STRATEGIC

MANAGEMENT
Submitted to: Dr. Vivek Sane

ASSIGNMENT 1

Submitted by: Darshana Parashar (C-15)

 Indian Automobile Industry

Brief about The Industry

The Indian automobile industry comprises of the automobile and the automotive components
segments & it is one of the key drivers of economic growth of India. Being deeply integrated
with other industrial sectors, it is a major driver of the manufacturing gross domestic product
(GDP), exports, and employment. This sector has grown on account of its traditional strengths
in casting, forging and precision machining, fabricating & cost advantages on account of
availability of abundant low-cost skilled labour and significant foreign direct investment (FDI)
inflows. India is the largest tractor manufacturer, second largest two-wheeler manufacturer,
second largest bus manufacturer, fifth largest auto market in 2019 with sales touching 3.81
million units, fifth largest heavy truck manufacturer, sixth largest car manufacturer, and eighth
largest commercial vehicle manufacturer. The contribution of this sector to GDP has increased
from 2.77% in 1992–1993 to about 7.1% now and accounts for about 49% of manufacturing
GDP. India is expected to emerge as the world’s third-largest passenger vehicle market by
2021.

Highlights of the Auto Industry

7.1%
share in
GDP
Fourth
35 mn
largest
employment
producer of
generated
automobile
Auto
Industry
$118 bn 40% share
size of in global
industry R&D
4.3%
share in
export

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Market Segment & Market Share
Automobile sector split into four segments, each having few market leaders. Two wheelers and
passenger vehicles dominate the domestic demand. Two wheelers accounts for nearly 80.9 %
of the domestic demand in FY20. Segments are illustrated pictorially: -

Market Share of Every Segment

Performance of Auto Industry in 2019-20

(a) Production: The industry produced a total 26,362,282 vehicles including Passenger
Vehicles, Commercial Vehicles, Three Wheelers, Two Wheelers and Quadricycles in 2019-
2020 as against 30,914,874 in 2018 -2019, registering a de-growth of (-) 14.73 percent over
the same period last year.

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(b) Domestic Sales: The sale of Passenger Vehicles declined by (-) 17.88 percent in 2019-
2020 over the same period last year. Within the Passenger Vehicles, the sales of Passenger Cars
and Vans declined by (-) 23.58% and (-) 39.23% respectively while sales of Utility Vehicles
marginally increased by 0.48% over the same period last year. The overall Commercial
Vehicles segment registered a de-growth of (-) 28.75% in April- March 2020 as compared to
the same period last year. Within the Commercial Vehicles, Medium & Heavy Commercial
Vehicles (M&HCVs) and Light Commercial Vehicles declined by (-) 42.47%and (-) 20.06%
respectively in 2019- 2020 over the same period last year. Sale of 3-wheelers declined by (-)
9.19% over the same period last year. Within the Three Wheelers, Passenger Carrier and Goods
Carrier declined by (-).8.28 % and (-)13.27% respectively. Two Wheelers sales registered a
de-growth of (-) 17.76 percent. Within the Two Wheelers segment, Scooters, Motorcycles and
Mopeds declined by (-) 16.94%, (-) 17.53 % and (-) 27.64 % respectively.
(c) Exports: Overall automobile exports registered a growth of 2.95%. While Commercial
Vehicles and Three Wheelers exports declined by (-) 39.25% and (-) 11.54% respectively.
However, Passenger Vehicles exports marginally increased by 0.17 % and 2-wheelers
exports registered a growth of 7.30 percent.

Historical Sales Data: 2011 to 2019

Auto Sector – The COVID impact

Auto sector has been under pressure due to a mix of demand and supply factors. However,
there are also some positive outcomes as well. Impact on the sector are as under: -
(a) Contraction of Demand: With India’s GDP growth rate for FY21 being
downgraded from 5% to 0% and later to (-5%), the auto sector is likely to take a hit.

