A
PROJECT REPORT ON
MISCELLANEOUS BILLING & ERP
For National Aviation Company of India Ltd (NACIL)
SUBMITTED BY
Nair Dhannya Mohan Mohan Roll No:38
SUBMITTED TO
“UNIVERSITY OF PUNE”
In the partial fulfillment for the requirement of the award of MBA (Dr.D.Y.Patil Institute of Management, Ambi, Pune)
M.B.A BATCH (2009-2011) 1
EXECUTIVE SUMMARY
Air India is India‟s national Airline. Air India‟s history can be traced to October 15, 1932. On
this day J.R.D. Tata, T ata, the father of Civil Aviation in India found Air India. Air India was earlier known as Tata Airlines. Tata Airlines was converted into a Public Company under the name of Air India in August 1946. On March 8, 1948, Air India International Limited was formed to start Air India‟s international
operations. On June 8, 1948, Air India started its international services with a weekly flight from Mumbai to London via Cairo and Geneva with a Lockheed Constellation aircraft. In early 1950s due to deteriorating financial condition of various airlines, the Government decided to nationalize air transport. On August 1, 1953 two autonomous corporations were created. Indian Airlines was formed with the merger of eight domestic airlines to operate domestic services, while Air India International was established to operate the overseas services. The word 'Internatio ' International' nal' was dropped in 1962. With effect from March 1, 1994, the airline has been functioning as Air India Limited and now it is known as NACIL (National Aviation Company of India Limited). Air India is still known by the name to retain the prestigious brand name it posses. As the whole aviation industry is running in losses Air India being the national carrier is not left out from the problem. It is facing a very bad financial crunch and is recording crores of losses every day, but all efforts are being made to overcome the crunch. In this project the ERP usage in Air India in the Revenue accounts section is explained. The whole project is a chain of operations beginning with the RA Forms and Security Services calculations which is then used in Miscellaneous billing and finally used to form the ERP and generating reports of the transactions. transactions. The RA Forms form the basis of all the further operations. The Security personnel present at the TARMAC fills in the details of the services provided by the airlines to the domestic and IATA airlines. These forms are filled during the period from the point the flight lands till the departure. It also includes the PHS charges.
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Air India provides services according to the agreement being entered into with other airlines. Certain airlines are exempted from some charges due to the agreement. An RA Form and a Security Form is given in the annexure which clearly mentions the details. Next comes the Miscellaneous Miscellaneous Billing where the charges are made according according to the RA Forms. Recharges form a part of MSBILLING. MSBILLING. It enables in calculation on the basis of the rate on the day of providing the service. Invoice numbers are given to each bill being passed. The numbers are used in making modifications and finding out the respective invoices. It is a more simple form of passing the bills. MSBILLING also enables passing JVs (Journal Voucher) consisting the calculation of Comprehensive charges, tax, education cess etc. the rates applied for the services are already decided in advance and a rate chart is provided. Finally comes the ERP. ERP was started in Air India before 2 years. All the staff was given training for it and hence was implemented widely in all the sections. It is a more consolidated form of the transactions. ERP numbers are given to every transaction and each number consists of a large number of MS BILLS. ERP is an internet and intranet based solution, helping the users to access and work on the system wherever they are. The user configurable configurable reports help the users to take appropriate decisions on time. An employee from the Cochin station can access the ERP on any of the station worldwide. This saves a lot of time and helps proper decision making. It consolidates all the processes into one database. ERP in the revenue accounts section mainly deals with the calculation of Sundry Debtors and deciding on the revenue to be generated.
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ACKNOWLEDGEMENT I hereby take the opportunity to express my sincere gratitude to each and everyone involved during my training stint in Finance Department. i would like to profusely thank Mrs. Vandana Deshmukh, Assistant General Manager-Finance, for guiding me at every step. The whole training stint of Miscellaneous Billing and ERP Section in the FINANCE Department has made me aware of the facts and importance of Miscellaneous Billing and ERP in Air India. To acknowledge the contribution for guiding me during my training in FINANCE Department, i would like to express my gratitude to all the officers for their unflinching support and their constant endeavor in providing me invaluable insights into the intricacies of the structure, functions and critical working areas of Miscellaneous Billing and ERP Section in AirIndia. i whole-heartedly acknowledge and express my gratitude to the following officers:
1. Mrs. Chitra Raje – Senior Senior Manager, Finance 2. Mrs. Vandana Deshmukh-Assistant General Manager 3. Mrs. Subha Putnis- Assistant General Manager 4. Mr.Suhas Khare – Deputy Deputy Manager, Miscellaneous Billing Section 5. Mr. Sandip Sathe – Assistant Assistant General Manager, Miscellaneous Billing Section 6. Mrs. Geeta – Miscellaneous Miscellaneous Billing Section 7. Mrs Revathy – Deputy Deputy Manager, Miscellaneous Billing Section 8. Ms. Chanda Pawar Clerk, Miscellaneous Billing Section – Clerk, 9. Mr.Ashish Gardi – Clerk, Clerk, Miscellaneous Billing Section 10. Mr.Pramod Ghagre-Finance 11. Mr. Ramesh More- Administration 12. Mr.Patil- Finance Administration 13. Mr. Bindu Katti – Finance Finance My sincere thanks to my institute “Dr. D.Y. Patil Institute of Management - Ambi, Pune” for
supporting throughout the completion of the project. I would also like to extend my gratitude to my parents for providing all possible support towards completion of my project and the duration of my course.
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Table of contents SR.NO
TOPIC
1.1
SUMMARY
PAGE NOS 2-3
1.2
ACKNOWLEDGEMENT
4
1.2 1.3 2.
WHY THIS TOPIC?? OBJECTIVE OF THE STUDY COMPANY PROFILE
9 10 11
2.1.
HISTORY
12
2.2.
BOARD OF DIRECTORS
13
2.3.
MISSION
14
2.4.
