A

PROJECT REPORT ON

MISCELLANEOUS BILLING

&

ERP

For

National Aviation Company of India Ltd (NACIL)

SUBMITTED BY

Nair Dhannya 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, 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 'International' 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.

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.

2

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 Billing where the charges are made according to the RA Forms.

Recharges form a part of 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 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.

3

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 Air-

India. i whole-heartedly acknowledge and express my gratitude to the following officers:

1. Mrs. Chitra Raje – Senior Manager, Finance

2. Mrs. Vandana Deshmukh-Assistant General Manager

3. Mrs. Subha Putnis- Assistant General Manager

4. Mr.Suhas Khare – Deputy Manager, Miscellaneous Billing Section

5. Mr. Sandip Sathe – Assistant General Manager, Miscellaneous Billing Section

6. Mrs. Geeta – Miscellaneous Billing Section

7. Mrs Revathy – Deputy Manager, Miscellaneous Billing Section

8. Ms. Chanda Pawar– Clerk, Miscellaneous Billing Section

9. Mr.Ashish Gardi – Clerk, Miscellaneous Billing Section

10. Mr.Pramod Ghagre-Finance

11. Mr. Ramesh More- Administration

12. Mr.Patil- Finance Administration

13. Mr. Bindu Katti – 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.

4

Table of contents

SR.NO TOPIC PAGE NOS

1.1 SUMMARY 2-3

1.2 ACKNOWLEDGEMENT 4

1.2 WHY THIS TOPIC?? 91.3 OBJECTIVE OF THE STUDY 102.

2.1.

2.2.

2.3.

2.4.

2.5.

2.6.

2.7.

COMPANY PROFILE

HISTORY

BOARD OF DIRECTORS

MISSION

OBJECTIVE

AMALGAMATION OF AIR INDIA AND INDIAN AIRLINES

WITH NACIL

ORGANISATION STRUCTURE OF THE COMPANY

MAHARAJA

11

12

13

14

15

16-17

18

19

3. REVIEW OF PERFORMANCE-HIGHLIGHTS 20

4. CSR 215.

5.1.

5.2.

AVIATION SCENERIO

CIVIL AVIATION SCENARIO IN INDIA

DEVELOPMENTS IN THE YEAR 2008-09

21-22

23

24

6.

6.1A

6.1B

ANALYSIS OF FINANCIAL/PHYSICAL PERFORMANCE

REVENUE

EXPENDITURE

25

26

27

5

6.3.

6.4.

6.4A

6.4B

EXPENDITURE

PROFIT AND LOSS ACCOUNT

BALANCE SHEET

FINANCIAL INITIATIVES

SALE AND LEASE BACK OF AIRCRAFT

23

24

25

26

7. HIREARCHY 27

8.

8.1.

8.2.

DEPARTMENTS

VARIOUS DEPARTMENTS IN AIR INDIA

SECTIONS IN FINANCE DEPARTMENT

28-29

9.

9.1.

9.2

PROJECT PROFILE

RAMP ASSISTANT ON AIRPORTS

RA FORMS

30-31

32

33-3410.

10.1

10.2.

10.3.

MISCELLANEOUS BILLING

SPECIMEN OF RECHARGE

SPECIMEN OF JV

SPECIMEN OF MISCELLANEOUS BILLING VOUCHER

35

36

37

38

39

6

11. RECHARGES 4012.

12.1.

12.2.

12.3.

12.4.

ERP ORACLE AT AIR INDIA

AR AT AIR INDIA DOES…

IMPLEMENTATION OF ERP

MODULES OF ERP

WHY ERP?

41-44

45

46

47-48

4913. FINDINGS 50-5114. CONCLUSION 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.

9

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

10

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.

11

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

12

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.

13

2.4 OBJECTIVE

To provide safe, efficient, adequate, economical and properly co-ordinate international air-

services, 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 co-

operation in the performance of the company’s activities.

To provide wider participation amongst its employees in management functions.

14

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.

15

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.

16

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:-

17

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.

18

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

19

4. CORPORATE SOCIAL RESPONSIBILITYEnvironment 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 1st 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 unitsIn 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.

20

5. AVIATION SCENERIO5.1 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 22nd March 2008 and 23rd May 2008,

respectively.

21

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

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.

