ACHKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my teacher MS. VINITA

MAVI and our Directorof Department DR. K.K. RATTU gave me the golgen
opportunity to do this wonderful project on the topic of CASE STUDY ON AIR
INDIA CRISIS , which also helped me in doing a lot of research and I came to
know so many new things , I am really thankul to them.
Secondly I would also like to thank my parents and friends who helped me a lot
in finalizing this project within the limited time frame.
I also wish to thank the lecturers and the non teaching staff of the university of
their support.
Lastly , my deep appreciation goes to especially Expert respondents for their
genuine support, encouragement, understanding and patience throughout the
long period of time spent on this work.

Thank you

13
 ABSTRACT

After economic liberalization there is a fierce competitiveness in Indian marketleading

to organizations adopting innovation and change.

Organizations resortto this initiative as a result of downsizing, economic recession,

restructuring,and reengineering.

Air India being the third largest airline in India is stillfacing challenge to sustain in this
competitive era. Although Air India hasbeen through various phases of transformation
from organizational driven toemployee driven including changes in:

Strategic intent, competencies,challenges, and learning environment, technology, and

customer behavior, effect of communication, impact on employees attitude and
behavior, role of culture, climate, and structure, and reasons for the success or failure
ofchange. However, it is still facing challenges to retain its survival.
This studyreviews literature on Air India and unravel questions on the survival
andgrowth of this Indian airline.

14
 Air India

Being awarded with several national andinternational awards from consumer services
tocorporate social responsibility Air India was consideredamong the best and
prestigious air services. It was onceupon a time a first priority of customers and also
theirstatus symbol. It also received the Corporate excellenceaward for its innovation
and vision. Having such amajor brand image it started raising questions now thathow
come such a big ship is drowning today? How it isoverburdened with the losses and
loans? Why it isunable to bring up with any revival strategy? What arethe reasons
responsible for its failure? To tackle all theseissues this case study has been taken up.
The study tries to unravel the issues for its future survival. Air India was founded by
J.R.D. Tata in July 1932as Tata Airlines, a division of Tata sons Ltd. Tata airlineson
29th July 1946 became public limited company underthe head of Air India. In 1948
after independence ofIndia, 49% of the airline acquires by Govt. of India, withan option
to purchase an additional 2%. In return, theairline was granted status to operate
internationalservices from India as designated flag carrier under thename Air India
International. In 1960 Air IndiaInternational entered Jet age. On 8th June 1962,
airline'sname was officially truncated to Air India and on 11th June it became the
world's first all jet airline.
15
In 1986,with the delivery of Air bus A310-300 airline becamethe largest operator of
this type in passenger service. In 1993 Air India made history by operating the first
non-stop flight between New York and Delhi. In 1994 it wasregistered as Air India Ltd.
From 1990' to 2000 Air Indiastarted/introduced services to London, Chicago, and
Shanghai.

On 23rd Feb 2001, Air India was put up forsale by NDA Govt. 3 groups have queued
up to buytickets in the part privatization of Air India including:Tata group with
Singapore Airlines, Hinduja Bros. withLufthansa consulting, and Air France of US. In
2004May, Air India launched a wholly owned low costairline called Air India Express
and also launchedflights to Los Angeles but terminated them soon. On 1stDecember
2009, Air India introduced services toWashington but they were also terminated soon.

AirIndia received various awards for its diversifiedcustomer service and corporate
social responsibility.However, being the holder of Corporate Excellenceaward, Trusted
Brand award, Best Airline award, fromfew years Air India was facing huge financial
crises.

During the period of 5 years it had faced a loss of 10billion rupees and amassed 38
billion rupees in debt. Ithas also employed 18,000 staff, which at over 700workers, per
plane is more than double the industrystandard. The Indian pilots had fears that there
will bemajor job losses when airline is sold. The re-privatization plan collapsed and
Singapore airlinesdecide to pull out of a joint bid with Tata group to takeover Air-India.

Political opposition to privatization,bureaucracy, and global slowdown, make

companiesless willing to part with their cash are all thought tohave conspired against
the privatization process.This deal was expected to raise $2.5 billion. EarlierLufthansa,
Delta and Air France were its potentialbuyers.

Air India has rights of 90 routes but it can't takeadvantage of them due to 27 air craft.
Although it's anattractive proposition but it carries 6 years of losses anda debt burden
of $70 million. It may be due to PMVajpayee's failure to force the 19-party coalition
16
in powerto push through change.

17
 Merger with Indian Airlines

In 2007 Govt. of India announced the merger ofAir India (along with Air India Express)
and IndianAirlines (along with alliance air) to form NACIL(National Aviation
Company of India Ltd.).

Arvind Jadhav was the chairman and managing director of AirIndia. This move will
help the cash strapped nationalcarrier which suffered losses to the tune of 5551
crore(2009-10) and Rs. 7189 crore (2008-09), to reduce itsadministrative cost arise out
of billing, ticketing andother services. Merger was opposed due to differentethos and
philosophies.

18
Financial crises

19
Around 2006-07 combined losses for Air India andIndian airlines were 7.7 billion
which raises to 72 billionafter merger by March 2009. There was variety of reasonslike
rising oil prices, slowing world economy. Thedifference of Air India from private and
state owned is areason to loss. Its falling demand and the most importantreason is man-
made.There is 800% increase in losses in just two years.After the merger aircraft were
leased or purchased,capacity was gifted away to foreign airlines underbilateral
agreements, ground handling in Bangalore andHyderabad was surrendered to a
proposed joint venture.Flights were withdrawn from profitable routes andpilots weren't
sent for proper training.
Actual losses began in 2006 on the decision to leaseaircraft to increase market share.
There was no properroute, marketing or pricing strategy. Airline took heavylosses till
market built-up. In 2006, 4 Boeing 777 leasedand delivery of own aircraft from July
2007 onwards.Some of its operations expired due to the expiry of lease.Air Indian
express and India airlines flightscompeted with each other ever after the merger. At
theairports of Bangalore and Hyderabad, Air India has toshare its revenue from ground
handling with Singaporeairport terminal services. The industry average for a
firstofficer to become a commander is 4 years. In air Indiapilots spend close to 10-11
years to be first officer.Airline's inadequate planning for command trainingfrom 2003
onwards meant hiring over 160 expatriatepilots and paying them double the salary paid
to Indiancounterparts.Air India cost Rs 390 crore from 2007 to 2009. AirIndia faces
tough competition from foreign airlines dueto liberal bilateral agreements. Foreign
competitorspound not only in Indian carriers such as DeluiorBombay but also in places
like Nagpur, Kochi etc. due to which Air India's share of the overseas market hasbeen
steadily declining.In July 2009, SBI capital markets ltd. was appointedto prepare a
roadmap for recovery. At the launchceremony of Air Indian aviation 2010, Praful
Patel,aviation minister, said that the national carrier couldsoon get an organizational
restructuring plan. Air Indiawould undergo a major transformation of management.It
will involve important and eminent people on boardof Air India.Air India has chalked
out a turnaround planaimed at generating Rs 3000 crore through internalaccruals over
the next six months. It also plans tomobilize additional revenue through cost cutting
and saving.

20
 July 29, 2009
Air India sold 4 of its aircraft during the month ofMarch 2009 for $ 18.57 million
including airbus A300and one Boeing 747-300. Fleet optimization is the wayin which
the airline is looking at saving cost. 4 aircraftswere sold on "as is where is" basis. In
2008 Air Indiasold 13 aircrafts on "sale and lease back" basis. Total 12aircrafts were
sold for $ 451.88 million. It leased 46aircrafts including Boeing and airbus planes
costly$18.945 million per month. Air India taking measuresto reduce overhead cost
includes rationalization ofroutes, return of leased aircraft, rationalization ofmanpower
costs and reduction of contractualemployment, establishment of international board.

