Air India Finance calculation under Dr. kinnarry Thakkar

7/30/2019 Air India Finance calculation under Dr. kinnarry Thakkar

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A Project Report

On

"Management Information System

Of Finance In

Air India

SUBMITTED TO SMT. K.G. MITTAL INSTITUTE OF

MANAGEMENT, I.T., & RESEARCH IN THE PARTIAL

FULFILLMENT FOR THE DEGREE OF

MASTER OF MANAGEMENT STUDIES

SUBMITTED BYAshvani R. Bhagat

Under The Guidance Of

Dr. Kinnarry Thakkar

Smt. K.G. Mittal Institute Of Management, I.T. & Research

Malad (West), Mumbai - 400064


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Declaration

I, Ashvani R. Bhagat the under signed that this project report entitled Management

Information System for Air India Ltd. is my original work. The empirical finding in this

report is based upon the information collected by me and not copied from elsewhere. I

understand that the detection of any such copying by me for this report is liable to punished

in any way the institute deems.

[Ashvani R. Bhagat]


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ACKNOWLEDGEMENT

No man can live as an island, journey through life alone

These words aptly describe the theme of this short but essential page of the report. In

our highly professional field, we need help from time to time from the people around us. Be it

simple suggestion or little words of encouragement, weird ideas or morale boosting talks.

Through these lines I humbly acknowledge the contribution of all those who have helped me

and to whom I am highly indebted.

I take this opportunity to convey my deep sense of gratitude towards the Director, ,

Smt. K.G. Mittal Institute of Management, I.T. and Research and Prof. Annie Joseph for

permitting me to undertake this project.

I am extremely thankful to Ms. Surekha Neelkantan Ma'am (Sr. Manager

Finance)and Mr. Vinod Hejmade (Dy. General Manager) who has extended his full support

and co-operation in the successful accomplishment of the project.

We would also like to thank Mr. Bindu Madhav Katti(Manager), Mrs. Shraddha

Gandhi(Manager, Finance),Mr. Uday Donwalkar, Mrs. Bharati Tambaku(Assistant Manager,

Finance), Praful Bhagat, Sujata Broker, for providing me this opportunity for taking up this

challenging project.

We are also thankful to all the employees of Air India who have helped us in

completing the project.


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EXECUTIVE SUMMARY

MIS is something we all do. Planning and preparation for the future is not important

for an individual, but also for a business. Successful companies are constantly improving

their ability to predict their future operations and their related resource requirements,

enabling them to adjust their plans as needed and stay ahead of the competition.

A Budget is our best estimate of what our business will achieve during the budget

period. It is planning tools, which provide us with forecasts of what might happen and also

target that we aim to achieve financially.

By considering the importance of the MIS, this report focuses on the following areas

Preparation of the Annual Revenue & Expenditure Budget of the Corporation in theform of the booklet for submission to the board for its approval

Intimation of the Annual Budget allotments, to the Outstations as well as thedepartments at headquarters

Comparison of Actual Expenses with the Budget Allotments Preparations of Monthly Report on Estimated Financial Result for submission to

Headquarters

Preparations of Quarterly Report, Performance Budget and other returns for submission toGovernment Agencies

Preparations of Cost Analysis Statement Submission of Data to the IATA Information Required from the Stores & Purchases


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TABLE OF CONTENT

Chapters Particulars Page No.

1 Company Profile

a. Historical Background

b. Wholly Owned Subsidiary Companies

c. Organization Structure

7

2 Types of Departments

a. Finance Department subsections

b. Financial Performance

12

3 Merger of Air India and Indian Airline 22

4 Research Hypothesis

a.Research Methodology 245 Working of MIS

a. Introduction

b. Management information System in Air India.

c. Role of MIS in the financial Aspects of air India

d. Route Analysis

e. Preparation of Route Analysis Report

30

6 Direct Cost / Revenue Ratio

a. Introduction

b. Preparation Of Direct Cost / Revenue Ratio Statement

c. Analysis Of Report

40

7 Revenue Expenditure Budget

a. Work of the section

62


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b. Preparation ofRevenue Expenditure Budget

c. Layout of Preparation ofRevenue Expenditure Budget

8 ERPa. Introduction

b. ERP - Financial Accounting Graph

c. ERP SAP

70

9 SWOT Analysis Of Air India 75

10 Findings and Interpretations 78

11 Implementation of Study - Cost Accounting Tool 84

12 Limitations 89

13 Conclusion 91

14 Recommendation 93

15 Future Scope 94

16 Bibliography 96


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Chapter 1.

Company Prof il e

Historical Background

Tata Sons Ltd has taken birth in the year October 15, 1932.Mr. J.R.D Tata who was

the first Indian to get his license in India. Mr. Neville Vincent a formal Royal Air Force

(RAF) pilot came to India in 1929 from Britain. He saw immense potential for aviation in

India. By consider future globalization of the world. Mr. J.R.D Tata has taken the first step

with an air service.

On consultation with Mr. J.R.D Tata Mr. Vincent brought out a scheme to operate an

Air service. They got this to the notice of Mr. Peterson a director of Tata Son Ltd. After the

approval they operate the first Air service Karachi to Bombay via Ahmedabad. In the first

full year of operation, Tata airline flew 1,60,000 miles, carried 155 passengers and 10.71

tones of mails. When a light single engine Puss Moth aircraft took off from Karachi with

J.R.D Tata as its pilot and landed on grass strip at Juhu. There was no runway, no radio

facility in the aircraft or on the ground and no Aerodrome officer on the ground.

The Government initially bought 49% of the airlines shares in 1946, making it a

public company and renaming it as Air India. On 8th march, 1948 Air India international has

been incorporated then they launched its first service to London via Cargo and Geneva on the

date 1st Jan 1949 with a twice weekly service. In the year 1952 the planning commission

recommended the nationalization of Air transport industry. This resulted in creation of two

nationalized corporations. Air India International which retained its identity and international

flag carrier status & Indian Airlines to operate at domestic level.


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WHOLLY OWNED SUBSIDIARY COMPANIES

(A) Hotel Corporation of India Limited:

As part of the disinvestments programmer an advertisement was issued in all the

leading newspapers in India and abroad inviting bids from the prospective buyers for the

remaining properties comprising of Hotel Corporation of India, a wholly owned subsidiary of

Air India viz the Centaur Hotel Delhi Airport and Chef air units at Delhi and Mumbai.

(B) Air India Air Transport Services Limited (AIATSL):

With a view to improve the quality of Ground Handling services to Air India flights

and those of Customer Airlines, AIATSL was registered as a fully owned subsidiary of Air

India on 9 June 2003. While the Company has been growing at a moderate pace, the year

2005-06 has been a very eventful year with its wings being spread to many Indian

international airports.


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AIATSL took over handling services at Calicut, Pune Ahmedabad and Amritsar in a

major way. While comprehensive handling was taken over at Calicut with the

commencement of AI Express flights effective 1August 2005, similar arrangement

commenced at Pune effective 12 December 2005. Terminal handling was taken over at

Ahmedabad and effective 1 May 2005 and 15 May 2005, respectively.

Resources for provision of security services have been inducted on three year contract

by AIATSL at these locations, the other handling activities are being availed through

outsourcing.

(C)Air India Engineering Services Limited (AIESL):

Air India Engineering Services Limited was incorporated on 11 March 2004 with

Authorized Capital of Rs. 10 cr. and is still awaiting Governments approval. The Certificate

to Commence Business was obtained on 17 January 2006. The Paid-up Capital of the

Company stands at Rs.5lacs. It is planned to develop this subsidiary company into a

Maintenance, Repair and Overhaul (MRO) facility in this Region with Air India providing

the necessary initial support in terms of infrastructure and domain knowledge.