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 Auto demand is highly sensitive to job creation and income levels and both have been
impacted. CII has estimated the revenue impact at $2 billion on a monthly basis across
the auto industry in India.
(b) Supply Chain: It has taken a serious hit. Even as China recovers, supply chain
disruptions are likely to last for some more time. Domestic suppliers are chipping in
but they will face an inventory surplus as demand remains tepid. The Unlock phase
coincides with the implementation of the BS-VI norms and that would mean heavier
discounts to dealers and also to customers. Even as auto companies are managing costs,
the impact of discounts on profitability is going to be fairly steep.
(c) Profitability & Inventory: Pricing & The real pain could be on the dealer end with
most of them struggling with excess inventory and lack of funding options in the post
COVID-19 scenario. The BS-VI price increases are also likely to hit auto demand.

• Positive Outcome: There are two positive developments emanating from COVID-19.
(a) “Make in India” Initiative: The China supply chain shock is forcing major
investments in the “Make in India” initiative.
(b) Electric vehicles (EVs): The COVID-19 crisis has exposed chinks in the
automobile business model and it could catalyse a big move towards EVs. That could
be the big positive for auto sector.
Outlook Post Unlocking phase

• Performance: April - August 2020

(a) Production: Total production of Passenger Vehicles, Three Wheelers, Two
Wheelers and Quadricycle in April-August 2020 was 53,35,683 units as against
1,16,39,355 units in April-August 2019 with a decline of (-) 54.16%.
(b) Sale: Passenger Vehicles sales was 5,52,429 units in April-August 2020, compared
to 10,91,928 units in April-August 2019, down by (-) 49.41%. Three-wheeler sales
was 40,022 units in April-August 2020 compared to 2,64,334 units in April- August
2019, down by (-) 84.86%. Two-wheeler sales was 41,34,132 units in April-August
2020, compared to 80,38,980 units in April-August 2019, down by (-) 48.57%.

• Summary: Automobile sales in India is likely to stay in the slow lane for some time despite
a rise in sales in Q1 FY 2020, given the uncertainties over demand, according to industry
experts. Companies and analysts expect an uptick in wholesales, or factory dispatches, over
the next few months to replenish dealer stocks ahead of the upcoming festival season.
Also, rural market and segments such as motorcycles are expected to fare better than the
urban markets and cars. However, rising cases of coronavirus infections and sporadic local
lockdown mean the auto industry faces many hurdles before it can score a full recovery.
Experts are not fully convinced whether the rebound seen in Q1 will sustain beyond the
harvest season, which ends in October, coinciding with the festive season, during which
vehicle sales across categories typically increase. Automakers remain wary of several

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 challenges such as timely procurement of components, sporadic lockdowns, closures of
dealerships and availability of manpower at vendors to scale up production.

Industry Analysis: Tata Motors Limited (TML)

• Introduction: Tata Motors Limited (TML) is one of India’s largest Original Equipment
Manufacturers offering an extensive range of integrated, smart and e-mobility solutions.
TML’s Commercial Vehicle (CV) offerings include sub-1 tonne to 55-tonne Gross Vehicle
Weight (GVW) trucks and small, medium and large buses and coaches. TML’s Passenger
Vehicle (PV) offerings include the NEW FOREVER range that exemplifies the IMPACT
2.0 design language across cars and utility vehicles and is developed using pioneering
technologies that are sustainable. TML is also playing a leading role in proactively shaping
the electric mobility landscape in the country. TML has a JV with Fiat Group
Automobiles to manufacture passenger cars, engines and transmissions for the domestic
market, and a JV with Cummins Inc. USA for the design and manufacturing of diesel
engines.
• Challenges of Automotive Industry Prior to outbreak of COVID-19: Challenges of
automotive industry were aplenty, much before the outbreak of the coronavirus pandemic.
A slowing domestic economy, muted demand across other geographies, regulatory
transitions (emissions, safety and axle load), pricing pressures and geo-political conflicts.
Company responded by prioritising capital expenditures towards immediately value-
accretive projects, reduced working capital and curtailed overhead costs.