August 9, 2011
Air India is short of funds. Moody's investorservice Inc. said Air India recovering
default is "creditnegative" of SBI and PNB. Carrier has been missingsalary payments
and defaulting on interest paymentsin the past 3 months. Govt. released 500 crore to
ensureinterest and salary payments. Air India move to acquire111 planes on debt which
is risky by Comptroller andAuditor General (CAG). They blamed this decision asone
of the major causes of debt troubles in Air India.Also the merger of Air India and Indian
Airlines isconsidered as "ill-timed". The merger was covered withtotal debt with less
equity infusion. The CAG reportdealt with several aspects of Air India losses like
fleetacquisition, merger, huge debt burden, delay in joining global airline, grouping star
alliance and its financialand operational performance. Fleet acquisition took"unduly
long time”.

Revival Strategies for Air India

On 14 July 2010, Air India chief Arvind Jadhavannounces their intention to make new
terminal 3 forinternational and domestic operations with plans tostart new direct flights
to Chicago and Toronto and alsotaking almost all international long haul flights due
tolack of space. This would also provide greaterconvenience for transit passengers who
before had totransfer between the international and domesticterminals which were
located on completely differentsides of the airport. They will now be able to catch
theirconnecting flights within the same terminal. Arvind Jadhav wanted to change the
21
order of some111 planes ordered in 2006 to get a narrow-body aircraftinstead of wide-
body aircraft.Factors responsible for the failure of Air IndiaAir India remained the
winner of various rewardsand recognized awards including Reader's Digest, BestSouth
Asian Airline, World's First All-Jet Airline,World's Largest Operator of Airbus and
many more.However, rising fuel prices were causing a severedecline in air traffic. With
the changing governmentnorms, Air India had to compete with International
levelflights offering better services and cheaper costsincluding Kingfisher Airlines and
Jet Airways. Secondlythe merger with Indian Airlines put a scar and a loss ofRs 7200
crores. This merger caused several challengesfor survival in front of Air India. Air
India took a loan ofUS $ 534 million from Indian government to fulfill itslosses. In
July SBI Capital Ltd decided to prepare revivalstrategy for Air India. Arvind Jadhav
also prepared aturnaround plan with the help of Accenture and SBICapital but it also
failed.Due to the incomplete merger the organization'sstructure become massive and
unwieldy. There weretwo sets of managers for practically every position andnothing is
shared. Its staff strength is roughly three timeswhat an airline of its size should have. It
has stronglyentrenched unions who oppose tooth and nail any effortto cut costs. It has
a terrible reputation for service andan even worse one for on-time arrival and departure.
That is not the worst. Being government-owned, AI has to contend with requests from
politicians andbureaucrats - requests that it cannot refuse. Moreimportantly, political
considerations play a role greaterthan economic logic when any strategic decision is
taken.When Jadhav took charge last year, he started offwith a fair amount of goodwill.
He was seen as acompetent, sensible and proactive bureaucrat with "firein his belly"
who would understand the underlyingproblems of the airline and take the correct
steps.Unfortunately, Jadhav managed to alienate practicallythe entire staff of the
organization shortly after takingcharge by giving a very candid interview to
thismagazine ('The Time For Talking Is Over', BW, 17August 2009). In the interview,
Jadhav lashed out at the work culture, at the sloppiness at every level ofmanagement,
and the general lack of energy and abilityamong his staff who he felt were too
pampered andoverpaid. Jadhav also pointed out that he was saddledwith 32,000 people
when he needed no more than 12,000or so. There are many in the aviation ministry
andoutside who think he is not wrong. "Jadhav spoke thetruth and it was too harsh for
most ears. But if AI is tosurvive, these things must be said," says one senior AIofficial,
who represents a small group of Jadhavsupporters within the airline. The mismatch
ofchairman's ideas and lack of employee commitment letAirlines to this failure.
Survival is still a question infront of the Airlines and it needs a strategic leader
underwhose guidance this ship can float successful
22
1. ANALYSIS OF THE FINANCIAL/PHYSICAL PERFORMANCE

I. REVENUE :

 Total revenue increased from Rs.147,138.1 million in 2011-12 to Rs.160,721.1

million (an increase of Rs.13,583.0 million) during 2012-13.
 Operating Revenue was Rs.160,278.4 million as against previous year’s
revenue of Rs.146,753.0 million (an increase of Rs.13,525.4 million)
 Passenger Revenue increased from Rs.114,236.9 million last year to
Rs.124,944.4 million (an increase of Rs.10,707.5 million) which was mainly due
to increase in yield per PKM from 3.74 to 4.33 and increase in Passenger Load
Factor from 67.9 to 72.4.

REVENUE BREAKDOWN 2012-13

1.4% 0.9%
5.3%
7.1% 0.2%
0.1%

7.3%

77.7%

II EXPENDITURE :

 The total expenditure incurred during the year was Rs.237,039.5 million as
compared to the previous
year’s figure of Rs. 234,594.8 million (an increase of Rs.2,444.7 million)
 Operating expenses increased from Rs.43,191 million to Rs.48,873.4 million (an
increase of Rs.5,618.8 million)

23
 EXPENDITURE BREAKDOWN 2012-
13

2.8% 2.2% 2.0% 1.6%

3.2% 1.0%
3.5%
0.5%
3.8%
4.7%
35.3%

5.3%
13.7%
7.8%

12.5%

Landing/ Navigation

24
2. MEASURES TO IMPROVE PERFORMANCE
2.1 Plans to turnaround performance :
The Company continued to take several initiatives to improve the performance
of the Company
including inter-alia
• Rationalization of certain loss making routes.
• Return of leased aircraft.
• Induction of brand new fleet on several domestic & international routes thereby
increasing passenger
appeal.
• Phasing out old fleet and consequent reduction of maintenance cost.
• Reduction of contractual employment & outsourced agencies.
• Critical analysis of Fuel consumption on all flights by setting up a Fuel Council and
Fuel Manager.
• Implementation of the recommendations made by IATA Group of Fuel
Efficiency Gap Analysis
(FEGA).
• Increase in passenger, cargo, excess baggage revenue through aggressive sales &
marketing
strategy including a separate Cell for attracting Government traffic.
• Implementation of Quickwin IT Solutions including upgrade of Revenue
Management System, introduction of SAP-ERP throughout the network.
• 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.
• Operationalisation of the two subsidiary companies formed for Ground Handling
and MRO activities effective February 2013.
• Implementation of the Financial Restructuring Plan and the Turnaround Plan to
improve the Financial
and Operating Efficiencies.
2.2 Infusion of Additional Equity- Linked to the Turnaround Plan of the
Company :
The Government infused equity capital of Rs 60,000 million during 2012-13 thus
bringing the total paid up capital to Rs.93,450 million. During the year 2013-14 the
Government was expected to bring equity capital of Rs 85,740 million including the
arrears of the earlier years. However, the Government could infuse only Rs 65,740
25
million due to certain budgetary constraints. During the year 2012-13, the Company
could achieve significant improvements in its operating performance as compared to
the corresponding period last year. Its Ontime Punctuality (OTP) improved on
domestic sectors to 80.2% and on international sectors to 70.8% resulting in a
network OTP of 77.1%. Similarly, its domestic load factors improved to 74% despite
many challenges faced from the Low Cost Carriers and international load factors
improved to 72.1% taking the network load factor to 72.7%. There was also an
increase in the yield per kilometer throughout the network with domestic yield
improving to Rs.5.92 and international to Rs.3.49.
The utilization of the Airbus fleet continued to improve to 10.5 hours a day and that
of the Boeing 777 fleet to 14 hours a day. However, the 787 aircraft averaged around
12 hours a day.
The delivery of the first 787 aircraft was taken on 5 September 2012 from Boeing in
Chaleston, USA and immediately thereafter inducted into service. During the year
2012-13 six Dreamaliners (787) were delivered to AI by M/s Boeing Company which
were deployed in its network. These 787 were used both for domestic and
international operations from Delhi.
The domestic routes which were covered were Kolkatta, Chennai and Bangalore and
the international routes covered were Paris, London and Frankfurt.
The Company however had to ground the fleet from mid January 2013 due to
problems associated with the battery compartment of the 787 which was rectified by
Boeing and the aircraft was reinducted into service from middle of May 2013.
The 787 will continue to be the mainstay of the Company’s wide body operations as
the Company plans to take delivery of 21 more aircraft up to the period March 2016.
The Ground Handling business and the Maintanence, Repairs and Overhaul business
of AI was hived off into two separate Companies following the Cabinet approval in
September 2012 and these subsidiaries were later operationalized from February
2013.
The Unions moved the High Court in Mumbai restraining the Company from the
operationalization of these Companies which was dismissed. Subsequently, a Special