(D) Air India Charters Limited:

Air India Express:

Air India Express, which operates under the flagship of Air India Charters Limited,

launched the first flight to Abu Dhabi from Thrivananthapuram on 29 April 2005. As on

31 March 2006, four aircraft had been inducted as follows:

VT-AXA23 February 2005

VT-AXB 08 April 2005

VT-AXC 19 April 2005

VT-AXD16 March 2006


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In April/May 2006, three more aircraft were inducted as follows:

VT-AXG06 April 2006

VT-AXF 10 May 2006

VT-AXG24 may 2006

All the above aircraft have been taken on dry lease for a period of five years.


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ORGANIZATION CHART

Director

Finance


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Chapter 2.

Types of Departments

Air India has been divided into different departments for the purpose of smooth

administration and operations. Each department is further sub-divided into sections that

expertise in their respective categories of skill. The departments are as listed below:

1.Air Safety Department

2.Airport Services Department

3.Commercial Department

4.Civil Works & Properties Department

5.Department of Information Technology

6.Engine Overhauling Department

7.Engineering Department

8.Finance & Accounts Department

9.Human Resources Development Department

10. In-flight Services Department11. Medical Services

12. Operations Department

13. Planning & International Relations Department

14. Public Relations

15. Security & Fire control

16. Stores & Purchases Department

Air India generates revenue through sales of passenger tickets sales, cargo and mail

handling, maintenance of other airlines and revenue sharing with other airlines. The finance

department is an important backbone of the companys roles at d ifferent levels of operation.

Due to the large number of activities involved in business and to facilitate division of labor,

the finance department is divided into eighteen subsections. Each of these subsections has an

important role and specialized role in the day-today functioning of the organization. Although

the functions have been assigned to different subsections, some of the subsections are inter-

related functionally to perform effectively and efficiently.


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Finance Department subsections

1. Capital Budget

Capital Budget deals with budgeting requirements of the company. The main function

of the department is to forecast budget requirements of the upcoming financial year. The

elements that need to be taken into consideration are the requirements of new assets in terms

of aircraft, maintenance machinery, property and man power. This department is responsible

for deciding the capital structure to be used for the purpose of asset procurement.

Since most of the decisions taken by this department involve high cost and longerdecision making duration, each task is classified as a Project. The objective of a project is to

improve benefits and reduce cost and risk to the company. Decision making for a project

requires considering many elements that are important to the cost and risk factor of the

project. For example: Decisions regarding procurement of aircrafts and simulators is a project

under Capital Budget department.

2. Financial Accounts

Air India has a large number of operational and non-operational stations. Until 2005,

each station maintained its own accounts and these were later consolidated for the purpose of

creating the financial statements of the company. This was a very tedious, complex and time

consuming task. To overcome these difficulties, an ERP was implemented for the purpose of

centralized accounting. As a result, all accounts are now maintained on a common platform.

This makes it easy to draw decisive reports and generate financial statements easily.

An ERP section also exists to impart training related to ERP and control the ERP

activities.


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3. Management Information Systems and Statistics

The main role of this department is its contribution to analytics. The Management

Information System (MIS) implemented in the section is capable of generating around 100

reports at regular intervals. The reports provide a trend of the past performance for the chosen

parameters. These reports are forwarded to the management for decision making as support

tools. The reports along with some other decision factors form the basis for creating future

plans. The reports thus act as a bridge between the finance department and the management.

It provides an indication of the companys performance in all areas.

4. Fuel and Oil

For an airline, fuel accounts to 60 percent of the operational expenses in an

accounting year. Thus, it plays a major role in the financial bills payable by the company.

The fuel and oil department is responsible for ensuring the procurement of fuel to the airline

at the best cost. The department also decides on method of payments for fuels to vendors viz.

fixed rate, floating rate or mixed rate. Fixed rate involves buying fuel from a vendor at a

fixed cost. Usually, this cost is higher than the current market price. This pricing is done

taking into consideration the future changes in fuel prices. If the market price increases

beyond the fixed price company still continues to pay the price fixed between both parties.

In floating rate, the fuel prices are paid as per changes in the market price. In mixed

rate, certain portion of the amount is paid on fixed rate and the remaining at floating rate.

Decisions regarding fueling strategy of aircrafts are decided by this section. If an

aircraft travels from Mumbai to London and then from London to New York, depending on

the fuel prices at different locations, it can decided how much fuel should be filled at Mumbai

and London.


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5. Banking

Banking section deals with handling transactions with banks where Air India holds

accounts for operational purposes. These accounts are used to meet operational expenses at

the current station or any other station. Transfer of funds among bank accounts is done in

order to facilitate funds at stations facing shortage.

Treasury management is another important function of banking section. It controls the

cash inflow and outflows at the stations.

6. Passenger Sales

Passenger sales deals with revenue generated exclusively from sale of tickets to

passengers. This section is further classified into two subsections: Offline section and

Commercial section.

Offline section

Revenue generated from ticket sales to passengers from stations where Air India does not

operate its flights are handled by this section. Air India has signed provisos with other airlines

that help in moving passengers from offline stations to operated destinations from where Air

India can fly them to their destination. The provisos cover revenue sharing agreements

between the airlines that outline fares to be shared and their percentages.

Commercial section

Commercial section deals with passenger handling at Air India operated stations. It

handles all cash sales, credit sales and agent sales of passenger tickets. Invoices are raised on

daily basis for passengers of otherairlines who have used Air Indias services and issued to

the respective airlines. Also, it settles invoices issued by other airlines in lieu of Air India

passengers who have used other airlines services. General Sales Agent (GSA) commissions

and other payments are settled by commercial section.


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7. Cargo and Mail

This department functions similar passenger sales section. It deals with revenue from

cargo and mail services.

8. Station Expenses Reconciliation (SER)

Station expenses reconciliation is responsible for handling expenses occurring at the

stations due to operations. It generates the statement of expenses and clears the dues.

Statement includes sharing of rent, telephone charges, conveyance with GSA, electricity,

government taxes etc.

9. Accounts Receivable Control (AR Control)

AR Control is responsible for ensuring the accuracy of entries in the ERP system. Part

of this system is outsourced to Kale consultants, an outsourcing agency. It handles revenue

documentation of passenger ticket audit coupons. Based on usage or cancellation of

passenger ticket effective revenue is calculated and credited to the respective sales station.

Before effective revenue realization, station is the debtor.

10. Insurance

Insurance section deals with all insurance needs of Air India. Insurance is mandatory

for assets like aircrafts, property, maintenance facilities, passengers, cargo and employees.

In case of aircrafts and passengers, the insurance cost is very high and thus it involves

high risk to the insuring company. In most of the cases, the insurance company reinsures part

or the full amount with a third party to pass the risk factor and reduce liability. Each aircraft

also needs to be insured with the manufacturer i.e. Boeing and Airbus for Air India.

For property and maintenance facilities insurance is required to safeguard in case of

any unexpected events like natural calamities or terrorist attacks.


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11. Billing

Billing is the largest section in the finance department. It deals with payments that are

to be done to external parties by the airline. These are classified as

Miscellaneous Billing Local Billing Billing

It includes all payments that are to be done by the company to outside parties like fuel

vendors, other airlines, airport payments, legal charges etc.

Policies regarding priority payments are done by this department.

12. Store Accounts

Stores accounts deals with acquiring spares as required. Procuring inventory for

stationery and aircraft spare parts required for maintenance from the company approved

vendors at the lowest price is the responsibility of this department.