• Performance: FY 2018-19 & 2019-20

(a) Net Profit (FY2018-19): In FY19, TML delivered positive net income of Rs.2,021
crore, after making losses for five years. However, in FY20, this turnaround journey
has been interrupted, as demand deteriorated sharply on the back of an abruptly slowing
economy coupled with the spread of COVID-19. In FY20, TML posted net loss of
7,289 crore, after posting profit in FY 19.
(b) Performance Highlights (FY 2019-20): In the CV segment, overall volumes
declined by 34% Y-o-Y, with the Medium and Heavy Commercial Vehicle (MHCV)
segment witnessing a steep decline of 50%. However, with improved stakeholder
engagement, TML managed to improve market share in both the MHCV and
Intermediate and Light Commercial Vehicle (ILCV) segments by 240 basis points (bps)
and 180 bps, respectively, while it lost market share by 210 bps in the Small
Commercial Vehicle (SCV) segment. The PV segment witnessed a volume decline of
37% and a loss of market share by 150 bps, as the Company streamlined its supply
chain, exited non-core operations and implemented measures to improve ecosystem
viability. During the year, TML successfully transitioned its entire product range to
BSVI emission norms, with historically low levels of system inventory.

• Q1 FY2020-21: Results impacted by Covid-19

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 Retails: CV down 97%
to 3.1K; PV down 55%
to 18.6K units

Net Revenue down 80% to ₹ 2.7K

Cr
EBIT down by 13.6 %

Loss before tax at ₹

2,190Cr.
Investments: ₹ 492 Cr in products
and technologies, lower by ₹ 454 Cr
YoY

(a) Analysis Q1 FY 2020: In India, the nationwide lockdown resulted in the

production and retailer shutdowns for major part of the quarter and heavily impacted
the volumes. It deeply impacted the volumes in both CV and PV. Amidst subdued
demand environment, Q1 was marked by successful transition to BSVI across the range
of commercial vehicles and a steep improvement in PV market shares. Gradual restart
of operations at plants and dealerships from mid-May for TML, Q1 was marked by
successful transition to BSVI and a sharp increase in PV market shares to 9.5% with
the “New Forever” range. Negative operating leverage impacted the performance
significantly. However, cash out flows were better than earlier expectations driven by
the improvement initiatives which yielded Rs 1020Cr of cash savings in the quarter.
(b) Outlook: The outlook remains uncertain for the year with infections continuing to
rise and intermittent lockdowns in many countries. However, TML is expecting a
gradual recovery of demand and supply in the coming months. In this context, they are
committed to significantly deleveraging the business in the coming years and aim to
generate positive free cash flows over last 3 quarters of the year by focusing on better
front-end activations of our exciting product range, and executing their cost and cash
savings with rigour.

(c) Projected Expectation for Balance FY 21

TML expects gradual pickup in demand and supply situation on the back of overall
economic recovery expected in Q2FY21. The company intends to focus on
conserving cash by rigorously managing cost and investment spends to protect
liquidity. The company has called out a cash improvement program of ₹ 6000Cr
including a cost improvement program of ₹ 1500Cr. Capex is expected to be around
₹ 1500Cr for FY21. Due to these actions, the company expects improving cash flows
for the remainder of the year and expects to end the FY21 with positive free cash
flows.