26
 Leave Petition was also filed by the Unions in Supreme Court of India which was
decided in Management’s favour. The Management however gave an assurance that
the service benefits of those employees will be protected in respect of their terminal
benefits and other wage arrears which they were supposed to receive from AI.

2.3 Product Development

a) Premier Clubs

The Flying Returns Programme has four levels of membership viz. Base, The
Silver Edge Club, The Golden Edge Club and the Maharajah Club. Currently
the club memberships are open members globally :
The Maharajah Club (TMC)

The Maharajah Club is the highest Tier in the Flying Returns Programme.
Membership of this club is on the basis of earning 75,000 miles in a span of
twelve months. Members may also be invited to join the club on the basis of their
status. Membership of the club entitles members to enhanced privileges which
are:
30% bonus mileage points, additional baggage allowance, priority check-in,
priority confirmation from
the waitlist and lounge access at select airports.

The membership base as on 30 September 2013 was

1,737. Golden Edge Club (GEC)

The Golden Edge Club is the second highest Tier in the Flying Returns
Programme. Membership of this club is on the basis of earning 50,000 miles in
a span of twelve months. Members may also be invited to join the club on the
basis of their status. Membership of the club entitles members to enhanced
privileges which are:
25% bonus mileage points, additional baggage allowance, priority check-
in,priority confirmation from
the waitlist and lounge access at select airports.
The membership base as on 30 September 2013

was 4,688. Silver Edge Club (SEC)

27
 The Silver Edge Club is the third highest Tier in the Flying Returns Programme.
Membership of this club is on the basis of earning 25,000 miles in a span of
twelve months. Members may also be invited to join the club on the basis of their
status. Membership of the club entitles members to enhanced privileges which
are:
10% bonus mileage points, additional baggage allowance and priority check-in.
The membership base as on 30 September 2013 was 15,952.

b) Flying Returns Programme

Flying Returns Programme is designed to recognise and reward frequent flyers of

Air India. The benefits and privileges of Flying Returns include :
 Increased check-in baggage allowance, tele check-in, personalized
check-in counters at select airports, priority for confirmation from the
waitlist, priority baggage handling, pooling of mileage points and wide
array of special offers.
 Apart from earning and redeeming on Air India, members can also
earn and redeem on our airline partners - Lufthansa German Airlines
and Singapore Airlines.

The highlights of Flying Returns Programme are as follows:

1. Membership extended worldwide

2. Update profile details online
3. Claim missing miles online
4. Redeem miles online at www.flyingreturns.co.in
5. No redemption threshold limit for redemption tickets
6. Purchase miles at Re.1 per mile on shortfall of redemption

2.4 Marketing Initiatives: Companion Free Scheme

28
29
Seamen Fares
Seamen fares were introduced for ticketing throughout the network.
Special Incentives
Special incentives were offered to the travel agents for promoting West Bound sectors
aggressively.
Performance Linked Bonus (PLB)

PLB Scheme for the year 2012-13 was offered only on International Sales separately
for Economy Class and Business and First Class, resulting in an increase of 14% on
International BSP sales of India Region as compared to the previous year, although
there was a complete industrial unrest of 61 days during 2012-13.
Agency Commission

The standard agency commission

payable to travel agents in India
was reduced from 3% (on basic +
YQ) to 1% (on basic + YQ) with
effect from 16 July 2012,
resulting in an annual saving of
approximately Rs.1,200 million.
Capping Policy

The New Capping Policy

empowers the region to have
better control over the ticketing
entitlement of an agent and helps
Air India to achieve maximum
revenues from these agents.
Short Term Promotions

Various short term promotional initiatives

were undertaken to enhance revenues :

• Desh Videsh Offer

30
3. HIGHLIGHTS

Awards & Recognition

Amity HR Excellence Award in November 2013 for Global Business Development – for
significant contribution in the field of HR development in the corporate sector.
Indian women’s cricket team captain, Ms. Jhulan Goswami and former hockey captain
Mr. Zafar Iqbal were among the sports persons chosen for the prestigious Padma Shri
Awards announced on the eve of Republic Day 2012.
Air India figured in the top 50 service brands in India in November 2012 edition of “Most
Trusted Brands” survey by the Economic Times Brand Equity. Air India was the only
airline to have made its mark in the list. Air India has been honoured with this Award for
the seventh time.
Air India received the “Best Performing Airline” Award in October 2012, presented by
Travelport, Singapore. The award was based on various performance parameters and on
the basis of an internal survey.
The Global Commerce Excellence Award 2012 was presented to Air India in appreciation
towards continuing
business in Sri Lanka despite challenges.

Air India’s Mrs. Harpreet A. De. Singh, Head of Corporate Quality, Safety & Environment
Management System has been awarded with the Global Awards for excellence in Quality
Management and Leadership for “Outstanding Contribution to Quality Movement” by the
Jury and Council of Board Members of the World Quality Congress in the “World Quality
Congress and Awards 2012” summit which was held on 22 & 23 November 2012.
Air India was presented the Gold Award in the Reader’s Digest Trusted Brand 2013
survey, India, in the airlines’ category for a record eighth consecutive year.

4. REVENUE GENERATION THROUGH OTHER SERVICES

4.1 Engineering Department

Engineering and Engine Overhaul have earned Rs.400 million during the year by
means of third party work.
31
.

4.2 Cargo Revenue

During the year, the cargo revenue was Rs.8,549.0 million as against Rs.7,549.7
million during 2011-12.

5. FLEET SIZE, AIRCRAFT UTILISATION, NETWORK, JOINT

VENTURES ETC.

5.1 Fleet Size

As of 31 March 2013, Air India had the following aircraft in its fleet :

Aircraft Type Owne Lease Sale & Lease Total

d d Back
B777-200LR 8 - - 8
B777-300ER 12 - - 12
B747-400 3 - 2 5
B787-8 6 - - 6
A320 12 - 6 18
A319 19 5 - 24
A321 20 - - 20
A330-200 - 2 - 2
TOTAL 80 7 8 95
As of 30 September 2013, the fleet consisted of :

Aircraft Type Owne Lease Sale & Lease Tot

d d Back al
B777-200LR 8 - - 8
B777-300ER 12 - - 12
B747-400 3 - 2 5
B787-8 8 - - 8
A320 12 - 6 18
A319 19 5 - 24
A321 20 - - 20
A330-200 - 2 - 2
TOTAL 82 7 8 97
5.2 Fleet Utilisation & Despatch Reliability

Utilisation in terms of average daily utilisation per aircraft in block hours and the
technical despatch reliability
after considering technical delays of 15 minutes and above are given hereunder for the
32
year 2012-13 :