13. Income Tax

Income tax department handles all income tax transactions for the airline. All these

factors are consolidated to help in filing the companys overall tax returns. The various

transactions handled are:

Earnings and employee taxes Corporate taxes Service taxes Employee tax returns Tax deducted on source (TDS)


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14. IATA

International Air Transport Association (IATA) is the regulatory authority for all

airlines across the world. This section deals with all payments that need to be routed through

IATA. Payments to invoices raised by other airlines for passenger and cargo services are

performed by IATA section.

15. Revenue Pools

Revenue pools are responsible for identifying areas that can be used for better revenue

earnings. It helps in measuring the current level of efficiency and comparing it with the

expected results. This can help in planning for future based on new revenue opportunities.

16. Pay Accounts

Pay accounts section deals with payments that are to be done for staff. Salaries and

other incentives to be credited to staff accounts are handled by this section. Air India houses

staff belonging to 38 categories and each category is further divided into grades. Pay

accounts section arranges for funds required for monthly salary payments. Along with

monthly payments, work related conveyance charges, other claims and dues are paid through

the pay accounts section.

17. Staff Claims

Along with salaries, some categories of staff are also eligible for allowances like

telephone charges, vehicle claims etc. These non claims are non taxable and are handles by

the staff claim section. Other claims like outstation expenses and expenses incurred on

travelling for business related reasons for Air India are also settled by this section.


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18. Refunds & Recoveries

The refunds section is responsible for handling all refunds and recovery related to

employees. Refunds like payments of unused staff tickets (fare and tax as applicable) are

handled by the refund section. The recovery section deals with recovering extra payments

that have been provided to staff for different reasons like advance taken for outstation

conveyance, salary paid in advance etc.


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Financial Performance

Revenue Earned:-

During the year 2005-2006, the total revenue of the company consisting ofpassengers, Excess Baggage, Mail, Cargo, Pool, Charters, Block Seat Arrangement, Royalty

from Air India Charters Limited and Handling/Miscellaneous Revenue was Rs. 92,449.5

Million as compared to Rs. 77,268.9 Million in the year 2004-2005, representing an increase

of 19.6%


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Expenditure Incurred:-

During the year, the total expenditure of the company likewise was Rs. 92,325.2

Million as against Rs. 76,617.5 Million representing an increase of 20.5%.


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Chapter 3.

Merger of A ir I ndia And Indian Air lines

As you would all be aware on 1 March 2007 Government of India approved to merger

of Air India and Indian Airlines known as National Aviation Company of India Limited

(NACIL). The Indian aviation industry to create a single mega national carrier which is also

poised to become South Asias largest airline Touted as the mother of Indian aviation

mergers. The merger of Air India and Indian is expected to form Indias largest airline with a

clout to take on the domestic and international competition.

The formal approval given for the merger by the Union cabinet on March 1, 2007

cover the way forthe birth of the Rs. 15,500 cr. Airline which is almost thrice the size of its

closest domestic rival, Jet Airways. Though the cost of integration of the merger is estimated

to be around Rs. 200 cr.

The past couple of years many players like Kingfisher, Air Sahara, Jet Airways, Go

Air, Air Deccan, Spice Jet, Paramount, Indigo and Indus have entered the air space. Jet

Airways and Kingfisher, closest rival of the public sector airlines, have around 44 & 23 fleets

respectively and gearing up to induct about 20 &109 aircrafts.

All these factors challenges for the government owned airlines which have been

witnessing declining market shares. In attempt to increase their market shares, both Indian

and Air India have started eating into each other market shares. The Indian Government, the


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owner of these two airlines, has finally decided to merge these to companies to protect the

economic interests. The merger formalities are expected to be completed by 2010, forming a

new entity with over 33,000 employees and a fleet size of 112 new generation aircrafts. The

government has already placed a orders for 68 and 43 planes from Boeing and Airbus.

The merger of the two airlines can be envisaged as the beginning of the consolidation

efforts in the Indian aviation space which is the fastest growing in the world at a rapid pace of

40% compared to 15-20% growth at the global level.

New airline introduce Boeing 777 aircraft on August 1st, 2007 the Non stop daily

flight Mumbai - New York - Mumbai.


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Chapter 4.

Research Hypothesis

A hypothesis is a preliminary or tentative explanation or postulate by the researcher of

what the researcher considers the outcome of an investigation will be. It is an

informed/educated guess. It indicates the expectations of the researcher regarding certain

variables. It is the most specific way in which an answer to a problem can be stated.

Research hypotheses are the specific testable predictions made about the independent

and dependent variables in the study. Hypotheses are couched in terms of the particular

independent and dependent variables that are going to be used in the study. The research

hypothesis of this study is as follows.

1) Ho: There is significant relationship between performance and profitability.

Mean

Std.

Deviation N

Performance 1.72 .573 20

Profitability 1.50 .707 20

Correlations

Incentives

Employee

performance

Cost Pearson Correlation 1 .655(**)

Sig. (2-tailed) . .000

Sum of Squaresand Cross-products

16.080 13.000

Covariance .328 .265

N 50 50

performance Pearson Correlation .655(**) 1

Sig. (2-tailed) .000 .

Sum of Squares

and Cross-products13.000 24.500


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Covariance .265 .500

N 20 20

** Correlation is significant at the 0.01 level (2-tailed).

Inference:

Since the Correlation is significant at the 0.01 level (2-tailed) the null hypothesis that is

There is significant relationship between Performance and Profitability is rejected and

an alternative hypothesis is framed.

H1: There is significant relationship between incentives and employees performance.

2) Ho: There is no significant relationship between Cost Control and Poor Quality Services

Mean

Std.

Deviation N

career

developmentopportunities

3.70 1.035 20

extent of

motivation3.36 1.317 17

Correlations

career

development

opportunities

extent of

motivation

career

development

opportunities

Pearson

Correlation 1 .909(**)


Sum of Squares

and Cross-

products

52.500 52.111


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Covariance 1.071 1.184

N 50 45

extent of

motivation

Pearson

Correlation.909(**) 1


Sum of Squares

and Cross-

products

52.111 76.311


N 18 17


Inference:


There is no significant relationship between Cost and Poor Quality Services is rejected

and an alternative hypothesis is framed.

H1: There is significant relationship between Cost and Poor Quality Services.

3) Ho: There is significant relationship between MIS and Marketing.

Mean

Std.

Deviation N

Performance

appraisal system2.40 1.143 20

Extent of

Motivation2.60 1.355 20


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Correlations

performance

appraisal

system

Extent of

Motivation

Performance

appraisal system

Pearson

Correlation1 .962(**)


Sum of Squares

and Cross-

products

64.000 73.000


N 50 50

Extent of

Motivation

Pearson

Correlation.962(**) 1


Sum of Squares

and Cross-

products

73.000 90.000


N 20 20


Inference:


There is significant relationship between MIS and Marketing is rejected and an

alternative hypothesis is framed.

H1: There is no significant relationship between MIS and Marketing


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RESEARCH METHODOLOGY

Research is a systematic method of finding solutions to problems. It is essentially an

investigation, a recording and an analysis of evidence for the purpose of gaining knowledge.

According to Clifford woody, research comprises of defining and redefining problem,

formulating hypothesis or suggested solutions, collecting, organizing and evaluating data,

reaching conclusions, testing conclusions to determine whether they fit the formulated

hypothesis

Sampling Design

A sample design is a finite plan for obtaining a sample from Air India. Simple random

sampling is used for this study.

Universe

The universe chooses for the research study is the MIS & Statistics of Air India ltd.