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 Initiatives by TML during pandemic to boost the growth
Some of the major initiatives taken by the company to boost the demand, cut the cost and
improve the efficiency are as under: -
(a) Engagement with customers on various platforms: Call centre executives, product
specialists and dealer staffs are interacting with potential buyers through phone calls,
WhatsApp video calls, messages and emails to provide them with essential information during
these times.
(b) Launch of Click to Drive: End-to-end digital sales initiative that has taken passenger
vehicle product sales online. This initiative has empowered the customers to buy cars from the
safety and comfort of their homes. It has been integrated with all Tata Motors dealers from
more than 750 outlets across the country
(c) 100% Finance: Scheme to facilitate up to 100% on road funding on our entire range of
cars and SUVs. Introducing the long tenure EMI schemes (up to 8 years) thus lowering the
amount of their monthly EMI payment. The option to customise EMI payments every year in
line with their cash flows offers additional convenience and enhances benefits.
(d) COVID frontline warriors Scheme: Special offers were introduced to thank and support
the brave COVID frontline warriors (doctors, healthcare professionals and police. Tata Motors
has virtually launched some of its BSVI models from the commercial vehicle portfolio, using
digital platforms. Additionally, the sales teams are also engaging with the customers all across
the country, via digital communication apps, to disseminate information about the newly-
launched products and also accept bookings.
(e) #ThankYou Indian Truckers campaign: To recognise the efforts of truck drivers and
acknowledging their role on the frontline of the Covid-19 pandemic, Tata Motors has launched
a #ThankYouIndianTruckers campaign. Through this campaign, Tata Motors tried to uplift the
morale of the truck drivers. Tata Motors has also been providing various facilities across the
country for the truck drivers through its dealerships, workshops and Saarthi Aaram Kendras,
while also engaging with the ones that are on highways by offering free food, sanitisers and
masks.
(f) Extension of Warranty: On the aftersales front, we have extended our warranty and free
service period for all our PV and CV owners, whose expiration date falls within the dates of
the lockdown. The current pandemic has challenged individuals and businesses across the
world which has led to the emergence of a ‘new normal’. It has changed the way brands look
at conventional marketing techniques.
(g) Use of Social Media: On the CV front, Tata Motors has used its social media channels to
reach out to its customers to educate them on the profit-potential-increasing value adds and
upgrades to the BSVI-compliant range of commercial vehicles. The series of videos are being
released on the company’s social media platforms. The benefits – which are extremely
customer centric – can be easily communicated to all the stakeholders in the commercial
vehicle ecosystem through the videos, as well as other forms of content and with easy access
to the internet.

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 AVIATION SECTOR

Introduction: The civil aviation industry in India has emerged as one of the fastest growing
industries in the country during the last three years. India has become the third largest domestic
aviation market in the world and is expected to overtake UK to become the third largest air
passenger market by 2024.
Market Size:
• India’s passenger traffic stood at 341.05 million in FY20. It grew at a compound annual
growth rate (CAGR) of 11.13 per cent during FY16-FY20. Domestic passenger traffic
stood at 274.50 million in FY20, growing at a CAGR of 12.91 per cent over FY16.
International passenger traffic stood at 66.54 million, growing at a CAGR of 5.01 per cent
during FY16-FY20.
• Freight traffic grew at a CAGR of 5.32 per cent during FY16-FY20 from 2.70 million
tonnes (MT) to 3.33 MT.
• Aircraft movement grew at a CAGR of 9.56 per cent from 1.60 million in FY16 to 2.59
million in FY20. During FY16-FY20, domestic aircraft movement increased at a CAGR of
9.83 per cent and international aircraft movement expanded at a CAGR of 3.57 per cent.
India’s domestic and international aircraft movements grew to reach 2,155 thousand and
433 thousand during FY20, respectively.
• As of March 2019, India had 103 operational airports. Further, the rising demand in the
sector has pushed the number of airplanes operating in the sector.

Perennial problems of Aviation Industry (Pre- Covid):

(a) Increase in fuel prices: Aviation turbine fuel (ATF) is one of the important sections
of the industry. Indian government didn’t not reduce the jet fuel prices in proportion to the fall
in international crude oil prices. But, when there is a rise in crude prices, it increases in the fuel
cost would eventually increase the operation of the airline. Besides, it could compel airlines to
go for an upward fare revision to offset the increased cost of operations because the jet fuel

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accounts for 45 percent of an airline's cost of operation. For the past one year, the ATF price
has witnessed an increase of nearly 30 percent and around 25 percent in just last six months.