Aircraft Type Block hrs flown/day/ Tech Despatch

aircraft Reliability (%)
B747-400 8.90 99.5
2

A320 8.80 98.8

7

A319 10.10 99.4

4

A321 10.80 99.5

6

A330 6.80 99.5

7

B777-200LR 14.50 99.5

2

B777-300ER 14.20 99.5

2

B787-8 7.30 98.7

1

33
34
5.3 Joint Ventures and Code Share Arrangements

As on 31 March 2013, Air India had code share arrangements with the following
foreign carriers :

To : Operating Marketi Type of

Airline ng Code
Airline Share
London -New York v.v. Kuwait Air India Block
Airways Space
Frankfurt -India v.v. Lufthansa Air India Free Flow
Munich- India v.v. Lufthansa Air India Free Flow
Frankfurt- Lufthansa Air India Free Flow
Berlin/Munich/Dusseldorf/Stuttgart/
Amsterdam/Copenhagen/Oslo/Stockho
lm v.v.*
Frankfurt-Chicago/Los Lufthansa Air India Free Flow
Angeles/Washington/
Denver/Detroit v.v.*
Delhi-Frankfurt v.v. Air India Lufthansa Free Flow
Mauritius- Air Mauritius Air India Block
Bangalore/Chennai/Mauritius Space
Mauritius-India v.v. Air Mauritius Air India Block
Space
Vienna -Delhi v.v. Austrian Air India Block
Airlines Space
Mumbai-Bangalore, Chennai, Delhi, Air India South Free Flow
Hyderabad, African
Trivandraum v.v.* Airways
Mumbai- Johannesburg v.v. South African Air India Free Flow
Airways
Johannesburg-Durban, Capetown v.v.* South African Air India Free Flow
Airways
Moscow- Delhi v.v. Aeroflot Air India Block
Space
Colombo- India v.v. Sri Lankan Air India Block
Airlines Space
India- Zurich v.v. Swiss Air Air India Block
Space
Singapore - Kolkata, Bangkok, Singapore Air India Free Flow
Kualalumpur, San Airlines
Francisco, Los Angeles v.v.
Addis Ababa- India v.v. Ethiopian Air India Free Flow
Airlines
Addis Ababa -Dar-es-Salaam v.v.* Ethiopian Air India Free Flow
Airlines
Addis Ababa-Nairobi v.v.* Ethiopian Air India Free Flow
Airlines
Mumbai- Air India Turkish Free Flow
Bangaluru/Kolkata/Delhi/Hyderabad/ Airlines
Ahmedabad/Chennai v.v.*
Delhi- Air India Turkish Free Flow
Bangaluru/Kolkata/Hyderabad/Ahmed Airlines
abad/
Chennai/Amritsar v.v.*
35
 India-Istanbul v.v. Turkish Air India Free Flow
Airlines
Istanbul- Turkish Air India Free Flow
Ankara/Kzmir/Antalya/Adana/Dalaman Airlines
v.v.*
Mumbai-Delhi v.v.* Air India Egypt Air Free Flow
Mumbai-Cairo v.v. Egypt Air Air India Free Flow
Cairo-Alexandria v.v.* Egypt Air Air India Free Flow
Delhi-Seoul v.v. Air India Asiana Free Flow
Airlines
Seoul-Delhi v.v. Asiana Airlines Air India Free Flow
* For carriage of through 3rd/4th freedom traffic only and subject to connectivity.

6. FINANCING INITIATIVES

Aircraft Financing
Air India financed five of the B787 aircraft through Bridge Loans obtained from the
Standard Chartered Bank and Boeing Capital Corporation. Since the collateral value of
the B787 was not determined, some of the financial institutions asked for alternate security
of aircraft instead of the B787.

The take out financing of these aircraft will be through a Sale and Lease Back arrangement
whereby the Company would sell these aircraft to a selected bidder and in turn lease these
aircraft under an operating lease for 12 years.

Till date the Sale and Lease back

arrangements have already been completed on 7 of the 13 delivered B787 aircraft as of 31
March 2014 and the
bridge loans from various financial institutions have been repaid.

The Company has also sold 5 of its 8 B777-200LR aircraft to Etihad Airways since the
200 LR aircraft is being slowly removed from the fleet due to the high cost of operations
of this aircraft.

The delivery of these aircraft have been planned to take place in 2013-14 and 2014-15.
Till 31 March 2014, the Company has already delivered 3 of these aircraft to Etihad.

36
7. AIR SAFETY
 A dedicated website flightsafety@airindia.in has been set up which aids
dissemination of vital safety related information in a cost effective manner to all
employees of the Company.
 On-line submission of operational incident, bird hit, EGPWS, TA/RA and hazard
identification reports has
expedited analysis of incidents and addressing safety related issues.
 Various spot checks (Surprise Field Inspections) have been introduced. Such checks
identify any deficiencies
which are subsequently addressed by the parent department, thus maintaining required
standards.
 Cockpit and Cabin Surveillance checks are routinely carried out to monitor safe
operation of flights.
 The Flight Operations Quality Assurance (FOQA) programme has been ramped up
to include direct email interaction with flight crew, thus elevating safety awareness.
 Cockpit Voice Recorder (CVR) monitoring on a regular basis with crew interaction
through email to ensure
adherence of SOP in flight.
 Counselling of personnel is regularly conducted for safety enhancement and
recommendations are sent to various departments requiring time bound ATRs (Action
Taken Reports).
 Flight Duty Time Limitations (FDTL) for pilots and cabin crew are monitored with
violations addressed
appropriately.
 Regular PIB (Permanent Investigation Board) meetings are conducted in order to
investigate incidents. Special PIBs are conducted to investigate serious incidents.
 International and Domestic Safety Audits are carried out on a periodic basis.
 An Internal Audit is conducted for safety evaluation of the airline and findings are
actioned in a time bound manner. The associated report is filed with the DGCA.
 Airport Surveys/Risk Assessments are carried out before commencement of flight
operations to a new
airport.
 Incident data is routinely uploaded to the DGCA Website and FSD Monthly Activity
Report submitted to
DGCA.
 Safety Action Group (SAG) meetings are conducted on monthly basis.
 Quarterly Exceedance Trend Analysis are generated which analyse exceedance of
operational parameters.
These reports are sent to Operations/Training Departments for necessary remedial
measures.
 Base audits at Mumbai and Delhi are conducted once a year. At other stations audits
37
 are conducted once in two years.
 Compliance checks of DGCA CAR, MEL requirements, Safety Enhancement
Training (SET)/Safety Enhancement Recommendations (SER)/Corrective Training
(CT) and Flight Duty Time Limitations (FDTL) are carried out on a periodic basis.
 Latest DGCA CAR Rev.2, dated 18 June 2012 on pre-flight medical checks for crew
members has been
implemented.
 Safety Management System (SMS) is implemented and integrated throughout the
Organisation to address the safety issues in conformance with ICAO, DGCA and
Corporate SMS requirements.
 Safety Review Meetings with DGCA being held on monthly basis to brief DGCA on
safety related issues.

8. GROUND HANDLING
As on 31 March 2013, Air India provided Ground Handling services at 43 domestic
airports and 13 international airports. Apart from this, AISATS, a Joint Venture Company
of Air India is providing ground handling services at 5 international airports viz.
Bangaluru, Hyderabad, Mangaluru, Delhi and Thiruvananthapuram. During the period
2012-13 flights handled were as follows:
20 20
11 12
- -
12 13
Air India 1,2 1,3
8,3 3,8
08 84
Foreign Carriers 32, 27,
50 75
7 9
Air India Express 9,4 7,1
61 93
Other flights 22 13
2 8
Haj flights 20 27
8 2
Total flights handled 1,7 1,6
0,7 9,2
06 46
38
 Ground Handling Revenue for the flights handled during the year 2012-13 was Rs. 4,966.66
million.

