinations abroad or transported to Mumbai from overseas. There are no domestic flight operations within India. The Mumbai office handles routine day-to-day operations undertaken by junior and middle-level management staff. The work handled by the Mumbai office includes flight ticket booking and cancellation, managing Avian's airport lounge facilities, managing the check-in counters at the airport, assisting customers with services like in-flight meals, providing access to airport lounge facilities, providing flight information, travel insurance information, assisting with missing luggage queries, and any other customer-related services. At the same time, the place of effective management is outside India, and it is determined that Avian Airlines Inc. has an active business outside India. Below are the details of revenue from business operations of operating aircrafts received by the Mumbai Branch office for the year ended 31st March 2024: (i) 5 crores in India on account of carriage of passengers from Mumbai to destinations outside India (ii) 2 crores in India on account of carriage of passengers from outside India to Mumbai (iii) 3 crores in New York, United States of America on account of carriage of passengers from United States of America to Mumbai The total expenditure incurred by AAI's Mumbai branch for the purpose of carrying out its operations in India is 8 crores. The Indian economy is considered one of the fastest-growing economies, with projections for GDP growth of 7% year-on-year. Private consumption and growing economic activity in both the manufacturing and service sectors have spurred growth since 2022. Post-pandemic, with the easing of restrictions on civil aviation, consumers' appetite for travel has increased manifold. It is expected that domestic aviation will require at least 4,000 fleets within the next two decades to meet the anticipated growth in demand. Since 2022, passenger traffic in India has increased. With the rise in disposable incomes, rapid urbanization, and an increase in the working-class population, the growth in demand for air travel is expected to remain constant. Tier 2 and Tier 3 cities are also expected to play a pivotal role due to the greater spread of economic activity and increasing population in these cities. The government is focused on building and expanding modern infrastructure facilities across the country to support the domestic civil aviation industry. Almost 100 more new airports will be operational by 2028, giving scope for the development of new regional routes that can provide excellent connectivity within India. A growing economy will need to be supported by a burgeoning demand for international travel to and from India. Hence, India will require better connectivity with international destinations. This opens up the scope for developing newer routes to connect passengers across the globe. TAPL, a Joint Venture between Avian Airlines Inc. and Power Group Limited In order to be part of a growing market, Avian Airlines Inc. has decided to enter the Indian aviation industry. On April 1, 2024, AAI plans to enter into a joint venture with Power Group Ltd. (PGL), which is one of India's largest conglomerates with business interests in various sectors ranging from technology, automotive, infrastructure, to consumer and retail. Power Group Ltd. (PGL) is headquartered in Mumbai, India. Thunderbolt Airlines Private Limited (TAPL) is the joint venture between Power Group Ltd. and Avian Airlines Inc. Power Group Ltd. will have a 60% stake in the joint venture, while Avian Airlines Inc. will hold a 40% stake. Avian Airlines Inc. is renowned for its full-service airline service, catering to the premium flying segment. On the other hand, Power Group Limited (PGL) has access to global markets due to its operations in various business segments. It has been a pioneer in many of the businesses it operates, hence it is considered one of India's most valuable conglomerates. The brand image of PGL has given it deep penetration in the Indian domestic market due to the various businesses it operates. Most airlines in the Indian market operate as low-cost carriers (LCC). However, intense competition combined with inflationary pressures on input costs like ATF fuel, personnel costs, etc., means that margins are limited and always under pressure. Therefore, it has been decided to position TAPL as a full-service airline in the domestic civil aviation market. The targeted customer segment would be high-end business travelers in a price-sensitive market. Currently, 95% of the seating capacity within the domestic civil aviation sector is economy seats. The remaining 5% capacity consists of highly priced premium seats sold mostly to price-indifferent passengers, who form a very limited and niche market existing only on certain routes within the country. TAPL plans to offer a new segment of seats in its aircraft: "premium economy,” which combines the benefits of premium flying at affordable rates. Given that growing economic activity generally spurs the demand for business-related travel, TAPL plans to foray into the “premium economy” segment, positioned midway between economy seats and premium first-class seats. While the rates may be slightly higher than the regular market price for economy seats offered by other airlines, for a small additional cost, passengers can avail themselves of benefits like customized service, faster check-in, and a better in-flight experience. All the seats in TAPL's aircraft will offer "premium economy" seating. TAPL will have its main operational hub in Mumbai, which will serve as the nodal point for most of its domestic airline flights. It will also operate international flights to Dubai, where AAI has a major nodal hub for its international operations in Asia and the Middle East. Hence, a business flyer can connect to both domestic flights using TAPL's fleet as well as international destinations through AAI's fleet from Dubai. TAPL's vision “To be the most loved, most efficient, and most valuable