Sampling Procedure

The procedure adopted in the present study is probability sampling, which is also known as

chance sampling. Under this sampling design, every item of the frame has an equal chance of

inclusion in the sample.

Methods of Data Collection

The datas were collected through Primary and secondary sources.

Primary Sources

Primary data are in the form of Direct Cost / Revenue Ratio Statement to which statistical

methods are applied for the purpose of analysis and interpretations.

The primary sources are discussed with employees.


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Secondary Sources

Secondary datas are in the form of Budget Estimation as they have already been treated

statistically in some form or other.

The secondary data mainly consists of data and information collected from records, company

websites and also discussion with the management of the organization. Secondary data was

also collected from journals, magazines and books.

Nature of Research

Descriptive research, also known as statistical research, describes data and characteristics

about the population or phenomenon being studied. Descriptive research answers the

questions who, what, where, when and how.

Although the data description is factual, accurate and systematic, the research cannot describe

what caused a situation. Thus, descriptive research cannot be used to create a causal

relationship, where one variable affects another. In other words, descriptive research can be

said to have a low requirement for internal validity.

Sample

A finite subset of population, selected from it with the objective of investigating its properties

called a sample. The response to various elements under each questions were totaled for the

purpose of various statistical testing.

Variables of the Study

The direct variable of the study is the working of MIS in Finance Dept. in Air India.

Indirect variables are the Region wise Budget Estimation, Region wise Budget allotment,

Direct Cost/Revenue, Cost Profitability Ratio etc.

Tools and Techniques for Analysis

Correlation is used to test the hypothesis and draw inferences.


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Chapter 5.

Working of M IS

Introduction

A management information system (MIS) provides information that is needed to manage

organizations efficiently and effectively. Management information systems involve three

primary resources: people, technology, and information or decision making. Management

information systems are distinct from other information systems in that they are used to

analyze operational activities in the organization. Academically, the term is commonly used

to refer to the group of information management methods tied to the automation or support ofhuman decision making, e.g. decision support systems, expert systems, and executive

information systems.

Types

Management information systems (MIS), per se, produce fixed, regularly scheduledreports based on data extracted and summarized from the firms underlying

transaction processing systems to middle and operational level managers to identifyand inform structured and semi-structured decision problems.

Decision support systems (DSS) are computer program applications used by middlemanagement to compile information from a wide range of sources to support problem

solving and decision making.

Executive information systems (EIS) is a reporting tool that provides quick access tosummarized reports coming from all company levels and departments such as

accounting, human resources and operations. Office (OAS) support communication

and productivity in the enterprise by automating work flow and eliminating

bottlenecks. OAS may be implemented at any and all levels of management.
http://en.wikipedia.org/wiki/Information_systemhttp://en.wikipedia.org/wiki/Information_systemhttp://en.wikipedia.org/wiki/Decision_support_systemhttp://en.wikipedia.org/wiki/Expert_systemhttp://en.wikipedia.org/wiki/Executive_information_systemhttp://en.wikipedia.org/wiki/Executive_information_systemhttp://en.wikipedia.org/wiki/Transaction_processing_systemshttp://en.wikipedia.org/wiki/Decision_support_systemhttp://en.wikipedia.org/wiki/Executive_information_systemhttp://en.wikipedia.org/wiki/Executive_information_systemhttp://en.wikipedia.org/wiki/Decision_support_systemhttp://en.wikipedia.org/wiki/Transaction_processing_systemshttp://en.wikipedia.org/wiki/Executive_information_systemhttp://en.wikipedia.org/wiki/Executive_information_systemhttp://en.wikipedia.org/wiki/Expert_systemhttp://en.wikipedia.org/wiki/Decision_support_systemhttp://en.wikipedia.org/wiki/Information_systemhttp://en.wikipedia.org/wiki/Information_system


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Management information System in Air India

Initially in Air India, Internal Reporting was made manually and only periodically, as

a by product of the account system and with some additional statistic(s), and gave limited

information on management performance. Previously, data had to be separated individually

by the employees -in Air India as the requirement and the necessity. In the year 2007-08, the

Management Information System was also implemented in Air India. Thus the data was

distinguished from information, So instead of the collection of mass of data, important and to

the point data that was needed by the organization was stored. This informations retrieved

from the raw data was used for preparation of entire management report and these report

helped in analysis. Thus the MIS that was implemented and helped in providing the manager

with information about sales, inventories, profitability and other data that would help would

help in managing Air India as an organization. MIS provides for reports based upon

performance analysis in areas critical to any plan, with feedback loops that allow for

titivation of every aspect of the business, including recruitment and training regimens. In

effect, MIS not only indicates how things are going, but why they are not going as well as

planned where that is the case. These reports include performance relative cost centers and

project that drive profit or loss and do so in such a easy that identifies individual

accountability and in virtual real time.


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Role of MIS in the financial Aspects of air India

Management Information System (MIS) in finance have been widely adopted in Air India

since 2007-08. They are information system with capacity to maintain large data base

enabling organization to store, organize and access financial information easily. These

systems are primarily used for accounting operation and generation of financial reports.

Increasingly they are also used to support budgetary, planning and decision making

processes. These systems are credit with increasing financial transparency, efficiency and

accountability.

Management Information System in the Finance department of Air India helps

In providing timely, relevant and accurate information related to finance in order tosupport better business decisions

Provides integrated financial information Helps in flexibility of report and additional control over expenditure Helps in providing a clearer view of budgets versus actual

Budget Planning

Financial budget planning uses project financial statements that serve as formal

document of managements expectations regarding sales, expenses and other financial

transactions. Thus financial budget are tools used both for planning as well as control. MIS in

finance helps organizations evaluate what if scenarios. By modifying the financial ratios,

management can fore see the effects of various scenarios on the financial statement. MIS thus

serves as a decision making tool, helping in choosing appropriate financial goals.

Route wise analysis reports

The route wise analysis reports that are generated in Air India gives a summary of all the

aircraft that do not meet fuel cost, aircrafts that meet fuel cost but do not meet cash cost,

aircraft that meet the cast but do not meet the total cost and aircrafts that meet the total cost.

Thus based on this report generated various decision are taken by the management.


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Direct cost / Revenue ratio

The direct cost / revenue ratio gives the ratio of direct cost to revenue and thus helps in

planning and controlled the cost. It gives region wise and region wise station wise summary

reports of the direct cost / revenue ratio. Thus giving clearer view of how and where cost is

incurred.


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34

ROUTE ANALYSIS

Introduction

To soar over turbulent times, it is vital for airlines to save every single penny andoptimally utilize their assets to reduce costs and increase profitability. This calls for careful

analysis of various data and talking well - informed decisions. One of the key factors which

decide the future of an airline is Route Profitability.

Route profitability reports help in determining whether a particular route is profitable

or not during a given period of time. Route profitability analysis enable the management to

take decision on whether to change, add or eliminate routes from airline's schedule.

The focus of the Commercial/Planning department of Air India is to improve revenues

on route from various points of sales. Towards this, the commercial function is expected to

have a thorough understanding of the route and take actions on a regular basis to improve the

performance. In a continuously evolving market place the only constant for the commercial

function is a focused analysis of routes on a regular basis.

Thus the MIS section of the Air India generates the "Route Analysis Reports" monthly

in order to study the routes and to analyze and monitor them. Route analysis is the techniqueto study routes and analysis to study routes and analysis hem a give time interval.