OBJECTIVE
15
2.5.
AMALGAMATION OF AIR INDIA AND INDIAN AIRLINES
16-17
WITH NACIL 2.6. 2.7.
ORGANISATION STRUCTURE OF THE COMPANY
18 19
MAHARAJA
3.
REVIEW OF PERFORMANCE-HIGHLIGHTS
20
4. 5.
CSR AVIATION SCENERIO
21 21-22
5.1.
CIVIL AVIATION SCENARIO IN INDIA
5.2.
23 24
DEVELOPMENTS IN THE YEAR 2008-09 6. 6.1A
ANALYSIS OF FINANCIAL/PHYSICAL PERFORMANCE
25 26
REVENUE
6.1B
27 EXPENDITURE
5
6.3. 6.4.
23
EXPENDITURE
6.4A
24 PROFIT AND LOSS ACCOUNT
6.4B
25 BALANCE SHEET FINANCIAL INITIATIVES
26
SALE AND LEASE BACK OF AIRCRAFT 7.
HIREARCHY
27
8.
DEPARTMENTS
28-29
8.1.
8.2. 9.
VARIOUS DEPARTMENTS IN AIR INDIA
SECTIONS IN FINANCE DEPARTMENT 30-31
PROJECT PROFILE RAMP ASSISTANT ON AIRPORTS RA FORMS
9.1.
32
9.2 10.
MISCELLANEOUS BILLING
33-34 35
10.1
SPECIMEN OF RECHARGE
36
10.2.
SPECIMEN OF JV
37
SPECIMEN OF MISCELLANEOUS BILLING VOUCHER
38
10.3. 11.
39 40
RECHARGES
6
12.
ERP ORACLE AT AIR INDIA
41-44
12.1.
AR AT AIR INDIA DOES…
45
12.2.
IMPLEMENTATION OF ERP
46
12.3.
MODULES OF ERP
47-48
12.4. 13. 14.
WHY ERP? FINDINGS CONCLUSION
49 50-51 52
7
List of tables and chart
8
Introduction
Why this topic was selected?? Air India consists of various departments and sections dealing in finance like the Cash management, Capital Budgeting, Store accounts, Pay accounts, Insurance, Local billing ,Revenue accounts comprising of MSBILLING and ERP, etc. but this topic was choosen as a topic of study. ERP is a new concept in Finance though it is uncommon in Operations Management. This bought in the curiosity to know how it is used in Finance and hence the selection of this topic. Air India implemented ERP lately and hence helped the airlines in a better recording of their transactions in a consolidated manner. Though it was difficult to learn everything associated with ERP we still tried learning whatever we could and have also been exposed to the corporate work culture of Air India.
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1.3
OBJECTIVE OF THE STUDY To know the finer nuances of Revenue accounts To know the procedures carried out in the Finance department To study the work culture of a corporate entity To learn what are the functions carried out in an airlines apart from the airport functions Need for implementing ERP What is the difference between MSBILLING and ERP To find if ERP has helped in adding on the revenue and simplifying the procedures in the section The next step after ERP
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COMPANY PROFILE HISTORY
Air India is India's national flag carrier. October 15, 1932 was the day that J.R.D. Tata,the father of Civil Aviation in India found Air India.Air India is the national flag carrier airline of India, flying a worldwide network of passenger and cargo services. Air India is state-owned, and administered as part of the National Aviation Company of India Limited - which was created in 2007 to facilitate Air India's merger with Indian Airlines . The main bases of operation of the airline are Mumbai's Chhatrapati Shivaji International Airport and Delhi's Indira Gandhi International Airport. Air India is the 16th largest airline in Asia, serving 28 destinations worldwide, and, with its affiliated carriers, serves over 100 cities. Air India has code share agreements with twelve other international airlines. In 2010, Air India is expected to join Star Alliance, the world's largest airline alliance.
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2.2
BOARD OF DIRECTORS Shri Praful Patel
Minster of Civil Aviation Shri Arvind Jadhav
Chairman and Managing Director, NACIL. Shri Prashant Narain Sukul
Joint Secretary, Ministry of Civil Aviation Shri E.K.Bharat Bhushan
Joint Secretary & Financial Advisor, Ministry of Civil Aviation Shri Amod Sharma
SBU Head-Related Business Smt. Anita Khurana
SBU Head-Cargo Shri Vipin K. Sharma
SBU Head-MRO (Engg & Comp)
MANAGEMENT DIRECTORS NAME
DESIGNATION
Mr. Amod Sharma
Director – Related Business
Ms. Anita Khurana
SBU Head – Cargo
Mr. V. K. Sharma
SBU Head – MRO (Engg. & Comp.)
Mrs. Urmila Subbarao
Chief Vigilance Officer
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2.3
MISSION
To inspire people to make India win and take pride in India and NACIL. To generate a net inflow of foreign exchange and seek its progressive enlargement through a larger share of the international market.
To create and maintain consumers and customers of international transportation by providing competitive superior package of services and generate a sustainable surplus by keeping the assets in a new and contemporary state and deploy the net surplus for growth and for justifiable reward to the stakeholder To generate a net inflow of foreign exchange and seek its progressive enlargement through a larger share of the international market.
To contribute through competitive success of Air-India to the national preparedness for the inevitable progressive globalization of the economy by generating confidence in the Indian business genius. To enhance its competitive market standing and image as an international carrier. To achieve the highest level of safety of operations.
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OBJECTIVE
2.4
To provide safe, efficient, adequate, economical and properly co-ordinate international airservices, and to develop such services to the best advantage.
To provide high standards of services to passengers and customers on ground and in the air.
To achieve, maintain and improve its rightful place in the international air transport industry.
To make an increasing contribution to the national economy and maximize revenues with efficient fleet utilization and route network.
To promote international tourism to India and to improve the nation‟s foreign exchange
resources.
To assist in the promotion of nation‟s export trade.