airline”. TAPL's mission “To enhance customer experience by offering seamless connectivity". Avian Airlines Inc. will provide the technical and managerial support required to run a full-service airline. Power Group Limited (PGL), with its market presence and brand image, will provide access to the Indian aviation sector for AAI, acting as a stable and trustworthy partner in the joint venture. A few executives from AAI and PGL will be part of TAPL's management team for the initial years until the airline can manage its operations independently. These executives will be well-versed with TAPL's overall strategy, helping guide the company in its initial years of establishment. Once the "start-up" phase is over, TAPL will hire eligible executives with appropriate experience from the Indian market to oversee airline operations. TAPL will have a hierarchical structure, with Mr. Tan being appointed as the Chief Operating Officer for India. Since TAPL is being developed as a full-fledged service carrier, it has been decided that decision-making, in the initial years of establishment, will follow a centralized model. Senior management at TAPL will comprise executives from AAI and PGL. Operations will be managed by AAI, given their expertise in the aviation sector, while PGL will oversee Sales & Marketing and Finance, being a recognized brand in India. The Directors of Operations, Finance, Human Resources, and Sales & Marketing will all report to Mr. Tan, who, in turn, reports to the Board Members at AAI and PGL. As mentioned above, TAPL will have specific departments that will look into Operations, Finance, Human Resources, and Sales & Marketing. TAPL will invest in digitalization and the use of information technology to provide a high level of customized service to its passengers. Similarly, based on guidance from executives at AAI, workflows will be documented, established, and communicated throughout the organization. Digitalization can smooth process flows, make interactions less cumbersome, and speed up process times, all of which contribute towards cost efficiencies and enhanced customer satisfaction. Each department will have specific goals and performance measurement systems in place. AAI and PGL are reputed companies with work cultures and ethics defined by the core values of their respective companies. The employees and other support partners of TAPL are expected to uphold similar values such as honesty, excellent work ethic, transparency in working, accountability, and trust. Both companies have a global presence. Hence, TAPL is expected to support a culture of diversity at its workplace in terms of gender, background, and age. The aviation sector is a highly competitive industry. The success of the joint venture depends on the management leadership and teamwork at TAPL. It is expected that each department will create synergy that merges the work cultures of both AAI and PGL. Cross-functional project teams will be deployed to build this synergy and foster team spirit. This will encourage creativity and motivate employees to work towards a successful venture. Due to its competitive environment, the aviation industry is prone to high attrition due to employee poaching. TAPL aims to create value for its employees by offering attractive pay packages, facilities, and a conducive environment for professional growth. A high attrition rate could have a detrimental impact on a business that wishes to be a full-fledged premium service airline. Since TAPL is targeting to be a full-fledged service carrier, it is important for the staff to be well-experienced both technically and in soft skills like customer service. TAPL is expected to hire pilots, engineers, and other technical staff who are already working at other airlines. They are also planning to collaborate with institutes that offer aeronautical engineering and aviation technology courses to hire a well-experienced and rounded pool of staff who are highly skilled, as well as to arrange for periodic training of staff. Senior executives of AAI, who are deputed to TAPL, will be in charge of ensuring that the workforce comprises highly skilled and qualified staff in charge of airline operations. The other non-technical staff will be hired by the Human Resources department in consultation with the respective department heads. However, Mr. Tan was well aware of the key factors required for success in the airline industry. He understood that one essential aspect was routes, and he knew that his main hub in Mumbai would only make sense if he secured a set of routes from Mumbai; otherwise, it would be catastrophic for the airline due to the high parking costs at Mumbai Airport. Being new to the Airlines of India, Mr. Tan was not familiar with all the laws but was determined to achieve his goals. He was aware that the renowned airline, TruJet Airways which had major routes originating from Mumbai, was undergoing insolvency due to running in losses and default in payment to secured creditors including in payment of current dues for the right to use the property in possession at Mumbai Airport. Consequently, Mr. Tan hired the best lawyers in town to acquire their slots. The lawyers immediately approached the DGCA and requested the reallocation of these rights to them. They argued that TruJet is not entitled and had no right to use. They claimed that this was a breach of TruJet's operating conditions with the DGCA, as no other Airlines were allotted and permitted to use. So requested that the slots should be immediately handed over for consumer welfare. The DGCA agreed and handed over the slots to TAPL. TruJet was offended by this order and approached the Apex court, claiming it was unjust. It argued that no one, including the regulators, has the right to take possession of any property from an owner or lessor in possession of the Corporate Debtor. DGCA countered that they had not initiated any new proceedings and that it was a matter of breach of contract; hence, the DGCA had the right to refuse the Right of use to TruJet.