Additional/New Ground Handling contracts negotiated during the year 2012-13 were with
M/s ASIG, M/s ISS Security Services, M/s Air Arabia PJSC, M/s Kuwait Airways
Corporation, Qatar Airways, Srilankan Airlines, Island Aviation, Uzbekistan Airways,
United Airways, M/s Bangkok Airways Co. Ltd., Silk Air, Etihad Airways, M/s LCC
Nord Wind, Thai Airways, Cathay Pacific.
Joint Venture Agreement between Air India Limited and Singapore Airport
Terminal Services (SATS) on ground handling :
The Company has entered into a Joint Venture (JV) agreement with SATS, Singapore in the
equity ratio of 50:50 to provide ground handling services to airlines at certain metro airport.
This was in pursuance of Government of India Notification on the Ground Handling
policy. The JV Company was formed on 20 April 2010. Prior to the formation of the
Company, since the airports at Hyderabad and Bangaluru were made operational on 23
March 2008 and 24 May 2008, respectively, AISATS operated under an Association of
Persons (AOP).
During the year, total bills raised by AI SATS towards handling charges and other services
provided to Air India amounted to Rs.2,238.4 million and total bills raised by Air India
on AI SATS amounted to Rs.1,552.0 million. Pursuant to settlement of dues during the
year relating to transactions pertaining to earlier years, an amount of Rs.147.8 million
was credited in the books as payable to AI SATS. As per the books of the Company, the
net balance payable to AI SATS as on 31 March 2013 was Rs.527.7 million which was
after adjusting the total advance of Rs.1,150.0 million. The accounts with AI SATS were
under reconciliation and the balance confirmation as on 31 March 2013 was yet to be
received.
AISATS has made a Profit after Tax of Rs.340.4 million during the year ended 31 March
2013.

9. MAINTENANCE, REPAIR AND OVERHAUL OF ENGINES &

COMPONENTS

9.1 Major checks carried out on A330

39
3 ‘A’ checks were carried out during the year under report.

Major checks carried out on A320

Major checks (A, B, C and Structural Inspection) on A320 aircraft are undertaken at
Delhi and Hyderabad. Delhi carries out ‘A’, ‘B’, ‘C’ checks and Structural Inspection,
scheduled and unscheduled engine changes, weighment of aircraft, renewal of
certificate of airworthiness, compliance of major modifications, etc. Following
number of checks were carried out during the financial year 2012-13 :
‘A’ Checks ‘C’ Checks
Delhi/Hyderabad 79 10

Major checks carried out on A319

All the major checks upto ‘C’ checks on A319 aircraft are carried out at Kolkata. 107
‘A’ checks, 26 ‘P2 & P3’
checks were carried out during the year 2012-13.

40
 Major checks carried out on A321
All major checks on A321 aircraft are carried out at Mumbai. 96 major checks were
carried out during the year under report.
Third Party Engineering
Services Mumbai
Overhaul shops and Major Maintenance facilities were utilised to provide engineering
assistance to Kingfisher,
Jet Airways, GoAir and Reliance. An amount of Rs.8.67 crores was earned from third
party servicing.
Delhi
Overhaul shops and Major Maintenance facilities were utilized to provide
engineering assistance to ARC Airwing, IAF, GoAir, Indigo, KAM Air, Deccan
Charters Ltd., British Airways Engineering, BSF, Source One, etc. An amount of
Rs.10.90 crores was earned during 2012-13 through this facility.
Hyderabad
 Number of components belonging to Indian Air Force, M/s Blue Dart
Aviation Ltd., Chennai, M/s Rajiv Gandhi Aviation Academy, Hyderabad
and M/s AISATS, Hyderabad were serviced and an amount of Rs.79 lacs
earned.
 An amount of Rs.1.14 crores earned from renting of hangars at Chennai and
Hyderabad.
Kolkata
An amount of Rs.1.03 crores earned by providing engineering services to ARC,
North East Shuttle, IAF, etc.
9.2 Jet Engine Overhaul Complex (JEOC)
The FAA approval received for JEOC is valid till 31 October 2014 and ISO 9001-
2000 certification till
17 February 2014.
During Financial Year 2012-13, 11 V2500 engines were refurbished.
The facility for inspection and repairs of CFM56-5B engines has been established. The
facility was
operationalised and is awaiting DGCA approval.
During the Financial Year 2012-13, Training Section of the Engineering Department
trained 2,436 Technical personnel.
41
10. QUALITY MANAGEMENT SYSTEM (QMS)

Emergency Response Plan

As continuous efforts to be prepared to face an emergency, mock drills and table top
exercises as per the Emergency Management Manual requirements were carried out. Also,
various activities carried out as per the Corporate Emergency Response Plan prepared for
the year 2013. Emergency Response Mock drill was conducted on 7 June 2013 which
involved activation of the Emergency Command Centre.

Documentation Management System (DMS)

A centralized DMS has been implemented effective 31 December 2012 which provides
creation, search, retrieval and dissemination of documents over a browser to all authorised
personnel. This is in compliance with the IOSA, DGCA, ISAGO standards and would
reduce need for paper, thereby generating cost savings, improved efficiency, saving time
and environment. The audits carried out by IOSA, ISAGO, DGCA and ICAO on DMS
were found satisfactory and there were no findings related to the same.

IATA Safety Audit for Ground Operations (ISAGO)

For the first time, Head of QMS has been nominated as Vice Chairperson of the ISAGO
Oversight Council (GOC) for the next two years. Air India can now be involved in the
policy changes as it can share views on the new Ground Operations Policies and
requirements for AHM/IGOM, etc. which influence the certification standards for ground
handling as well as the airport related activities.

Operational Efficiency & Fuel Management

QMS Department has been monitoring and ensuring quality enhancement in all areas of
fuel management, operational efficiency, cost reduction besides implementation of green
initiatives as well as emission reduction. Aviation Fuel Consulting group of IATS was
entrusted with the work of conducting the Fuel Efficiency Gap Analysis (FEGA) on the
consumption of aviation turbine fuel as well as implementation of specific cost saving
opportunities. Implementation of the recommendations of FEGA helped in saving fuel.
Huge monetary, fuel savings and reduction in Carbon Dioxide emission were achieved.
Upto March 2013, carbon dioxide emissions were reduced by 822,731,184 kgs. and
261,184,503 kgs of fuel was saved.

42
Flight Planning System

Phase II of the Flight Planning System was developed by M/s SABRE. Data entry into
SABRE-FWZ FPM for B787
aircraft has been completed and it would be introduced on B787 in phases.

Corporate Safety Management System (SMS)

Corporate SMS Plan 2013 covering various activities as per Audit Plan 2013 was prepared
and followed.

Phase IV of SMS has been completed. More than 6000 personnel in various Departments
underwent SMS awareness training and Emergency Response training.

Auditor Training to support the Safety and Quality Assurance functions was also carried
out.

Train-the-Trainer courses for key areas like Operations, Flight Safety, Engineering,
Ground Handling and Cargo were also conducted.

43
Personnel in the Organisation are encouraged to make use of every channel to report issues
of concern which affect quality, safety and security of operations through the detailed
standardised formats.
IATA Operational Safety Audits (IOSA)
Air India is the first airline in the world to voluntarily get audited for E-IOSA (Enhanced
IOSA) with new Standards. The E-IOSA renewal audit was conducted from 2nd to 6th
September 2013 with zero findings. E-IOSA will introduce significant new elements into
the IOSA process. Airlines on IOSA Registry incorporate an ongoing internal assessment
process using IOSA provisions in their Quality Assurance Programme and provide a
Conformance Report as a record of ongoing evaluations against IOSA provisions before
each recurrent IOSA audit. The information in the Conformance Report is reviewed,
verified and then forms part of the overall IOSA assessment. The overall objectives of E-
IOSA are based on achieving four “pillars” of effective airline operations viz.
Continuity
To maintain continued conformity with all IOSA standards throughout the registration
period by conducting ongoing internal audits as an integral part of internal quality assurance
programme. The results can be analysed and if there are any areas of concern, the same can
be addressed immediately.
Implementation

It facilitates and enhances overall implementation and execution of operational policies,

plans, processes and procedures, etc.
Reliability

The reliability and integrity of internal quality assurance system can be demonstrated by
conducting ongoing
internal assessments against ISARPs using appropriately trained and qualified auditors.
Standardisation

The use of IOSA provisions, published auditor actions and IOSA auditing principles would
result in a systematic standardisation of internal audit procedures and the overall audit
process.

