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Case Study


Vaidyanathan Krishnamurthy, Catherine Xavier
Debt Financing, Corporate Finance, Debt Management, Turnarounds , Turnaround Strategies , Restructuring Strategies


In the year 2016, after more than a decade of loss-making, Air India posted an operating profit of INR 1.05 billion. Over the years, Air India's greatest problem has been its crippling debt. At the end of fiscal 2014-15, the airline had a total debt of INR 513.67 billion. While the airline managed to phase out more than INR 50 billion of debt from its books during the year 2015-16, its total debt still stood at INR 460 billion. In order to facilitate the revival of Air India, Ashwani Lohani, known as the “turnaround man”, was appointed Chairman and Managing Director of Air India. As Lohani piloted Air India towards revival, efforts were being made to convert INR 100 billion of Air India's debt into equity, a move that would substantially reduce its interest burden and give banks a major say in its functioning. Lohani was in talks with banks and investors who could play a critical role in Air India's debt restructuring. Lohani mulled over the various options related to debt restructuring.
It remained to be seen whether Lohani's image as the “turnaround man” coupled with Air India's operating profits would increase investor confidence and help Air India deal with its debt burden. While Air India's modest operating profit was good news, it remained to be seen if it could provide relief to the sick airline's actual financials. It also remained to be seen whether Lohani's attempts at improving employee relations with the organization and the operational changes he was introducing to Air India could help turn the tide for the ailing airline. As of July, 2017, two questions remained: Had Air India really turned the corner under Lohani's leadership? Could Air India's short-term progress help it to overcome the huge debt that had become the “elephant in the room”?

Learning Objectives

1) Analyze various debt restructuring methods and their effects on corporate control and management,

2) Analyze and evaluate the effect of corporate restructuring on equity and debt.

3) Gain a nuanced understanding of turnaround management during debt restructuring,

4) Illustrate and analyze strategic issues faced by managers and investors during debt restructuring.

The case is suitable for MBA and Executive MBA students. 

  • Pub Date:
    01 Feb 2018
  • Source:
  • Discipline:
    Financial Management
  • Product#:
  • Keywords:
    Debt Financing, Corporate Finance, Debt Management, Turnarounds , Turnaround Strategies , Restructuring Strategies
  • Length:
    Pdf : 17 page(s) ,

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