22

CURRENT AVIATION SENARIO

MARKET SHARE IN JUNE,'09

23

ON TIME PERFORMANCE IN JUNE’09

DOMESTIC FLYERS

Jan-June,’09 211 lakh

Jan-June,’08 228 lakh

Fall 8%

24

LOAD FACTORS IN JUNE,’09

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

25

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

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.

26

6.1 ANALYSIS OF FINANCIAL/PHYSICAL PERFORMANCESince 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

27

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 of-

o 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.

6.1B EXPENDITUREThe 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

28

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.

6.2 PROFIT AND LOSS ACCOUNT

PROFIT AND LOSS ACCOUNT FOR THE PERIOD MARCH 30, 2007 TO MARCH 31, 2008

PARTICULARS  RUPEES IN MILLION

I) REVENUE  

29

1. Traffic  i)scheduled services 107612.6ii)others 15365.4 1229782. Handling, Servicing and Incidental   13405.5Operating Revenue   136383.53.Other (Net)   16191.2Total Revenue   152574.7II) EXPENSES  1. Payments to and Provisions for Employees   322452. Insurance   851.33.Aircraft Fuel and oil   62525.14. Navigation, Landing, Housing and parking   9698.45.Aircraft material consumed   9583.76.Outside repairs-aircraft   71967.Hire of Aircraft   137778.Handling charges   5460.99.Passenger Amenities   5929.310. Commission (Net)   615011. Communication Charges: i)Reservation Systems 2466.9 ii)Others 1534.1 400112. Travelling Expenses: i)Crew 2422.2 ii)Others 953 3375.213. Depreciation 8954.6less: Transfer from Capital Reserve -1338 7616.6Total operating expenses   10132.9III)(loss) before Interest, prior period   -25967.9Adjustments and Taxation  Interest and Finance Charges 7013prior period before adjustments(net)   7013IV)(loss) before taxation   -32980.9less: Provision for current tax   i)Fringe Benefit Tax 123.5 ii)Wealth Tax 2.5 126Add: Deferred tax benefit   10845.3V) Deficit carried to Balance Sheet   -22261.6

6.3 BALANCE SHEET AS ON 31ST MARCH, 2008

BALANCE SHEET AS ON 31ST MARCH, 2008PARTICULARS MARCH 31,2008 Rs in millionSources of Funds  Shareholder's Funds  a)Capital 1450.00

30

b)Reserves and Surplus 78942.90 80392.9Loan Funds  a)Secured loans 28917.5b)Unsecured loans 155216.5 184134TOTAL   264526.9   Application of Funds  Fixed Assets  a)Gross Block 186545.6 Less: Depreciation 7601.2b)Net Block 178944.4c)Capital Work-in-Progress 39726.3 218670.7Investments   901.2Current Assets, Loans and Advances  a)Inventories 10016.1b)Sundry Debtors 26134.1c)Cash and Bank balances 10845d)Other Current Assets 318.9e)Loans and Advances 15602  62916.1less : Current Liabilities and Provisions  a)Current Liabilities 42861.8b)Provisions 9234.3  52096.1Net Current Assets   10820Profit & Loss Account   22261.6Deferred Tax Assets (Net)   11873.4TOTAL   264526.9                 

6.4 FINANCIAL INITITATIVES

6.4. A AIRCRAFT FINANCING

31

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 31st 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.

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 31st March 2008 under a Sale and Lease back arrangement as

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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.

7. HIREARCHY CHART

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8. DEPARTMENTS 8.1. VARIOUS DEPARTMENTS IN AIR INDIA

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ChairmanDirector ManagerClerical staff

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

8.2. SECTIONS IN FINANCE DEPARTMENT

SER SECTION

MIS AND STATISTICS

FINANCIAL ACCOUNTS

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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 ASSOCIATION) CLEARING

SECTION

STAFF CLAIM SECTION

LOANS AND PROVIDENT FUND SECTION

MISCELLANEOUS BILLS PASSING SECTION

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

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parliament by 31st 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)

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

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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.

9. PROJECT PROFILE

9.1. RAMP ASSISTANT ON AIRPORTS

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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

9.2. RA FORMS (RAMP ASSISTANCE FORMS)

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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.

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.

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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.

 

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.

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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. RECHARGESRecharges are the charges been made by one airline to the other for changes or doubt on the charges

made on them.

ILLUSTRATIONSuppose 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.

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

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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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