Features

Review performance on existing routes Determine the viability of proposed new routes Validate the actual flown information with defined masters Build route studies for domestic and international destinations Providing to define specific rates for landing, parking, technical handling, ground

handling and cargo handling based on time slots and aircraft types


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35

Preparation of the report:

ROUTE

ANALYSIS

REPORTS

FINANCIAL

SYSTEM

EXPENDITUREMASTERS

(internal system)

REVENUEKALECONSULTANTS

FLIGHT

MANAGEMENT


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Preparation of Route Analysis Report

The MIS in Air India has facilitated the development of comprehensive framework

for analysis of route performance and identifying revenue drivers to evaluate route

performance against identified revenue drivers to provide on demand analysis.

The revenue report of Air India is generated by Kale Consultants by extracting the data from

the respective stations. It is then forwarded to MIS Section of AIR India where the revenue

report is then combined with expenditure report, which is generated in the MIS section using

the FoxPro software. The update rates are taken from the internal system and the report is

generated. This report is then forwarded to Management, the Marketing department and the

Commercial/Planning department.

Analysis of the Report

The Route Analysis is done separately for domestic flights and international flights.

These flights are then categorized based on the following four conditions.

Services not meeting ATF cost Services meeting ATF cost but not meeting Cash cost Services meeting Cash cost but not meeting Total cost Services meeting Total cost

Services not meeting the ATF cost are those flights that do not meet the fuel cost i.e. the

revenue generated by the route is insufficient to even meet the fuel cost. Since fuel forms

almost 40% of the total expenditure, if the service does not meet the ATF cost then it cannot

meet the other costs too.

Services meeting the ATF cost but not meeting Cast Cost are those flights that meet the

fuel cost but fail to meet the other costs like aircraft landing fee, navigation charges etc. Cash

cost is variable cost which is incurred when an aircraft is used.

Services meeting Cast cost but not meeting Total Cost are those flights that meet the cash

cost but fail to meet the cost. Total cost includes the operating cost as well as the non

operating costs.


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37

EXAMPLES:

The two major factors considered for the route analysis are the cost and the load

factor.

Passenger Load Factor (PLF) is the ratio of Passenger kilometers (PKMs) to Available Seat

Kilometer (ASKMs), usually expressed as percentage. PKM is the product obtained by

multiplying the number of fare playing passengers by the distance in kilometers flown by

them. ASKMs are the product obtained by multiplying the number of passenger seats

available in an aircraft by the distance flown in kilometers.

The Cost considered for the route analysis can be explained as follows:

A. CASH COST

Aircraft Fuel And Oil

Material Consumption Including Outside Repairs

Aircraft Landing free

Navigation Charges

Charges for Handling by other Operators

Cabin Crew expenses and insurance

Operating Crew expenses and insurance

Legal Liability Insurance

Booking agency Commission

Food and cabin service amenities

Hire of aircraft

Dry lease rentals

PLI

B. F IXED COST (Dir ect)

Operating Crew salaries

Cabin crew salaries allowances

Engineering, stores, GSD staff salaries

Engineering dept stores, GSD Staff

Aircraft insurance

Depreciation aircraft


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The Summary of ROUTE ANALYSIS is as given below:

SUMMARY

How does the Route Analysis Report help the Management?

Route profitability analysis can be broadly classified into two based on business drivers:

Past Performance Analysis This is mainly done to determine whether the existingroutes are profitable or not

ForecastThis to understand the viability of new route and the profitability forecastof existing routes based on future prediction of cost and revenue.

Past performance analysis: Whenever the report is submitted to the management, the

decisions are made keeping into consideration the performance of the route for the past 5 to 6

yrs. The management also checks whether the marketed section had done enough marketing

for the route. If the route was not well marketed then the changes of the load factor being less

is more. Thus the route does not meet the required load factor due to the lesser marketing

done by the marketing department and thus it cannot be shutdown. Also if the number of

passenger is less as compared to the available seats then the aircraft type also needs to beadjusted. Moreover if the fuel price increases every year then the previous reports of the route

cannot be the only source of decision making. Also the bilateral agreements are considered

before taking any decision on the routes.

Forecast: While past performance analysis gives a clear indication on the performance of the

routes, forecast indicates how a particular route is likely to perform based on various

parameters provided in these system. While some of them are more or less fixed there are

components which can vary dramatically.

Components that may have relatively low variations and thereby better control

includes cost like depreciation, interest, insurance, landing, navigation, ground handling, etc.

A component that has a great impact and which cannot be controlled by Air India or other

airline is the fuel cost.


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40

On the revenue side, the airline has limited control though the sale and marketing

functions tries to keep this as high as possible. While the break even Load factor can be

arrived at by feeding various parameters based on experience and expectation, some of the

following questions will remain a challenge and can affect the profitability factor drastically.

What wil l be the fuel cost be 6 months form now?


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41

Chapter 6.

Direct Cost / Revenue Ratio

INTRODUCTION

Every organization generates revenue and also uses the revenue for various activities.

Thus it is necessary to keep a control on the expenditure by the various activities. This cans

be done by calculating the ratio between the costs incurred to the revenue generated. As a

result it becomes easy to figure out which activity needs more expenditure. In this way we

can control the cost incurred by the particular activity.

Direct cost/ revenue ratio statement is a statement that gives the ratio between the

costs incurred to the revenue generated by the stations. A lower percentage is better since that

means expenses are low and earnings are high.

Direct cost/ revenue ratio statement is prepared for both, the online stations and the

offline station. An offline station normally refers to a station that is not represented by an

airline, but still capable of supporting that airline i.e. the airline might not fly there, but do

have officers around that area so that the station is still capable of supporting that aircraft

should it need to land there is an emergency.

EXAMPLE

Sr. No. Region Station

1 USA Houston, Los Angeles

2 Europe Geneva, Amsterdam

3 Southern India Coimbatore, Trichur

An offline station is a place or station that the airline flies etc.

EXAMPLE

Sr. No. Region Station

1 USA New York, Chicago


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42

2 Europe Frankfurt, Paris

3 Southern India Cochin, Mangalore

Preparation of the report:

EXPENDITURE

MASTERS

(internal system)

REVENUE

FINANCIAL

SYSTEM

DIRECT

COST/REVENUE RATIO

STATEMENT


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PREPARATION OF DIRECT COST / REVENUE RATIO

STATEMENT

The statement of direct cost / revenue ratio of stations are generated based on the datacollected in one year. It is generated only once in a year unlike the route analysis reports.

The report is generated from the data received from the stations. The revenue and the

cost of every activity is received from the station by the MIS section of IAr India and the the

report is generated.

ANALYSIS OF THE REPORT:

The direct cost/ revenue ratio statement is a report that gives the details of the

stations performance and also the performance of the region.

The total cost incurred by a particular station is calculated on the various parameters.

These parameters include Pay Allowance, Staff Cost, Landing, Handling, Publicity, Motor,

Insurance, Commission, Rent Rates, Printing and Stationery, Communication and

Miscellaneous.

The major cost that is the fuel cost is not considered during the preparation of the

direct cost / revenue ratio statement.

There has to be an effective use of the above mentioned parameters in order to control

or reduce cost. The Pay Allowance can be controlled by reducing new recruitments or by

avoiding overtime performance. The Staff Cost can be reduced by controlling the conveyance

cost and the welfare cost. The Landing fee depends on the operations. IF the cost related to

the landing has to be reduced or controlled then there has to be use of better equipment etc

.The handling Fees is based on the contractor. The only way to reduce the cost is to negotiate

about the costs or to wait for the contract to get over and give the contract to another contract

that can provide the same service at a lower cost. The publicity cost is incurred on

entrainment etc and can be controlled by use of barter system. The insurance cost is the cost

related to the employee insurance etc. It does not include the aircraft insurance. This cost

cannot be reduced. Commission is directly related to the revenue generated; this parameter

too cannot be controlled. The rent rates can be reduced by checking out region with lower


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44

rent. The Printing and Stationery, Communication and Miscellaneous Cost can be reduced by

controlling the use of the stationeries available.