To improve the national economy by encouraging local skills and technology to get equipment and materials other than aircraft, indigenously manufactured with the intention to curtail imports steadily.
To promote healthy relations with the various employee‟s unions for ensuring employee‟s cooperation in the performance of the company‟s activities.
To provide wider participation amongst its employees in management functions.
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2.5 AMALGAMATION OF AIR INDIA AND INDIAN AIRLINES WITH NACIL The need for amalgamation of Air India limited (AI) and Indian Airlines Limited (IA) was necessitated due to the fact that both AI and IA, which were operating in a largely protected environment, were faced with fierce competition from domestic private and global airline companies. Market share had declined substantially for both airlines. Significant increase in competitive activity had eroded historical advantage of both carriers as leading international carriers had increased coverage and frequency to major cities in India and domestic carriers also significantly ramped up operations.
The declining market, operating and financial performance posed a serious threat to future survival of the two airlines on a stand-alone basis. It was felt that in an increasingly consolidating global aviation environment, where ' critical mass/ size' is a key success factor, combining the two state owned airlines into a single merged entity would better equip them to survive and prosper amidst fierce global and domestic competition as it would provide an opportunity to leverage combined assets and capital better and build a stronger sustainable business. It was also felt that the amalgamation would:
Enable optimal utilization of existing resources through improvement in load factors and yields on commonly serviced routes as well as deploy 'freed up' aircraft capacity on alternate routes.
Provide an opportunity to leverage skilled and experienced manpower available with both the companies to the optimal potential.
Provide an integrated international/domestic footprint which would significantly enhance customer proposition and allow easy entry into one of the three global airlines alliances.
Provide an opportunity to fully leverage strong assets, capabilities and infrastructure.
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Potential to launch high growth and profitability businesses (Ground Handling Services, Maintenance Repair and Overhaul etc.)
Post merger, brand name "Air India" has been retained with “Maharaja" as its mascot. It has
also been decided to continue with the two alpha numeric codes viz. 098/AI and 058/IC in the merged company viz. NACIL till the integration of IT platforms of erstwhile Air India and Indian Airlines completed and to its effect two separate Tripartite Agreements were signed with IATA to establish the transfer of the existing airlines codes viz. 098/058 to NACIL.
The merged entity along with its subsidiary companies, with a fleet size of more than 140 aircraft would enter the list of top 30 airlines globally in terms of fleet size and would rank amongst the top 10 in Asia.Alongwith the size, the merger is expected to create considerable synergy, since the domestic and international operations could feed traffic into each other. Besides, it could result in redeployment of aircraft since Air India and Indian Airlines were flying on some common routes in the Gulf and South East Asia.
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2.6
ORGANISATION STRUCTURE OF THE COMPANY The Organization Structure of the Company consisted of the Corporate set up and 6 Strategic
Business units in the following areas:-
PASSENGER
RELATED BUSINESS
CARGO
STRATEGIC BUSINESS UNITS MAINT. REPAIR & OVERHAUL
LOW COST
(MRO)
OPERATIONS
GROUND HANDLING
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2.7
THE MAHARAJAH The Maharajah began merely as a rich Indian potentate, symbolizing graciousness and high
living. And somewhere along the line his creators gave him a distinctive personality. His outsized moustache, the striped turban and his aquiline nose.
It was a design for an inflight memo pad grew to take Air India's sales and promotional messages to millions of travelers across the world. Today, this naughty diminutive Maharajah of Air India has become a world figure. He can be a lover boy in Paris, a sumo wrestler in Tokyo, a pavement artist, a Red Indian, a monk... he can effortlessly flirt with the beauties of the world.
He has completed 56 years and become the most recognizable mascot the world over. His antics, his expressions, his puns have allowed Air India to promote its services with a unique panache and an unmatched sense of subtle humour. In fact he has won numerous national and international awards for
Air
India
for
humour
and
originality
in
publicity.
And as with all great men, he too has had his critics. But the millions of travellers whose lives he has touched far outnumber them. In fact, to them, the Maharajah with his inimitable style, charm and wit is a very real person. He's almost like a friend to every Air India traveler. A friend who reaches out with warmth and hospitality, even to the farthest corners of the world.
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3.
REVIEW OF PERFORMANCE-HIGHLIGHTS The Company suffered a net loss of Rs. 22,262 million vis-a-vis a projected loss of Rs. 21,440 million in 2007-08. Total revenue achieved by the company was rs. 152,575 million and Total Expenditure Rs. 185,555 million. After adjusting for Deferred Tax Asset of Rs. 10, 845 million the net loss registered was Rs. 22,262 million. This being the first year of accounts, there were no previous years‟ figures represented. However, comparison was based on projected
figures of 2007-08. The Loss was mainly due to the following factors:
Decline in passenger load factor Decline in projected yield Increase in financing cost due to aircraft acquisition and working capital Increase in Depreciation expenditure and aircraft maintenance costs Increase in Wage bill and other Staff Cost Increase in Aviation Turbine Fuel Cost
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4.
CORPORATE SOCIAL RESPONSIBILITY Environment protection Environment is a global concern and the aviation industry blamed for guzzling up fossil
fuels, is trying to do its bit for Mother Nature. The company is already in this league with its various efforts. Last year, it not only received the “Montreal Protocol Public Awareness Award” presented
by UNEP (United Nations Environmental Programme) in recognition of its efforts in protecting the ozone layer, but also bagged the “Golden Peacock Award” for corporate innovation for protection of
the environment. At its corporate office in Mumbai, various steps are being taken to save energy and conserve water. The building is being converted into a Green Building with the help of Ministry of Environment and Forests and The Energy and Resources Institute (TERI). Air India also placed orders for GEnx engines for its fleet of B787 aircraft which are expected to be 20 to 25% more fuel efficient than existing engines. On the occasion of World AIDS Day on 1 st December 2007,Air India lend a helping hand in generating awareness regarding AIDS by painting one of its Airbus A320 Aircraft in red-the colour of HIV-AIDS campaign-with Act 07 and the pneumonic ribbon of AIDS symbol on the fuselage. The aircraft was used as a backdrop in the aids awareness programme organized by M/s Heroes project, a Non-Government Organization (NGO).