(b) Government intervention: Frequent government intervention is proving to a great

obstacle for the growth of Aviation industry. Several aviation experts have pointed out that
India government should allow aviation industry free from policy hurdles like regulating
airfares and slash taxes, including jet fuel. Besides, they advise the government to focus on
building infrastructure and the air navigation system. The Indian aviation industry which
contributed five per cent of GDP, offers four million jobs and another seven million jobs
through tourism and related activities. So more efforts are needed, on creating infrastructure
which will enable further growth.

(c) Higher airport cost: Airport (aeronautical) Charges levied by Airport Authority of
India are higher. These charges payable at the International airports are higher than those
payable at the airports designated as Domestic airports. As a result, the domestic airlines in
India are incurring additional costs at the international designated airports without deriving any
extra facilities. According to a latest survey, the airport charges levied by the Indian airports
(Domestic and International Terminal) are amongst the highest in the Asian and the Gulf
countries. This adds more burden to aviation companies.

(d) Severe competition: There is a cut throat competition faced by the top airline due
to ticket pricing. Established Airlines are threatened by low cost carriers, which are eating up
their market share. In order to consolidate their market share, top premium airlines were forced
to reduce their ticket fares to around 15- 20 per cent. Such a slash down in price will lead to a
price war in the long run amongst the airlines with the only goal of increasing their market
share.

Impact of COVID-19 on Aviation sector

The aviation sector is flying through turbulence that seems to find no landing any time soon.
According to aviation regulator Directorate General of Civil Aviation, domestic air passenger
traffic slumped 82.3% in July compared with the same month a year ago. From January to
July, airlines carried a total of 37.28 million passengers, a decline of 54.84% compared to the
corresponding period a year ago. In a report by CAPA, the industry expert says Indian aviation
will shrink to 2-3 players without funding. This, they believe, will result in a sustained damage
to connectivity in India. According to industry experts, Only IndiGo, Vistara and Air India will
be able to survive this storm. The demand destruction can be gauged from the fact that even
after resumption of domestic air services; the load factor is hovering at 50-60%. The flow of
travel is primarily unidirectional and limited to largely essential travel. The report also says
that the fare-caps implemented by the government are higher on-year today. Domestic and
international air traffic to and from India may decline by at least 50% in the current financial
year because of the Covid-19 pandemic, causing significant job losses and force some airlines

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to ground aircraft to tide over the situation. Based on the preliminary estimates by airlines, the
sector may be set for a reduction of 50-60% in international traffic and up to a 50% drop in
domestic traffic.

Issues for Consideration For Revival Strategy: Following are some of the of the
challenges/considerations which airline companies in India may consider while formulating
their Post Covid-19 flight plan:

(a) Third party contractor agreements: Determination of the optimal size and dimensions of
their networks and fleet will hold the key to the survival of airline companies. These companies
may have to revamp their strategies vis-à-vis the air travel restrictions imposed by the
governments to identify routes that are most likely to recover basis demand, regulatory and
market structure scenarios.

(b) Financing Arrangements: Given that the airline companies have suspended all their
business, it would imperative to ascertain if defaults would get triggered under the various
financing agreements entered by the airline companies. It would be prudent for airline
companies to review their facility agreements when contemplating Covid-19 related measures
and consider the impact of such measures may have on their financing arrangements. These
tests can be carried out during the period of lockdown, such that the provisions can be re-
considered by the parties.

(c) Aircraft Lease Agreements: The airline companies may have to revisit/review their
aircraft lease agreements. The airline companies may consider approaching the lessors for
seeking concessions in relation to the lease obligations including ‘rental holiday’ on account
of liquidity crunch consequent to fall in ticket receipts post Covid-19.