44
11. INFORMATION TECHNOLOGY
MRO-IT Solution
MRO-IT Solution (M&E Series 5X), as developed by M/s Ramco Limited, Chennai
was implemented on 28 May 2012, resulting in achieving major milestone towards
increased productivity through the optimum use of all engineering resources. The data
migration activity from the Maxi Merlin database to the new system was successfully
carried out by DIT.
AIRCOM Server Installation
Department of IT in collaboration with SITA successfully migrated and upgraded existing
AIRCOM Server at the Data Centre, Mumbai during the week of 28 May 2012, resulting
in improved performance, reliability and product support. This would help in fuel savings,
schedule optimisation and enhanced passenger services due to fewer flight interruptions
and unnecessary delays.
With the induction of Boeing 787s in the fleet, AIRCOM Server will be of immense benefit
as it is capable of
interfacing to all necessary Boeing systems such as Aircraft Health Monitoring and
Electronic Flight Bag (EFB).
AIRCOM Server is a pivotal system which is ready for any future direction that Air India
takes on its EFB needs. It will also provide benefits like ‘least cost routing’ to deliver
content to the aircraft in the most economic way. SITA’s AIRCOM Server is in use by
over 70 airlines world over.
SAME TIME – Lotus Video Conferencing

For ease of communication, Phase I of Office Automation i.e. Video Conferencing based
on Lotus Notes is completed.

This would reduce considerable amount of travel direct cost and there will be a tremendous
amount of indirect cost savings in terms of reducing travel time, which can be better used
on other productive jobs.

45
Web Based Application for Visitor Entry Pass (WAVE)
Application for automating the process of issuance of visitor entry pass by Security
Department to reduce manual intervention and minimise paper usage has been developed
in-house and deployed at Duty Manager’s Office , Security Department, Old Airport,
Kalina, Mumbai.
Website for Central Training Establishment (CTE - Hyderabad)
Application for CTE has been developed in-house for providing details about the courses
offered, training programme, training schools/colleges, with a view to develop CTE at
Hyderabad as a separate business unit to impart training facilities to third parties also. A
dedicated website http://cte.airindia.in was launched on 30 January 2013.
Cargo Custodian Function
Air India is a joint custodian with MIAL at Mumbai. Custodian functions are automated
since 2006. However, the latest version of the software was implemented on 1 August 2012,
which is based on the latest Net Platform which provides online interface to bank for
collection of TSP charges, several new reports to cater to user requirements, etc.
Air India is also a custodian at Chennai and the custodian functions were automated on
the same lines at Mumbai.
Centralised e-mail Archival Solutions
As a continuous IT improvement initiative in the corporate mailing solutions, Department
of IT has implemented a centralised e-mail archival solutions based on IBM Content
Collector Platform alongwith the Corporate Data Management System environment,
wherein all e-mails will be stored in a centralised storage for any future references and
also for regulatory compliance purposes with proper access security controls.
Attendance Management System
DIT is in the process of evaluating and implementing a new Attendance Management
System to integrate with the state of art SAP ERP Human Capital Management Time and
Leave Management module. It is planned to implement biometric based technologies in
conjunction with smart ID cards, whereby all employees shall be able to view their
attendance, leave, etc.
Software to extract Passenger and Cargo Load Data
The IT Department, Delhi has developed a software to extract flown passenger figures,
cargo, mail, payload from TRIM Sheet, LDM Messages and AILOAD messages on daily
basis, which is useful in calculating payload, available cargo payload, etc.
46
Website for Air India Modern School

IT Department has designed and developed a website, www.aimodernschool.in, for the

school which will help to communicate with staff, parents and alumni of the school.
Information on various activities, procedures, staff profile, achievements, etc. is made
available on the site for the public.

Wi - Fi connectivity in Material Management Department (MMD)

IT Department has implemented Wi-Fi Solution in MMD at Old Airport, Kalina, the
important aspect of which is that the entire area has been ensured to have 100%
redundancy of Access Points (APs), implying that even if an Access Point fails, the
standby will take over seamlessly.

SAP

The SANGAM SAP Project has gone live on 31 January 2013. The System has been
implemented in Finance, Materials Management and Human Resources Departments. It
will also be integrated with all other systems already implemented/to be implemented in
Air India.

Advance Passenger Processing (APP) for UAE

UAE APP was implemented in February 2013. This system sends advance passenger
information to UAE authorities and black-listed passport holders are prohibited from
boarding in India through real time messages. This covers the stations of Dubai, Sharjah,
Abu Dhabi and Bahrain.

Integration of Air India Telephone Exchange with MIAL Exchange at

Terminal 2 CSI Airport

IT team with the support of Siemens has extended integration process to an external system
i.e. Nortel telephone exchange of MIAL at Terminal-2, CSI Airport whereby Air India
Offices at Nariman Point, Old Airport and CSI Airport have integrated voice
communication system. These Offices can call seamlessly to each other through Direct
Internal Dialling (DID) system without making an external call.

Haj Operations 2012

A software developed for Haj activities was upgraded to a centralised Haj software for
47
 printing boarding pass as
well as Haj pilgrims’ check-in and post flight activities including report generation.

Round the clock IT support is also organised from Data Centre, Mumbai. The system is
operational since 17 September 2012 and around 20,000 passengers have been handled so
far.

12. SECURITY

The Security Department of the Company has a well defined security policy for safety and
security of its operations.

It has a professionally managed set-up headed by Executive Director-Security, who is a

senior level IPS Officer on deputation from the Government and permanent and contract
security personnel through its subsidiary Companies viz. Air India Air Transport Services
Limited (AIATSL), Air India Charters Limited (AICL), Airline Allied Services Limited
(AASL) and through Joint Venture of AISATS, who are deployed for providing security
coverage to all Air India flights and those of our customer airlines.

In addition to its primary responsibility of providing security for our flight operations and
property, the Security Department also generates additional revenue for the Company by
providing security services to customer airlines.

Investigation & Fraud Prevention Cell

The Investigation & Fraud Prevention Cell, a vital wing of the Security Department, deals
with all revenue and property crimes/frauds, including policies and procedures to prevent
the travel of inadmissible passengers on our flights to western countries with improper
documents/documentation such as stolen/counterfeit/forged passports

48
 and visae, counterfeit/forged/stolen revenue documents like tickets, Miscellaneous
Charges Order (MCO), credit card frauds, etc. Owning to this, the British Government
has, through the Home Office (Her Majesty’s Immigration Service), bestowed upon Air
India the Approved Gate Checks status and signing of MoU with Canadian Government,
which enabled the waiver of several fines/penalties imposed by them for the carriage of
inadmissible passengers (inadvertently) to the UK/Canada on a case to case basis.

13. HUMAN RESOURCES

Staff Strength
The staff strength as on 31 March 2013 was 25,047.
Long Service Mementoes
Every year all the employees of the Company who had completed 25 years of service
are presented with a long service memento i.e. a wrist watch and a Certificate, on 27
August. Accordingly, this year on 27 August 2012, the Long Service Mementoes
presentation function was held Region-wise and 1,020 employees were felicitated.