Encouragement/Assistance to small scale industrial units In Accordance with the Government guidelines issued from time to time, the company continued to support the SSI units/Social Welfare/Charitable Organizations and procurement from SSI units during the year amounted to approximately Rs.360 million and the selective sourcing /procurement from other social / charitable organizations amounted to Rs.6.3million.
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5.
AVIATION SCENERIO
5.1
CIVIL AVIATION SCENARIO IN INDIA
Based on the carriage data available from the Airport Authority of India, scheduled international passenger carriage during year 2007-08 recorded a growth of 15.7% versus the carriage of 2006-07. Similarly, domestic passenger carriage recorded a growth of 23.3% versus the corresponding period of previous year.
India‟s airports handle close to 120 million domestic and international passengers for the
period ending March 2008, representing a 21% increase over the previous year. Centre for Asia Pacific Aviation (CAPA) has stated that India ‟s civil aviation passenger growth at 20% is among the highest in the world. The sector is slated to cruise far ahead of Asian giants like China or even strong economies like France and Australia. The no of passengers who will be airborne by 2020 in a whopping 400 million. Moreover, India has a share of 12% of the worldwide business jets market as the demand for private or business jets in India is expected to grow at 50% on the annual basis over the next few years.
IATA, in its estimates reckons India to be a driving force behind the world‟s civil aviation business that is globally expected to grow from US$5.1 billion to US$ 5.6 billion this year.
Domestic air traffic is likely to increase by more than double and touch 86.1 million passengers by 2010, up from 32.2 million passengers in 2007. India liberalization of the aviation sector has opened up 28 airports for foreign direct investment in areas of operation and maintenance of airports. International no-frills budget carriers, especially Asian low cost carriers are also make a beeline for India. The two new Green field state-of-art airports of Hyderabad and Bangalore were opened for traffic on 22 nd March 2008 and 23rd May 2008, respectively.
Currently, India has 80 fully functional airports handling schedule, commercial, charter, defense services and 368 landing strips. The government has envisioned an investment of close to
21
US$ 9 billion with a private sector contributing about US$ 5.92 billion and AAI to pitch in with US$ 2.96 billion in a bid to develop about 100 green field airports during the period of 2007-2012.
Strategic alliances have been one of the most visible responses of airlines to the intense competition of recent years. The main objective of the alliances is to create competitive advantage for the partners by enabling them to complement each other‟s services and achieve substantial
economies of scale, particularly in marketing and maintenance costs and largely retailing and corporate independence. Such alliances enabled airlines to break regional barriers and explore vast and hitherto untapped business opportunities.
Jet Airways and Air Sahara has set prelude for alliance and mergers with Jet Airways buying out Air Sahara for Rs.14500 million in April 2007 and Kingfisher by acquiring 26% stake in Deccan Aviation and additional 20% stake via open offer. Recently, Jet Airways and Kingfisher also entered into a commercial operation agreement in various fields to prevent duplication of infrastructure and reduce cost platform.
Also, the Government of India approved the amalgamation of Air India Ltd. And Indian Airlines Ltd. with National Aviation Company of India Ltd. in August 2007 with an appointed date of 1st April 2007. The potential synergies are expected to enhance the new combined airlines profitability.
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CURRENT AVIATION SENARIO
MARKET SHARE IN JUNE,'09
ON TIME PERFORMANCE IN JUNE’09
23
DOMESTIC FLYERS
Jan-June,‟09
211 lakh
Jan-June,‟08
228 lakh
Fall
8%
LOAD FACTORS IN JUNE,’09
24
5.2
DEVELOPMENTS IN THE YEAR 2008-09 The global crisis resulting from high oil prices and declining traffic in hitting India hard.
Growth has slowed from 33% in 2007 to 7.5% for the first six months of the year. And the last few months have been negative. Indian carriers could post US$1.5 billion in losses in 2008, the largest outside the US.” Urgent action is needed to help Indian carriers whether the perfect storm of high cost and falling demand,” said IATA in a Press Release. Three priority areas have been identified
viz., reducing costs, improving infrastructure and adopting global standards.
India was characterized by IATA as among the most expensive places on the planet to buy Aviation Turbine Fuel (ATF).In August 2008, it was 58% more expensive to buy fuel in Mumbai (for domestic flights) than in Singapore (for International).Excise duties, throughput fees charged by airport operators and state taxes of up to 30% for domestic flights result in a cost structure that cannot support a competitive industry. Removing excise tax, implementing a standard 4 % state sales tax for domestic fuel and greater transparency in overall pricing were urgently needed to restore profitability to the Indian Carriers.IATA also deplored India‟s Service Tax on premium class tickets
, over flying, landing and airport charges.
INFRASTRUCTURE Infrastructure investments are urgently needed. While Delhi was moving towards the capability of handling 100 million passengers, the situation at Mumbai remained critical. With the privatization of airports at Mumbai and Delhi the infrastructure at both these airports are expected to improve in the coming years with the expansion plans of the Mumbai International Airport Ltd. (MIAL) and Delhi International Airport Ltd. (DIAL) taking shape.
IATA has observed that India has been asked to take a leadership role in shaping Aviation policies, including environmental and commercial freedoms. It is said that in a few years, Asia Pacific will be the largest single aviation market. India will be key driver of that growth. India‟s
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enormous size makes it an important market. It also gives it a responsibility to take a leadership role on policy issues. India would become a strong voice for a global solution on the environment, as envisioned by Kyoto.
The Airport Economic Regulatory Authority (AERA) bill has been passed in the Parliament which would ensure that India‟s aviation infrastructure meets cost efficiency and service level targets
with charging polices in line with ICAO principles. Among other things IATA has called for a review on service tax on premium class tickets, air navigational charges and landing and parking charges.