The analysis is done keeping into consideration the report generated form past 5 t o 10

years. The bilateral agreements are also considered before taking any decisions.

How does the route analysis report help the management?

These reports are helpful to both management as well as the station heads for

following reasons:

The Management is able to judge the performance of each online/Offlineoffice

Station head are in a position to take effective steps in controlling expenditureand increasing revenue, as any deterioration in their performance will be

reflected in the percentage of the region and the corporation as a whole.

Name of

foreign unit/

Branch

Country Address of

foreign Unit /

Branch

Turnover/Expendit

ure during the year

ended 31st march2009 - 2010

Turnover/Expendit

ure during the year

ended 31st march2010 -2011

Turnove

r (in

Lacs)

Expendi

ture (in

Lacs)

Turnove

r (in

Lacs)

Expendi

ture (in

Lacs)

New York-

NYC

USA 570,Lexington

Avenue 15th

Floor,Newyork

1022

48797.58 17699.9 4644.86 15623.4

Newark -

EWR

USA Same as above 11861.93 4951.49 11352.85 4697.29

Chicago-CHI USA 33,North

Dearban sl suite


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45

2425

CHICAGO,IL

60602-3101

31443.91 6147.15 36155.03 6798.9

Los Angeles-

LOS

USA 5959 West

century,Bouleva

rd

Suite 118 Los

Angeles

9223.92 667.71 7281.87 668.75

Washington-

WAS

USA 1612,K Street

N.W.Suite 200

WASHINGTO

N DC 20005

12023.52 1394.76 12861.75 1360.77

Atlanta-ATL USA C/O.570,Lexing

ton Avenue

15th

Floor,Newyork

1022

Houston-

HOU

USA 1319 Grand

Haven

Lane,Sugarland

TXT

5303.06 110.69 4659.77 347.54

San

Francisco

USA 1014 Pomona

Avenue Aibary

ca.

539.19 134.54 492.7 192.24

Montreal-

YUL

USA POB 187

STN.Ahunlic

Montreal

8509.92 791.24

Toronto- USA 25 Adetaide 16080.84 5015.55 18112.62 5963.82


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46

YYZ street E.suite

Vancouver-

YVR

USA POB273,Surray

B.C.Canada v3t

8201.48 413.41

TOTAL 143475.4 36535.2 104071.3 36443.9

London-LON

/ BHX

UK 1st Floor Great

west House

Brantford,

36412.3 11629.3 38172.02 12180.9

Manchester-

MAN

UK Terminal

Building MAN

Intl Airport

TOTAL 36412.3 11629.3 38172.02 12180.9

Geneva/Zuric

h

Europe 7RUE DE

Chanta,Poulel

1201 Geneva

2349.34 473.9 1309.53 207.22

Amsterdam Europe Rokln Plaza

Bldg.Papenbrok

e street

1621.14 305.23 1853.65 223.79

Brussels Europe 60,RAVENSTE

INS 1000

Brussels

433.96 127.38 437.99 141.16

Copenhagen Europe VesterFanmaga

sgade1,1606

copenhagen

1548.44 236.76 2006.69 86.43

Stockholm Europe Harkussgaman

12,7th floor,SE

11152


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47

Frankfurt Europe Baselestrase 5th

floor 46-58

FRA

20168.6 19737.9 16787.3 14278.1

Vienna Europe Opemring

1/E/2-A-1010

VIE AUSTRIA

1966.58 275.93 2625.41 237.86

Rome Europe Resident sales

Manager

ITALY VIZ E

2564 422.93 1785.03 473.26

Milan Europe VIA Pantano

2,20122 Milan

Italy

Athens Europe Athens Intl.

Airport Greece

Paris Europe 5 Rue Des

Colonnes 75002Paris

10586.79 3371.83 9535.62 3662.6

Barcelona Europe Gran VA De

Les Corts

Catalanes 634

TOTAL 41238.85 24951.8 36341.22 19310.5

Moscow CIS Korovy Val 7

Ground floor

MOW

2628.94 473.43 978.82 173.23

Nicosia Africa Nicosia INTL

Airport Cyprus

Nairobi Africa 1 FLR Jeevan 3036.12 667.84 633.26 142.8


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48

Bharti Bldg.

Harnambee

Mauritius Africa No 5 President

John Kennedy

St Roge

437 25.01 51.69 4.85

Lagos Africa 16/164 Talewa

Balewa SQ.

Race Course

Dar-es-Salam Africa AL Ltd. Plot

61/62 UWT St.

Upang RD P

Johannesburg Africa JNB ITL

Airport S.Africa

TOTAL 6102.06 1166.28 1663.77 320.88

Abu Dhabi Middle

East

Bader Tower 1

FLR POB

46889 Airport

2846.42 658.53 5738.25 1025.91

RDME/Duba

i/ SHJ

Middle

East

Flat #404/405

AL Mulla Bldg

Plot# 76, Dubai

8346.97 2777.92 10429.72 2514.85

Fujiarah Middle

East

C/o AL Mullah

Bldg Baniyas

St. POE 170

Cairo Middle

East

1 Talaat Harb

St. Cairo

284.05 343.58 30.61 62.51

Amman Middle

East

C/o AL Mullah

Bldg Baniyas


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49

St. POE 170

Kuwait Middle

East

Al-Hilaliah

Building Al

Sour St.,PoBox-

594,Safat13006,

11123.93 111.45 487.02 147.42

Tehran Middle

East

AVE Shaheed

Sarafraz Av

Daryae E No.

58.45 36.75 35.54 26.78

Riyadh Middle

East

PO BOX

NAFA Building

Takhassosy st.