14. MEDICAL SERVICES

During 2012-13, a revenue of Rs.2,29,194/- was generated by way of calibrating
Alcosensor IV Instruments for commercial airlines for conducting pre-flight medical
checks.
A number of measures have also been initiated to reduce expenditure and achieve savings
in Medical Services
Department :
 Purchase of life saving medicines for terminally ill patients directly from the
manufacturers resulting in
saving of Rs.50,13,411/-.
 Availing institution discounts by stocking a large number of medicines in-house
resulting in saving of Rs.47,22,593/-.
 Issue of prescription was curtailed thereby saving Rs.45,15,255/-. In addition, 5%
discount was obtained from Panel Chemist resulting in savings of Rs.21,19,380/-.
 Rs.7,02,000/- was saved on the cost of pre employment medical examination as the
cost is borne by the
candidates as per the new policy.
Total savings by the Medical Services Department during the year under review amounted
to Rs.1,70,72,639/-.

49
15. SPORTS
The Air India Hockey Team won the L.B. Shastri Hockey Tournament held in Delhi from 27
November to 4 December 2012. In the League Phase, Mr. V.S. Vinaya and Mr. Arjun
Halappa were awarded the Man of the Match Award. Mr. V.S. Vinaya was declared the
Best Player of the tournament.

The Hockey Team won the Obaidullah Khan Gold Cup held in Bhopal from 17 to 25
December 2012. In the League Phase, two of our players viz. Mr. Arjun Halappa and Mr.
Birender Lakra were awarded the Man of the Match Award.
The Hockey Team also won Maharaja Ranjit Singh Hockey Tournament held in Delhi from
7 to 16 March 2013.

Air India Hockey Team upset last year’s Champions Punjab 6-2 to clinch the title of 3rd
Hockey India Senior Men’s
National Championship in Pune on 10 June 2013. Sameer Dad & Affan Yousuf scored a
brace to clinch the title.

Air India Junior Team performed extraordinarily well in 37th Junior National Badminton
Championship held in Imphal from 10 to 18 November 2012. The boys’ team was declared
best by winning Narang Cup whereas girls’ team won bronze medal in team events.
Overall, Air India won 4 gold medals, 5 silver medals and 3 bronze medals and finished the
tournament on a very high note.

Ms. Anjali Nair, Swimmer on Scholarship with Air India, won 2 gold medals in 50m
butterfly and 50m free style at the Interschool National Swimming Championships held
at Delhi creating a new Meet Record. She also won a gold medal in 100m free style
creating a new Meet Record and a silver medal in 50m butterfly stroke at the State Aquatic
Championship.

50
 Air India Chess Team participated in the 33rd National Team Chess Championship & 11th
National Team Chess Championship for Women held in Hyderabad between 20 and 26
February 2013. In Men’s section, the team won 4, drew 2 and lost 3 matches.
In Women Section, 7 matches were played and all the matches were won by Air India
team. Ms. Tania Sachdev and Ms. S. Vijayalakshmi won gold medal on 1st and 3rd board
respectively. Ms. Bhakti Kulkarni won bronze medal on 2nd board and Ms. R. Aarthie
won silver medal on the 5th board.
Ms. S. Meenakshi, Sr Traffic Supdt., Chennai was part of the Indian chess team which won
silver medal in the 4th
Asian Indoor Games held in Korea.
Ms. Shubhada Sawant on scholarship with Air India represented Maharashtra Chess team
in the National School games held in Andhra Pradesh and won silver medal.
Air India won Bronze medals in 43rd Inter Institutional Table Tennis Championship held
from 22-28 August 2013.
Air India Cricket Team (M) won the All India T-20 Tournament played at West Bengal.
The team also won the VIP Trophy 2013 at Kolhapur. The Cricket Team also won Times
Shield Cricket Tournament 2012-13.
Air India Badminton team won the Central Zone Badminton Tournament at Bangalore
played from 26 to 27 September 2013.

16. PUBLIC GRIEVANCES

During the year 2012-13, 267 Public Grievance cases were received. Out of these, 262
cases have been settled during 2012-13 and 5 are pending. Out of the 5 pending cases, 1
pertains to the year 2012 while remaining 4 pertain to the year 2013.

17. STATUTORY COMPLIANCE

Air India has six subsidiary companies. The financial statements of the subsidiaries are
included in this Annual Report elsewhere. Their performance is briefly discussed here :
18.1 Air India Air Transport Services Limited (AIATSL):
(Rs.in Million)
Particulars 2012- 2011-
13 12
Air India’s investment in equity 0.500 0.500
Total Income 750.09 609.06
51
 Profit/(Loss) After Tax 5.06 (2.60)
The Board of Directors of Air India Limited, the parent company, at its Meeting held
on 7 August 2010 approved operationalisation of Air India Air Transport Services
Limited.

Cabinet Note for operationalisation was submitted to the Ministry of Civil Aviation.
Cabinet has approved operationalisation of AIATSL on 6 September 2012.

It is proposed that the assets and manpower from Air India Limited, will be
transferred to AIATSL as per the decision of the Cabinet.

The Company will be treated as a separate profit centre for carrying out the Ground
Handling activities. The process of operationalisation has accordingly started
w.e.f. 1 February 2013 with transfer of manpower to the Company.

Further, steps have been initiated to obtain/fulfil various Regulatory and Statutory
approvals/compliances in order to start Ground Handling activities.

AIATSL provides certain handling services for customer airlines at various Indian
stations. A total of 3,143 staff on contract have been employed to carry out the work
of ground handling on behalf of the Company at various airports.

At all the stations Security Handling of all the flights is carried out exclusively by
AIATSL staff, as the same
is not permitted to be outsourced to any agency.

52
 18.2 Air India Charters Limited (AICL):
(Rs.in
Million)
Particulars 2012- 2011-
13 12
Air India’s investment in equity 300.00 300.00
Total Income 15,602. 13,779.
3 9
Profit/(Loss) After Tax (3,519.7 (6,025.
) 1)

AICL operates a Low Cost Airline under the brand name “Air India Express”.
Launched on 29 April 2005 with a fleet of 3 leased B737-800 aircraft, it operated from
3 stations in Kerala to 5 stations in the Gulf. As on 31 March 2012, AICL had a fleet
of 21 B737-800 aircraft (including 4 dry leased aircraft). This continued in the year
2012-13. It operated to 11 Indian and 13 foreign on-line stations.
AICL has carried 1.5 million passengers till October 2013. This is an increase of
almost 50% against last year compared to capacity increase of 41%. The Scheduled
Services Revenue, before revenue sharing with the holding company Air India
Limited, decreased marginally from Rs.18,104.2 million in 2011-12 to Rs.17,750.9
million in 2012-13. The reduction in revenue was primarily due to pilot strike,
however, the same was minimised due to a 4.1% increase in yield and a 4% increase
in the load factor.
Air India Express ended 2011-12 with a total of 124 flights per week. Air India
Express ended the Winter 2012-13 schedule with 187 flights per week. During the
year 2012-13, Air India Express carried about
2.1 million passengers as against 2.4 million passengers in 2011-12, constituting a
decline of 8% against a capacity decline of 14% mainly due to the prolonged cockpit
crew agitation. The Company made a loss of Rs.3,519.7 million during the year 2012-
13 as against Rs.6,025.0 million during 2011-12.
18.3 Air India Engineering Services Limited (AIESL):
(Rs.in Million)

Particulars 2012- 2011-

13 12
53
 Air India’s investment in equity 0.500 0.500
Total Income - -
Profit/(Loss) After Tax (0.02) (0.029)
The Board of Directors of Air India Limited, the parent company, at its Meeting held
on 7 August 2010 approved operationalisation of Air India Engineering Services
Limited. Cabinet Note for operationalisation was submitted to the Ministry of Civil
Aviation. Cabinet has approved operationalisation of AIESL on 6 September 2012.
It is proposed that the assets and manpower from Air India Limited, will be
transferred to Air India Engineering Services Limited as per the decision of the
Cabinet. The Company will be treated as a separate profit centre for carrying out the
Maintenance, Repair and Overhaul (MRO) activities of Airbus and Boeing fleet. The
process of operationalisation has accordingly started w.e.f. 1 February 2013 with
transfer of manpower to the Company. Further, steps have been initiated to
obtain/fulfil various Regulatory and Statutory approvals/compliances in order to start
MRO activities.