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6.1
ANALYSIS OF FINANCIAL/PHYSICAL PERFORMANCE Since this was the first year of the company‟s performance, comparison has been made to the
revised estimates for 2007- 08 & not the previous year‟s figures.
6.1A REVENUE Total revenue declined from the projected Rs.154840 million to Rs.152570 million (reduction of Rs.2270 million.) Operating revenue for the year was Rs.136380 million against projected revenue of Rs.141080 million (Reduction of Rs 4700 million) The reduction in the revenue was on account ofo
Decline in passenger seat factor from 66.8% to 63.8%.
o
Decline in cargo & freight revenue by RS.1480 million due to fall in freighter revenue.
Other revenue for the year increased by Rs.2430 million due to various factors like exchange gain, write back of certain liabilities etc.
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6.1B EXPENDITURE The total expenditure incurred was Rs.185550 million as compared to a projected figure of Rs.182660 million (An increase of Rs.2890 million) Operating expenses went up by Rs.2870 million mainly due to the following o
Aircraft maintenance expenditure increased by Rs.1990 million
o
Bad debts written of Rs.1120 million (Including write off Rs.1070 million towards due from Airline Allied Services Ltd.
Absorption of pilot training Expenses of Rs.750 million
The Deferred tax Asset of Rs.10845 million has been created in 2007-08 as compared to the p projected figure of Rs. 6380 million. An amount of Rs.78942.9 million representing the excess of the fair value of the assets transferred by the transferor companies (erstwhile air India & Indian Airlines) has been transferred to capital reserves in accordance with Accounting Standard 14 issued by ICAI.
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6.2
PROFIT AND LOSS ACCOUNT
PROFIT AND LOSS ACCOUNT FOR THE PERIOD MARCH 30, 2007 TO MARCH 31, 2008 RUPEES IN MILLION PARTICULARS I) REVENUE
1. Traffic i)scheduled services
107612.6
ii)others
15365.4
2. Handling, Servicing and Incidental
122978 13405.5 136383.5
Operating Revenue
3.Other (Net)
16191.2 152574.7
Total Revenue II) EXPENSES
1. Payments to and Provisions for Employees
32245
2. Insurance
851.3
3.Aircraft Fuel and oil
62525.1
4. Navigation, Landing, Housing and parking
9698.4
5.Aircraft material consumed
9583.7
6.Outside repairs-aircraft
7196
7.Hire of Aircraft
13777
8.Handling charges
5460.9
9.Passenger Amenities
5929.3
10. Commission (Net)
6150
11. Communication Charges:
i)Reservation Systems ii)Others
12. Travelling Expenses:
2466.9 1534.1
i)Crew
4001
2422.2
ii)Others
953
13. Depreciation
3375.2
8954.6
less: Transfer from Capital Reserve
-1338
7616.6 10132.9
Total operating expenses
-25967.9
III)(loss) before Interest, prior period Adjustments and Taxation
Interest and Finance Charges
7013
prior period before adjustments(net)
7013 -32980.9
IV)(loss) before taxation
less: Provision for current tax i)Fringe Benefit Tax
123.5
ii)Wealth Tax
2.5
Add: Deferred tax benefit
126 10845.3
29
V) Deficit carried to Balance Sheet
6.3
-22261.6
BALANCE SHEET AS ON 31ST MARCH, 2008 BALANCE SHEET AS ON 31ST MARCH, 2008
PARTICULARS
MARCH 31,2008
Rs in million
Sources of Funds
Shareholder's Funds a)Capital
1450.00
b)Reserves and Surplus
78942.90
80392.9
Loan Funds a)Secured loans
28917.5
b)Unsecured loans
155216.5
184134 264526.9
TOTAL Application of Funds
Fixed Assets a)Gross Block
186545.6
Less: Depreciation
7601.2
b)Net Block
178944.4
c)Capital Work-in-Progress
39726.3
218670.7 901.2
Investments Current Assets, Loans and Advances
a)Inventories
10016.1
b)Sundry Debtors
26134.1
c)Cash and Bank balances
10845
d)Other Current Assets
318.9
e)Loans and Advances
15602 62916.1
less : Current Liabilities and Provisions
a)Current Liabilities
42861.8
b)Provisions
9234.3 52096.1
Net Current Assets
10820
Profit & Loss Account
22261.6
Deferred Tax Assets (Net)
11873.4
TOTAL
264526.9
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6.4 6.4. A
FINANCIAL INITITATIVES AIRCRAFT FINANCING The company‟s USD 7.2 billion loans for one of the largest fleet acquisition of 68 aircrafts
was cleared by Export-Import bank (Ex-Im bank) of USA on 9 th October 2006. The US Ex-Im issued a final commitment of 17 aircrafts and a preliminary commitment for 751 aircraft schedule to be delivered between November 2006 and December 2011. The bank would guarantee loan upto 85% of the fleet acquisition costing USD 7.2 billion and the balance 15% was to be funded from commercial borrowings. The financing is the largest transaction done out of India supported by US Ex-Im bank. An agreement was signed with US Ex-Im on 19 th September 2008 for the guaranteed financing of the 3 B777 aircraft and 5 B737 -300 aircraft for an approximate value of US$ 550 billion. The Ex-Im portion of 85% of the bank loan will be funded by M/s Standard Chartered bank and the remaining 15% by M/s IDBI bank. Meanwhile to support the deliveries which have been already taken place, M/s Standard Chartered bank has given a bridge loan equivalent to this facility which is operational upto 31 st January 2009. The bridge loan will be financed out of the delivery financing shortly. Meanwhile, US Ex-Im has also renewed its Preliminary commitment for the remaining 43 aircraft including 27 B787 dream liner aircraft which are expected to join the fleet from early 2010 onwards. Due to the liquidity crisis and the virtual collapse of the US banking system in September 2008, M/s Standard Chartered bank revised the original terms of offer from sub LIBOR with a review clause after one year to revert to the original pricing subject to market stabilization. A similar agreement for financing 22 airbus fleet was entered into with M/s Kfw bank. For the 3 rd tranche of aircraft deliveries numbering 21 to commence from April 2009, the company is already in the process of typing of financing with a consortium of Indian banks led by IDBI to the extent of USD 1.1 million equivalents to Rs. 5500 crores.