Riyadh11321

21372.17 3703.49 20538.79 6168.55

Dhahran Middle

East

Airline Cente

POB 298 King

Abdul Aziz

14601.23 4057.98 13033.97 4074.52

Jeddah MiddleEast

M/s. Yusuf BinAhmed Kanno

Kil 07 Madiena

26612.11 4159.68 31322.67 7283.29

Beirut Middle

East

Beirut Intl

Airport

Lebanon

212.73 24 168.81 32.3

Muscat Middle

East

P.O.Box

No.962,P.Code-

100,Muscat

Istanbul Middle

East

Istanbul Intl

Airport Turkey

TOTAL 85458.06 15873.3 81785.38 21336.1

Shanghai Far East 1002 OOCL 6020.5 1338.79 8908.36 2229.54


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50

Asia plaza 841

Yanan Rd West

Shanghai

Bangkok Far East

Asia

C.P. Tower

Bldg, 3rd FLR,

unit D-10(A),

313 Silom Rd,

Hongkong Far East

Asia

Unit 44 FLR

Hopewell center

183 Quee

4695.85 2283.83 5760.7 3335.45

Tokyo Far East

Asia

Imperial HTL

Tower 11th

FLR RM C-5/6

11138.58 3497.29 17313.46 4786.96

Osaka Far East

Asia

Kokusai Bldg

3F-3-13

Azuchimmachi

2-CHQ

5786.59 1961.26 7837.94 2341.95

Seoul Far East

Asia

6th FLR Sina

Bldg 39-1

Seosomun

Dong

959.88 273.87 4807.26 1249.05

Taipei Far East

Asia

9-1 FLR

No.341 Hung

HaoBldg Chung

370.44 25.02 250.27 15.24

Kualalumpur Far East

Asia

1st

Floor,63,jalan

Ampang,50452

Kuala Lumpur

TOTAL 28971.84 9380.06 44877.99 13958.1


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51

Jakarta South East

Asia &

Australasa

Homoin Plaza

Bldg block J/8

JLN Suiyop

899.32 94.6 724.1 90.75

Singapore South East

Asia and

Australasia

Marina

House,shenton

way,singapore-

079118

7428.51 2643.24 9527.67 3740.65

Sydney South East

Asia and

Australasia

Level 15,31

Market st. SYD

NZW 2000

1331.92 226.75 767.24 203.25

TOTAL 9659.75 2964.59 11019.01 4034.65

East India India

Calcutta India 8310.47 1729.22 12510.01 1876.59

Gauhati India 129.06 6.86 265.49 23.03

Dhaka Bangladesh Hotel Sheraton,

Extn Vldg, 1-

Minto RD

Dhaka

2131.92 201.12 779.6 94.15

TOTAL 10571.45 1937.2 13555.1 1993.77

Northern

India

Delhi India 80403.39 17814.0 107763.1 25850.3

Amritsar India 900.48 563.99 401.58 351.96


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52

Lucknow India 630.23 27.22 978.25 134.41

Jaipur India 804.06 36.94 1178.57 106.53

kanpur India 53.67 9.57 71.71 16.31

Kathmandu Nepal Hattisar

4429468(BO)

Komal Pokhari

POB No.300

670.48 63.23 653.9 61.57

TOTAL 83462.31 18514.9 111047.1 26521.1

Southern

India

Bangalore India 9110.26 1761.79 12853.6 1563.1

Madras India 17139.52 4503.81 22860.73 4639.74

Hyderbad India 19873.2 1984.34 11357.91 2169.21

Trivandram India 4872.67 1378.44 6166.01 1595.61

Cochin India 11847.51 1670.71 7475.63 2178.06

Kozikode India 8729.38 1592.16 11201.49 2556.6

Trichy India 897.84 38.58 1251.3 109.39

Colombo India Bristo

Complex, 4-

Bristol Street

Colombia 01,

27.45 3 53.57 6.85

Coimbatore India 283.02 16.03 311.48 26.53

TOTAL 72780.85 12948.8 73531.72 14845.0


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54

Budget Allotment of 2011 - 2012

APRIL11- MAR12

ALLOTMENTS

PERCENTAGE ACCOUNT

CODE

Cost Sub-Head TOTAL

100 63301 Salaries-India Based Staff - Foreign 75,950,017

100 63302 Salaries - Local Resident Staff - Foreign Stat 368,216,364100 63303 Salaries - Staff In India 425,593,863

50 63306 Salaries - CaSUAL lABOUR 15,134,845

100 63320 Expns.A.I.Building Pay.Allo.P.F.Bonus -

100 63324 Bonus Expense 1,225,000

100 63325 Interim Relief To Executives 1,000

100 63327 Staff Income Tax Relief 5,840,000

100 63328 Staff Rent Releif 12,544,790

100 63311/12 Performance Link Incentive 13,490,000

50 63313/14 Late Sitting 45,000

50 63315 Over Time - India Based Staff 12,832,500

50 63316 Over Time - Local Resident Staff 176,300

50 63317 Over Time - Staff In India 7,150,250

100 63309 Staff Transport/Conveyance Allowance 8,808,027

50 63318/19 Weekly Offs / Holidays 277,000

100 63321 Travel-Reimbursement - Retired Staff 150,000

100 63322 Travel-Reimbursement 36,000

100 63323 Staff Travelling & Outstation Expenses 1,659,260100 63329 Telephone Allowance 5,540,600

100 63330 Reimbursement Of Costs - Kit Maintaince -

100 63333 Out Of Pocket Expenses 551,160

100 63334 Severance Compensation Foreign Stns 250,000

100 63332 Compensation For Weekly Off -

955,471,976

100 51511 Bar Loss Compen.To Cabin Crew -

100 51512 Sky Bazar Incentive For Cabin Crew 50,000

100 51513 Crew Entertainment Expenses 1,469,900


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55

100 51514 Training By 3Rd Parties Ops Pilots 150,000

100 51515 Long Haul Allowance U.K. Flts. 750,000

100 51516 Hourly Payments -

100 51517 Special Travelling / Productivity Allowance 200,000

100 63517 Crew Layover Allowance 33,302,285

35,922,185

100 63701 Company Contribution.P.Fund

I.Based.Foreign stations.

609,600

100 63702 Company Contribution to P.Fund Staff In

India

4,142,940

100 63703 Company Contribution to P.Fund Local

Staff Foreign stns

1,128,200

100 63704 Payment Under Social Legislation 59,634,158

65,514,898

90 51311 Purchase of Medicnes and X-Ray 4,502,250

90 51312 Medical Clinic-Staff Welfare - Other

Expenses

-

90 51313/382 Medical.Benefit Scheme #REF!

90 51314 Medical Benefit Sch.Ret.Emp.Families 2,430,000

90 51315 Medical Benefit Sch.Retired Employee 15,018,300

90 51316 Medical Expenses Government Off. -

100 51317 Staff Medical Expenses 73,055,072

50 51351 Holiday Home Expenses 9,625

75 51361 Cash Awards To Employees 3,750

90 51362 Joint Sub.Employee Transport -

80 51364 Other Welfare Expenses 820,749

80 51367 Hindi Incentive-Tran.& Typg 43,200

80 51368 Language Promotional Expenses 17,200

100 51370/71 Expenses On Sports 210,000

80 51376 Other Staff Welfare Expenses 53,596,336

95 51377 Farewel To Retired Staff 328,28290 51378 Provisions & Purchase M.Clinic N.Point -

90 51381 Staff Housing Colony Expenses - New Delhi 900,000

100 51386 I A T T / Fuel Surcharge - S.O.D. 43,923

100 51387/88 Consum.Of.Spares & Store - M.T. Medical

Clinic

-

80 51412 Breakfast / Lunch Allowance 6,791,648

80 51413 Breakfast / Lunch Allowance - Delayed

Flights

-

80 51414 Expenses On Staff Residence 3,025,491


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56

90 51415 Canteen Subsidy To Staff In India 676,080

90 51417 Childrens Education Allowance 149,279

80 51418 Uniform Maintaince.Allowance. 1,760

90 51419 Clothing Allowance 4,950

90 52251 Staff Uniforms - Consumption 1,156,334

80 63137 Repair And Maintenance Of Buildings - Ccu

Hsg

316,800

90 63151 Repairs and Maintenance-General 69,246

#REF!