(d) Governmental Support: Globally, the market structure for airline industry is set to witness
a major revamp. This change will be significantly influenced by government responses to the
crisis and types and levels of support extended to the airline industry. In the absence of specific
announcements/ relief measures, the airline companies in India may consider approaching the
Ministry of Civil Aviation and/or the GoI for relaxation/waiver in relation to various
fees/licenses including airport charges, AAI and Private Airport Operators’ space rentals and
infrastructure charges which are to be paid by them. This waiver may specifically be sought in
relation to air spaces/sectors, which the airline companies suspect will not be recommissioned
or sectors where the travel demand likely to rebound slowly.

(e) Resolution/Restructuring: Globally there are several airline companies which have filed
for bankruptcy. Per CAPA-Centre of Aviation, most world airlines would be bankrupt by the
end of May. In this context, the Ministry of Finance (“MoF”) has on March 24, 2020, indicated
that if Covid-19 crisis continues beyond April 30, 2020, it may consider suspending Section 7,
9 and 10 of the Insolvency and Bankruptcy Code, 2016 for a period of six months to stop
companies from being forced into insolvency proceedings in such force majeure causes of
default under the commercial agreements (e.g. financing agreements, lease agreements).

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Additionally, RBI has issued several circulars dealing with the measures to alleviate the Covid
-19 impact on corporate India. With this background, the airline companies may consider
engaging in dialogues with their creditors/lenders for preparing and implementing a
resolution/revival plans which may involve sale or purchase of minority equity stakes, merger
and other consolidation opportunities for resolving the financial crisis and liquidity crunch.

(f) Import Duties and Trade barriers: Government of India is considering putting in place
several trade restrictions/embargos on the import of goods from China. The airline companies
in India import spare parts including generator control units for their inventory from China.
The prices of these spare parts may be increased due to the embargo/trade restrictions imposed
by the Government of India.

Outlook: As Covid -19 continues to spread across the globe, the challenges triggered by it are
numerous and unprecedented. In order to successfully navigate through this challenging and
uncertain environment, a thoroughly crafted and a comprehensive flight plan will be pivotal.
The dramatic reduction in passenger numbers represents a threat to the solvency of the airline
companies. The airline companies may consider restructuring their business and debt.
However, it would imperative that any such restructurings (business or debt) will have to be
agreed and implemented relatively quickly, in order to avoid collapses. It may be worthwhile
to note that in stressed situations like Covid-19, being on the fastest trajectory may matter more
than having a great plan that may quickly become outdated. Therefore, after the pandemic is
contained, GoI may have to provide a relief package for the aviation industry to support
economic recovery and prevent collapse of the aviation industry.

India’s aviation industry is largely untapped with huge growth opportunities, considering that
air transport is still expensive for majority of the country’s population, of which nearly 40 per
cent is the upwardly mobile middle class. The industry stakeholders should engage and
collaborate with policy makers to implement efficient and rational decisions that would boost
India’s civil aviation industry.

Road Ahead: India’s aviation industry has a huge potential and offers huge growth
opportunities. One of the key factors which favours such expectation is that 40 per cent is the
upwardly mobile middle class are starting to prefer air travel as the prefect mode of transport.
So, government must engage and collaborate with industry stakeholders to implement efficient
and rational decisions that would enable the growth of India’s civil aviation industry. With the
right kind of infrastructure and policies with thorough focus on quality, cost and passenger
interest, India would surely achieve the third-largest aviation market by 2025.

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 Industry Analysis: INDIGO

Introduction

IndiGo is the largest airline in India with around 52 per cent share in domestic passenger traffic,
according to aviation regulator DGCA's February data. In January 2020, IndiGo became first
Indian carrier to have an aircraft fleet size of 250 planes and became the first airline to operate
1,500 flights per day. The airline added just 5 aircraft during Q1FY21.