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6.4.B.
SALE AND LEASE BACK OF AIRCRAFT The company has entered into aircraft sale agreement with Investec Bank (UK) Ltd. for sale
5320-200 and 3 B747-400 aircraft on 31 st March 2008 under a Sale and Lease back arrangement as that date, the beneficial ownership in the sale property was transferred to Investec bank(UK) Ltd. after receipt of an initial amount of USD 100 million.
The transfer of the legal title in the sale property was conditional upon Investec bank remitting the balance portion of the sale proceeds and the execution of an operating lease agreement by both parties in respect of each aircraft whereby NACIL would lease back the aircraft from the buyer.
In the view of the severe liquidity crunch in the market and the global financial crisis, Investec bank was in the position to complete the transaction only in the case of 3 B747-400 aircraft and 1 A320-200 aircraft.
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7.
HIREARCHY CHART Chairman
AIR INDIA BOARD
Managing Director
Director
General Manager
Deputy General Manager
Senior Manager
Manager
Deputy Manager
Assistant Manager
33 Clerical staff
8.
DEPARTMENTS
8.1. VARIOUS DEPARTMENTS IN AIR INDIA AIR SAFETY COMMERCIAL DEPARTMENT OF INFORMATION TECHNOLOGY ENGINEERING FINANCE GROUND SERVICES HEADQUARTERS HUMAN RESOURCES DEVELOPMENT INFLIGHT SERVICES INTERNAL AUDIT MATERIALS MANAGEMENT MEDICAL SERVICES OPERATIONS PUBLIC RELATIONS PLANNING AND INTERNATIONAL RELATIONS PROPERTIES AND FACILITIES SECURITY VIGILANCE
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8.2.
SECTIONS IN FINANCE DEPARTMENT SER SECTION MIS AND STATISTICS FINANCIAL ACCOUNTS BILLING SECTION STORES AND ACCOUNTS INSURANCE ADMINISTRATION CAPITAL BUDGET AND (PROJECTS) MANAGEMENT PAX (PASSENGERS) SCREENING SECTION AIR INDIA EXPRESS BANKING INCOME TAX CARGO AND MAIL IATA
(INTERNATIONAL
AIR
TRANSPORT
SECTION STAFF CLAIM SECTION LOANS AND PROVIDENT FUND SECTION MISCELLANEOUS BILLS PASSING SECTION
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ASSOCIATION)
CLEARING
FINANCIAL ACCOUNTS
Financial Accounts section consolidates all entries to prepare trial balance; the necessary details are used to prepare the balance sheet. The balance sheet is then submitted to the parliament by 31 st October of each year. And then the government displays it to the general public.
INSURANCE
Insurance Section handles the overall insurance of various office equipments, computers, employees, etc.It is a time bound activity. There are two types of insurance, first being unit insurance i.e. the insurance which expires within one year & the second which continues after one year.
PAX (PASSENGERS) SCREENING SECTION
Pax (passengers) screening section sells tickets through agents and Ground Service Agents Sales. They get all the report of sales i.e. the revenue which Air India gets by selling the passenger tickets.
AIR INDIA EXPRESS Air-India Express is a low-cost airline subsidiary of Air India based in Mumbai, India. It
operates services mainly to the Middle East. Its main base is Cochin International Airport, with a hub at Trivandrum International Airport. The airline is now part of the National Aviation Company of India Limited, which was formed in order to facilitate the seamless merger of Air India and Indian Airlines
CARGO AND MAIL
Warehousing
Acceptance, build-up and storage of goods
Inventory control
Handling of transit freight
HUB concept (for full freighter airlines)
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Security services
Express services
Acceptance and processing of import, export, transit and transfer documentation
Handling of dangerous goods, live animals, perishables and other special freight.
Courier services
Transport to and from aircraft. IATA (INTERNATIONAL AIR TRANSPORT ASSOCIATION) CLEARING SECTION
The IATA Clearing Section of Air India enables the airlines to settle their interline billings securely, efficiently and On-time.
By offsetting their mutual transactions through the IATA Clearing House, participating companies can reduce hundreds of bi-lateral, multi-currency transactions for passenger, cargo, baggage, catering, ground-handling and other services to one single payable or receivable amount.
IATA transactions are closed weekly. PAY ACCOUNTS AND STAFF CLAIM SECTION
Pay Accounts and staff claim section handles the employee‟s salary, allowances (lunch, medical, etc.) and claims like mediclaim, leave encashment, etc.
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9. 9.1.
PROJECT PROFILE RAMP ASSISTANT ON AIRPORTS Cargo flights crew ramp service Provide fast and safe CIQ clearance by special assigned person with full knowledge of regulations avoiding any disturbance. Professional ramp transportation between terminal and the aircraft. Provide transportation between hotel and airport as requested.
Passenger flights ramp assistant Ramp supervision and coordination (liaise with all parties involved, supervise loading, dispatch service, arrange fueling, arrange catering, etc...) Filing of station copies of post-flight documents Arrange services in case of diversion Filing of station copies of flight documents Effect payment, on behalf of the Carrier Monthly OTP report
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9.2.