18.4 Airline Allied Services Limited:

(Rs.in
Million)
Particulars 2012- 2011-
13 12
Air India’s investment in equity 22.50 22.50

Total Income 281.10 295.20

Profit/(Loss) After Tax (133.38 (114.74

) )

The Company operates under the brand Alliance Air.

54
 As on 31 March 2012 the Company had 7 ATR-42-320s and 4 CRJ-700s leased
aircraft in its fleet. As at the end of the year, the network of the Company consisted of
21 stations within the country. Presently, it has been operating around 161 flights per
week. As on 31 March 2012, the staff strength of the Company was 1,005 including
25 employees on deputation from the parent Company.
As per the terms of an MoU with the North Eastern Council (NEC), the Company
has been operating air services in the North East since 2002. The Viability Gap
Funding (VGF) arrangement with the NEC to cover operating losses on these
operations was initially for a period of five years, extended on year to year basis with
last extension till the end of 2011. The Company received approval and payment of
grant for viability gap funding from North Eastern Council for its North East
Operations till 31 December 2011.
The Company has been following up with the Ministry of Development of North
Eastern Region/NEC directly as well as through the Ministry of Civil Aviation for
approval of VGF for 2012. However, though the operations have been continued, no
approval has so far been received, putting huge financial strain on the Company. The
VGF was not approved for 2012 and therefore the operations were withdrawn
effective mid January 2013. However, Planning Commission constituted a
Committee to consider the VGF issues. The Committee recommended that MOCA
could provide the VGF gap support for the year 2012 from overall budget support to
Air India. The Committee also recommended to restart services effective 10 July
2013, for which VGF would be paid by NEC and in the event NEC does not agree,
the same may also be included in the annual budget support to Air India and the
services be discontinued. The matter has been taken up with MOCA.

18.5 Hotel Corporation of India Limited (HCI):

(Rs.in Million)
Particulars 2012- 2011-
13 12
Air India’s investment in equity 406.00 406.00
Total Income 463.64 577.39
Profit/(Loss) After Tax (356.15 (212.90
) )
Chefair Flight Catering, Mumbai

As all efforts to offer the unit under Management Contract failed, the Board of Air
India Limited had advised the Management to make the unit as a separate profit centre
55
and give 30% of its catering business to HCI without following the tender procedure.
Accordingly, 30% catering business of Air India was granted to Chefair without
following the tender procedure.

Centaur Lake View Hotel, Srinagar

Subsequent to failure to offer the unit of CLVH under Management Contract due to
the intervention of the State Government of Jammu & Kashmir, the Board of Air
India Limited had directed the Management to continue running the hotel after
carrying out necessary renovation for upgrading the unit. In the meanwhile,
Government of India had sanctioned Rs.50 million in its Annual Plan 2012-13 for
CLVH, Srinagar, which could be spent for the renovation of the unit. Necessary steps
are being taken to upgrade the unit to bring it at par with other star hotels of the State.

Centaur Hotel, Delhi and Chefair, Delhi

With the approved Annual Plan 2012-13 of Rs.100 million, efforts were being made
to upgrade the Chefair Flight Catering, Delhi (CFCD) and Centaur Hotel Delhi
Airport (CHDA) with the allocated fund of Rs.50 million for these units out of the
said Rs.100 million.

While approving the Project Report, the Board had advised that the Government
sector companies like Airports Authority of India (AAI) or other PSUs who had
undertaken such projects of upgrading their existing properties be consulted.

Accordingly, the work has been assigned to AAI & the renovation work is being
carried out by them on depositary work basis after following the laid down
procedures.

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 Post Disinvestment Issues

The Arbitration Petition filed by M/s Sahara Hospitality Limited against the
Arbitration Award granted on the issue of settlement of Net Current Assets and other
obligations with respect to Centaur Hotel Mumbai Airport (CHMA) is yet to come up
on regular Board for hearing.
The settlement proceeding with regard to the dispute in the settlement of Net Current
Assets subsequent to the sale of Centaur Hotel Juhu Beach (CHJB) to M/s Tulip
Hospitality Services Limited (currently known as M/s V Hotels Ltd), several
meetings were held between the parties and Director-Finance, Air India Limited,
Mediator. An award has been finalised and the same is being put up to the Board for
its final approval.

18.6 Vayudoot Limited:

(Rs. in Million)
Particulars 2012- 2011-
13 12
Air India’s investment in equity 364.20 364.20
0 0
Total Income - -
Profit/(Loss) After Tax (0.91) (1.03)
Ministry of Civil Aviation, Government of India, vide its letter dated 25 May 1993
conveyed its decision to merge the company with erstwhile Indian Airlines Ltd. now
amalgamated with NACIL effective 27 August 2007. Consequently, the entire
shareholding of the company is being held by NACIL now AIR INDIA LTD. The
company therefore is a wholly owned subsidiary of AIR INDIA LTD. During the
year, the company did not undertake any flight operations as it’s operations were
transferred to erstwhile NACIL now AIR INDIA LTD. As on date, the company is
remaining as a “Shell” company pending completion of legal formalities related to
merger.

18. RISK MITIGATION STRATEGIES

The Company continuously monitored the risks perceptions and taken preventive action
for mitigation of risks on various fronts.

19. INTERNAL CONTROL SYSTEMS

The Company continues to ensure proper and adequate internal control systems and

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procedures commensurate with its size and nature of business to ensure that all assets are
safeguarded and protected against loss from unauthorised use and that transactions are
authorised, recorded and reported correctly.

The internal control system enables documented policies, guidelines, authorisation and
approval procedures. Necessary actions were also being taken to address some of the
concerns raised by the Auditors in this regard.

The Company has an extensive system of internal controls which ensures optimal
utilisation and protection of resources, IT security, accurate reporting of financial
transactions and compliance with applicable laws and regulations as also internal policies
and procedures.

The internal control system is supplemented by extensive internal audits, regular reviews
by management and well documented policies and guidelines to ensure reliability of
financial and other records to prepare financial statements and other data.

The Company has a well defined manual on delegation of authority and administrative
powers, based on which, the authorities exercise their powers.

This manual is reviewed periodically to cope with the changes necessitated by the needs
of the organisation. The said manual, along with the Company’s key functional process
manuals, further strengthens the internal control system of the organisation.

The Company has independent internal audit systems to monitor the entire operations and
services spanning over all locations, business and functions on a regular basis.

The Company has also employed outside consultants in its various areas of functioning in
order to reduce/monitor its cost platform.

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 REFERENCEC

https://m.economictimes.com › ... › Transportation › Airlines / Aviation

https://www.businesstoday.in › magazine › features › story

https://www.indiatoday.in › Business

https://www.firstpost.com › tag › air-india-crisis

https://www.firstpost.com › business

https://airwaysmag.com › airlines › crisis-in-india-deepens

https://isbinsight.isb.edu › the-case-of-the-ailing-airline-air-indias-turnaround

https://www.icmrindia.org › casestudies › catalogue › HROB153

https://www.slideshare.net › shjera333 › merging-of-indian-airlines-and-air...

https://www.ijerm.com

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