Performance of Indigo

• FY 2019-2020(Pre Covid -19): Interglobe, the parent company that operates IndiGo, has
closed financial year 2019-20 with net loss of Rs 233.7 crore. The Gurgaon-headquartered
low-cost carrier had posted net profit of Rs 157.2 crore in FY19. Revenue from operations
stood at Rs 35,756 crore in FY20, an increase of 25.5 per cent compared to the last year,
helped by a capacity increase of 18.8 per cent during the year. For the fourth quarter ended
March 31, 2020, IndiGo reported net loss of Rs 870.8 crore as against a net profit of Rs
595.8 crore in the same period last year, due to suspension of air travel in wake of the
coronavirus outbreak. Revenue from operations rose by 5.3 per cent year-on-year to Rs
8,299.1 crore. Major cause for the loss as per the company filing was "Closure of flight
operations during national lockdown on account of COVID-19 significantly impacted
revenue for the March quarter”.

• Q1 FY 2020-2021(Impact of Covid-19): The company recorded a net loss of Rs 2,844

crore for the April-June quarter as against a profit of Rs 1,200 crore in the corresponding
period of the previous year. Interglobe Aviation Limited, parent company of Indigo, posted
its sharpest quarterly loss in at least five years as coronavirus-related restrictions hit its
operations badly. The company recorded a net loss of Rs 2,844 crore for the April-June
quarter as against a profit of Rs 1,200 crore in the corresponding period of the previous

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 year. Revenue from operations fell 92 per cent to Rs 767 crore. As per the company report,
“Closure of scheduled operations till May 24, 2020 and lower capacity deployment
thereafter on account of COVID-19, significantly impacted the quarterly results".
Outlook as per INDIGO
As per Ronojoy Dutta, CEO of the company, "The aviation industry is going through a crisis
of survival and therefore, our cash balance remains our number one priority. However, we also
recognize that major disruptions offer companies opportunities for improvement in
product, customer preference, costs and employee engagement. We have built a strong
team which is working on multiple fronts to ensure that we emerge from this crisis stronger
than ever."

Measures taken by Indigo to counter the impact of COVID-19

(a) General Action
(i) Salary Cut A salary cut in the range of 5 to 25% across the organisation excluding
certain employees at the lower pay grades.
(ii) Leave without Pay: Company announced leave without pay for the months of
May, June and July. This action will result in employees foregoing an additional 3% to
17% of their pay.
(iii) Freezing the Expenditure: Company announced to put on hold all discretionary
expenses and have deferred certain capital expenditure projects.
(iv) Renegotiation of contract: Company is looking at every element of cost and
working hard with the partners for negotiating better prices and terms.
(v) Rightsizing the Capacity: Company is striving hard to right size its capacity to the
demand in the market. Company values the efficiency and structural low costs
associated with NEO aircraft and thus we will continue to substitute them for the older
CEO aircraft. Company would be taking deliveries of all new NEO aircraft and
balancing them by returning the CEO aircraft.
(b) Customer Safety: Priority is to ensure safety of our customers. Company has introduced a
number of measures as a part of new standard operating procedures to minimise the impact of
the virus. Some of these procedures include: -
(i) Disinfecting aircraft before every departure
(ii) Spray cleaning the aircraft at every arrival
(iii) Increased frequency of deep cleaning of the aircraft including wiping of all touch
points
(iv) Providing safety kits to our passengers, mandatory masks on board for both crew
and passengers, placing hand sanitisers at various places, discontinuance of meal
services & ensuring social distancing norms at check in, boarding.

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 (v) Hassle-free experience from the initiation of ticket booking till the completion of
journey. Exemplary customer service is at the core of everything we do, and each year
we actively work towards enhancing the same
(c) Shift in Focus from profitability and growth to cash management and liquidity: Focus
has shifted from profitability and growth to cash management and liquidity. This crisis has
once again highlighted the importance of a strong balance sheet, particularly, our cash reserves.
(d) Replacement of Aircraft: Returning older CEOs and getting deliveries of NEOs has
become priority for the company. The CEOs (older aircraft) are having higher ownership cost
driven by higher maintenance cost and higher fuel burn. As part of fleet plan, company is
working on retiring a number of these CEO aircraft.

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