RA FORMS (RAMP ASSISTANCE FORMS)
RA forms are the forms which are to be filled according to the services provided by Air India to the local and IATA Airlines. The services are provided on the basis of the agreements made between the airlines. The agreement has a standard format. There are two versions of the SGHA (Standard Ground Handling Agreement).i.e. 1. 2004 2. 2007 The services provided are clearly mentioned on the RA forms the format of which is provided in annexure 1. Some of them include providing: Buses Packstanders X-raying Baggage strapping etc. It also comes under the security services provided by the airlines the format of which is given in annexure 2. Services provided by the airlines is divided into 3 types: Comprehensive Service Charges Peak Hour Charges DCS with PBPT It also gives information regarding the type of flight i.e. whether it is a Transit flight or a Turnaround flight. RA forms also gives details of the timings of the aircraft being halted at the TARMAC i.e. the place of landing an aircraft. On the basis of which the PHS (Peak Hour Service Charges) is charged. Any aircraft landing after 12:00 at midnight till morning 4:00 (00:01 to 00:04) is charged with PHS.
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The PHS charges for security, extra equipment and handling are 15% extra over the normal charges. Suppose a flight stays on the TARMAC for more than 4 hrs then the calculation is TR+4 and if the flight departs before 4 hrs then the calculation is made as TR-4. The charges are calculated on the RA forms in $ (dollars) for IATA airlines and in Rs. (Rupees) for local airlines. The calculation is as follows: OLD RATES
NEW RATES
CRITERIA
12%
10%
Service tax on whole amount
2%
2%
On service tax
1%
1%
Calculated on service tax(Higher Education Cess) RATE CHART
The RA forms are the basis of the calculation in the Miscellaneous Billing which is then consolidated to form the ERP.
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10.
MISCELLANEOUS BILLING The Miscellaneous Billing of Air India manages the detailed information associated with
recording, tracking, calculating, and printing miscellaneous bills. It allows for great flexibility in managing billing information. Seamless integration with the Financial Management, Bank Reconciliation, Collections, and Budget Preparation Modules ensures data consistency. User-defined tables, expressions, and formulas process supplements, bills or charges
Features: Powerful on-line editor updates billing data on-line Print detail and summary reports on demand User-defined codes and classifications simplify your data management Automatically compute bill amounts, late payment penalties, and simple interest due Access information via billing ID, customer name, customer location, or other user-defined criteria Track unlimited number of information years for review and analysis Create and maintain detailed records for each transaction including: Late Payment Notifications Creates one-time or recurring invoices that can be posted as unpaid items to the Accounts Receivable system for item and payment processing.
Provides miscellaneous invoices containing an invoice number, invoice date, billing code, unlimited free form text, due date, customer purchase order, discount date, and line item detail. An invoice register is printed for verification prior to invoice printing.
Maintains monthly, quarterly, or annual perpetual or fixed amount contracts for recurring charges. These recurring charges are posted to the Accounts Receivable system for payment processing.
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Provides for one-time invoices to be posted to a customer account for charges such as services billing and sales of parts or fixed assets.
10.1.
SPECIMEN OF RECHARGE
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10.2.
SPECIMEN OF RECHARGE INVOICE
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10.3.
SPECIMEN OF JV
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10.4. SPECIMEN OF MISCELLANEOUS BILLING VOUCHER
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11.
RECHARGES
Recharges are the charges been made by one airline to the other for changes or doubt on the charges made on them.
ILLUSTRATION Suppose Air India has charged $100 for the services being provided to Emirates. If according to Emirates calculation of charges the amount sums upto only $50 then they would accept the $50 charged by Air India and will recharge the remaining $50 which they reject. This process continues till either of the airlines accept the charge. In case Air India made a mistake in calculation they accept the recharge and if not they reject it.
NARRATION FULL REJECTION
Fully rejection to your recharge Invoice No:_____ of January 2007 clearance of our invoice no:____ dated March 2006. PART REJECTION
Part rejection to your recharge Invoice No:_____ of January 2007 clearance of our invoice no:____ dated March 2006. ON THE BASIS OF AGREEMENT
Fully rejection to your recharge Invoice No:_____ of January 2007 clearance of our invoice no:____ dated March 2006.The calculations are done on the basis of agreement. Please refer to the attached letter. LEVY
Fully rejection to your recharge Invoice No:_____ of January 2007 clearance of our invoice no:____ dated March 2006.CIAL levy mandatory. The Recharge document is given in Annexure 3
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12.
ERP ORACLE AT AIR INDIA Air India Limited began operations in 1933 with two planes, one pilot, and a handful of
engineering staff. Its „office‟ was a palm-thatched shed. Today, Air India has a fleet of 45 aircraft,
including Air India Express, a low-cost airline, and flies to around 44 destinations worldwide. Headquartered in Mumbai, the airline made a net profit of US$2 million (Rs.97 million) and increased revenue by 15% in the 2005 financial year. In January 2006, Air India implemented a range of Oracle E-Business Suite applications as the basis of an integrated enterprise resource planning system. To ensure its business and technical staff could maintain and use the system, the company sent 40 employees to Oracle University. The interactive training helped staff understand how an electronic business management system worked and gave them the knowledge and confidence to use the applications from the go-live date. The positive experience of staff promoted a cultural shift inthe organization and encouraged management to consider extending the technology to other areas of its business.
A NEW WAY OF WORKING Although Air India had used IT packages in the past, this was the first time the organization had implemented a commercial off-the-shelf enterprise resource planning solution. Although the concept of multiple users interacting on the same platform was not new to Air India, usage of a true ERP solution was new to the organization. In the past, the company had relied on manual, paper based processes to manage its inventory, purchasing, and budgetary control and monitoring. The airline sent around 40 people to Oracle University for training on Oracle Inventory and Oracle Purchasing, followed by training on Oracle Financials. Technical staff received Level 1 and Level 2 system administration training and attended patch installation courses. The courses took place at Oracle‟s premises in Mumbai and occasionally at Air India‟s
offices. The face-to-face classroom training included instruction on how to use the Oracle applications and basic exercises. Oracle trainers were on hand to help users when they ran into difficulties or had queries. Training notes were also provided. Courses ran from three to five days, depending on the subject.
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Staff was happy with the quality and level of the training and instructors. The airline did not expect them to master the application after one week of training; the aim was to give them some reassurance on the system so they had the basic navigational routes and make it possible for them to explore other options. Training familiarized staff with the application and gave them the skills and confidence to use the system by themselves. Without the Oracle University training, the airline believed it would not have been able to implement and use the Oracle solution effectively. Air India had engaged an external company to implement the solution and found that training improved communications. After the training, staff could talk the same „language‟ as the
implementation partner. Risk was minimized because both organizations understood what the other was trying to achieve.
REDUCED TRAINING COSTS Air India used the first group of trainees to tutor their colleagues on the Oracle system, reducing overall training costs. The staff didn‟t just train them on the actual use of the application but
also showed them how the integrated Oracle ERP solution works. They provided background information on the system that may not be immediately visible to the end user, satisfying users‟
curiosity as to why certain processes happened in a particular way.
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12.1.
Accounts Receivable Of Air India Does...
Calculates penalty and late charges and even prints delinquency notices, form letters and mailing labels.
Facilitates collection of outstanding revenue with account aging inquiry, payment processing, custom letter requests, and payment arrangement set-up.
Allows you to quickly view account balances and detail history with detailed on-line inquiry.
Prints account summaries, trial balance, and detail trial balance information on demand.
Maintains customer information including customer name and address, mailing address, multiple ships to codes, credit limit, and account balance and detail invoice history and payment transactions.
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12.2
IMPLEMENTATION OF ERP
Air India SATS has successfully implemented an integrated ERP (Enterprise Resource Planning) system. ERP covers all the processes related to the ground and cargo handling companies, ranging from their recruitment to retirement, flight opening and closing to final billing, complete financial accounting, equipment maintenance and asset accounting, procurement and inventory, bio-metric attendance and duty planning and allocations.
Process covered by ERP:
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12.3.
MODULES COVERED BY ERP: Procurement Inventory Human Resource
Payroll
Duty Roster
Bio-metric Attendance
Quality Control Financial Accounting
General Ledger
Accounts Payable
Accounts Receivable
Asset Register
Maintenance and Repair
Preventive
Break-down
Operations
Flight opening
Flight closing
Additional Services
Contracts Automated Billing
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ERP is a frame-work based solution, any-time-ready for the business rule changes in terms of contractual obligations or service level agreement (SLA) based changes in the processes. These changes can be configured in ERP and accurate invoicing is possible with its flexible design.
ERP is an internet and intranet based solution, helping the users to access and work on the system wherever they are. The user configurable reports help the users to take appropriate decisions on time.
Overall, ERP integrates all the departments of Air India SATS into one database, collaborating the required information; make the information available to all the stake holders including their partners, customers and vendors.
As shown above in the Oracle e-business suite transactions, Receipt, Collection and Customers are the 4 major dimensions on which ERP works.Accounts Receivable, Accounts Payable and GL Journal Voucher are the 3 main things which are worked on in the Revenue section of Air India. It enables the calculation of Sundry Debtors. The sum of all the Sundry Debtors is taken and accordingly Invoices are raised. Invoices are raised for local parties‟ i.e. domestic airlines.It also
enables the creation of new customers, recording time of pay, customer details, customer no. etc.
The transactions are done on the account no of finance department-703 The transactions are given codes as 703NCH001 0000 0000 0000 where the codes can be extended according to additional specifications. The coding remains the same for Government and Private Airlines.
The ERP accounts are also known as 7 segment accounts.
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12.4.
Why ERP? The catch word of ERP implementation is speed. The faster it is implemented the quicker and better are the advantages and delivery in terms of results. The returns are sought at a shorter period. This deviation from the conventional practice has become the order of the day as far as many companies are concerned. Updating the system from time to time will help in gaining the finer nuances of technology.
ISSUES TO BE CONSIDERD WHILE ERP IMPLEMENTAION Popular information systems Likelihood of fluctuations in the choice of technology The ability of market players to stay in tune with it The ways and means to implement a business applications like ERP To benefit from the same so as to gain a competitive edge Their usage and services The necessity for innovating software applications
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14.
FINDINGS
ADVANTAGES OF ERP Bringing down the costs and saving the valuable time which would have otherwise been wasted in procedural maneuvers and unwanted delays. Consolidates all the data in one database Can access from any station in the world Disposing queries immediately and facilitating the payments from customers with ease. It is the perfect commercial and scientific epitome of the verse "Think Local. Act Global". ERP helps to control and data and facilitates the necessary contacts to acquire the same. Ensures in finding the oldest of the data and the very latest easily and in no time. Consolidates 100s of transactions in one ERP code due to specific codes given to each. Is a chain process where the information is proceeded only after checking by the Assistant Manager and the Senior Manager. Any changes to be made in the information fed is made by them thus reducing the possibility of mistakes. DISADVANTAGES
Being a software based programme a failure in the system brings a halt to all the processes. When Air India finance department was attacked by viruses all the ERP proceeding came to a halt and no transactions were recorded. Being the year ending the airlines had to face tremendous loss of time and money. Training the employees in ERP consumed a large amount of time bringing other functions to a halt. Requires huge investment of money and time. Not all employees are well acquainted with it increasing burden on other employees. Information may reach in hands of
wrong persons and also does not have secrey of
information. The data once entered cannot be modified as done in MSBILLING.
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ADVANTAGES OF MSBILLING
User friendly software and easy to use and understand. Modifications can be made when needed. It encompasses all the domestic jargons, currency conversions, diverse accounting standards etc. No need to learn the rates and find them in case of recharges. Feeding the invoice number gives the detail of the invoice at that very moment. Calculation of JV also given in consolidated form.
DISADVANTAGES OF MSBILLING
Any wrong information entered can be modified but this process deletes all the available information fed about the invoice. Thus is time consuming. Outdated method. Network failure brings the entire system to a standstill.
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