100 52651 Landing Fees - Scheduled & Other Ops 1,338,412,917

100 52652 Landing Fees - Delayed Flights -

100 52653 Landing Fees - Training & Practice Flight 10,000,000

100 52655 Landing Fees - B737 Aicl -

1,348,412,917

100 52611 Housing & Parking Fees - Scheduled 102,812,878

100 52612 Housing & Parking Fees - Delayed Flights -

100 52614 Housing & Parking Fees - Ops B737-Aicl -

102,812,878

100 52681 Flight Comm. & Navigation Charges 597,394,713

100 52684 Exp.Flight Comm.& Navigation - Training -

100 52685 Exp.Flight Comm.& Navigation Ops B737-

800-Aicl

-

100 52686 Exp.Flight Comm.& Navigation Traing Flts

B737-

1,000,000

598,394,713

100 55351 Handling Charges-Technical AI 65,594,900

100 55352 Handling Charges-Commercial AI 2,380,617,310

100 55353 Handling Charges-Delayed Flights AI 72,000

100 55354 Handling Charges-A.I.A.T.S.Ltd. -

100 55355 Handling Charges-Comm. A.I.C.Ltd -

100 55356 Handling Charges-Tech. A.I.C.Ltd -

100 55357 Handling Charges-Comm Freighter Ops 25,000

100 55358 Handling Charges-Comm. B737-Aicl -

100 55359 Handling Charges-Tech. B737-Aicl -

2,446,309,210

100 55401 Security Charges-Courier Baggage 4,621,631

100 55402 Special.Security Service Charges 304,282,040

308,903,671

90 55311 Expenses On Pax Baggage Claims 34,612,218

90 55312 Expenses on Cargo Claims 737,100


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57

90 55313 Expenses on Cargo Immigration Fines 192,150

35,541,468

80 53,561 Pax Amenities - Catering On Ground 70,727,552

80 53562 Pax Amenities - Catering On Ground -

Delayed Flights

14,072,320

80 53563 Pax Amenities - Catering On Board 735,273,520

80 53564 Pax Amenities - Catering On Board -

Delayed Flights

400,000

80 53569 Pax Amenities - News Paper Service-Depart.

Pax

559,440

80 53568 Pax Amenities - Hotel Expenses - Delayed

Flights

22,453,600

80 53565 Pax Amenities - Hotel Expenses 54,956,223

80 53567 Pax Amenities - Sundries - Bombay Airport 103,200

80 53571 Pax Amenities - C.S.Sun.Incl.Ser 12,211,938

80 53572 Immigration Fine - Foreign Stns 978,016

80 53573 Expenses Incurred On Deportees 445,104

80 53574 Pax Amenities - C S Sun Incl Sur - Delayed

Fli

9,713,040

80 53575 Pax Amenities - Maharajah Club- Executive

Class

1,454,904

80 53577 Pax Amenities - Denied Boarding Compen

To Pax

1,791,786

80 53566 Pax Amenities - Call Centre Charges -

925,140,643

80 54091 Expns.On Computer Reservation - Rental Of

Cable

1,316,541

80 54092 Expns.On Computer Reservation - Rental Of

Modem

2,800

80 54093 Expns.On Computer Reservation - Other

Expenses

699,376

80 54094 Expns.On Computer Reservation - Tds For

Arms

-

80 54095 Expns.On Computer Reservation - Other

Carriers

-

2,018,717

80 54068 BSP-ARC Processing Chgs / Subscription 978,000

80 54056 Expenses On Sita Circuit -

80 54057 Expenses On Telephone Circuit 2,291,791

80 54058 Postage 12,568,90180 54060 Telephones 22,511,524


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80 54061 Telephones Delayed Flights -

80 54064 Telephone Equipment Rental 42,560

80 54065 Trunk-Calls 10,452,544

80 54066 Trunk-Calls Delayed Flights 5,280

80 54067 Expenses On Residence Telephone / TrunkCalls

4,781,760

80 54059 Telegrams -

53,632,360

90 63511 Crew Catering Expenses 87,907,382

90 63512 Crew Meal Allowance -

90 63513 Crew Catering Expenses - Delayed Flights -

90 63514 Crew Meal Allowance - Delayed Flights -

90 63515 Crew Hotel Expenses 599,306,646

90 63516 Crew Hotel Expenses - Delayed Flights 9,000

90 63518 Crew Layover Expenses - Delayed Flights -

90 63519 Crew Short Payment -

90 63520 Crew Suppl. Layover Allowance 21,110

90 63521 Crew Allowances Account 9,918,000

90 63522 Crew Transhipment Expenses 57,758

90 63559 Crew Allowance on Temp.Posting 22,500

697,242,396

80 63551 Staff Travelling Expenses-India 3,243,76080 63552 Staff Travelling Expenses - India To Foreign 5,124,288

80 63554 Staff Travelling Expenses - Out Side India 20,693,834

80 63555 Expenses On Temporary / Permanent

Transfer

2,038,456

80 63556 Visa Charges 630,568

80 63557 Hotel Expenses - Staff on Duty In/To India 33,548,816

80 63558 Allowance On Temporary Posting 48,523,034

113,802,756

90 62401 Rates & Taxes 7,623,127

90 62402 Expns.A.I.Building Municipal -&-Other

Taxes

-

7,623,127

90 62451 Rent-Premises 304,066,836

90 62452 Expns.A.I.Building Ground Rent -

304,066,836

100 63141 Maintenance of Office Buildings 28,805,173

100 63143 Expn.A.I.Building-Repair/Maint.Bldg. -

100 63161 Maint of Staff Training College -


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28,805,173

100 63111 Maint of Equipments 44,025,873

100 63116 Maint of Equipments (Others) 170,250

100 63121 Maint of Ramp Equipments 13,000,000

100 63166 Maint of Engineering Equipments 10,000

100 63211 Ramp Equipment-O/S 375,000

100 63221 Repair by Outside Party - Motor Transport 6,126,329

100 63113 Repair & Maintenance of Equipment-A.I.

Bldg.

-

63,707,452

80 61136 Hire of Transport - Cabin Crew 23,430,560

80 61141 Hire of Transport-Cockpit Crew 22,278,816

80 61131 Hire of Transport 30,513,297

80 61133 Hire Of Transport Delayed Flight 59,440

80 61151 Hire of Transport -CIP/VIP 30,000

76,312,113

100 71701 Insurance General Equipment / Store 2,173,094

100 71703 Insurance General M.T 437,128

2,610,222

100 52803 Water Charges 3,624,600

90 71301 Electricity & Heating Charges 78,910,908

90 71302 Expns.A.I.Building Elect/Pow.Charge -82,535,508

100 62212 Publicity and Sales Promotion - Publicity 13,500

100 62223 Publicity and Sales Promotion - TSC -

13,500

100 71801 Legal Charges 9,515,780

9,515,780

100 61129 Printing and Stationary 16,511,996

16,511,996

100 52868 Audit Fees & Exp. - Accts. Fee /

Certification

280,500

100 71111 Audit Fees - Statutory Audit -

100 71112 Statutory Auditors Out Of Pocket Exps 54,650

335,150

100 52711 Fuel and Oil-HSD and Petrol Consumption 9,687,000

100 52714 Fuel And Oil - Surface Transport 50,424,562

100 52801 Staff Training Expenses 8,895,300

90 52802 Staff Travelling Government Off. -90 52829 Laundry Charges 4,125,004


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90 52833 Membership Subscription & Fees 1,657,533

90 52849 Payments To Clubs 20,250

90 52857 Conveyance Expenses 19,498,039

90 52858 Conveyance Expenses Delayed Flights -

90 52863 Ex-Gratia Payment 1,225,218

80 61811 General Charges 70,319,997

80 61826 General Charges - Delayed Flight -

80 61812 General Charges - HAJ Exp. 120,000

100 61841 Haj Expenses -

90 52842 Compensation Payable To Agents -

100 71533 Commission to Payment Gateway -

100 71533 FTT claims of Custom-Commercial -

90 52820 Expenses On Ai Guest House - New Delhi 405,000

90 52832 Local Tax 5,879,060

90 52834 Office Cleaning 4,248,958

90 52854 Expns.A.I.Building Water Charges -

90 52855 Expns.A.I.Building Other Misc.Expns -

90 52271 Clearing and Forwarding 25,281,729

90 52805 Taxes - M.T. 5,580,888

90 52831 Income Tax - Foreign Station 5,382,000

80 61112/113 Books and Periodicals 8,213,368

100 52867 Audit Fees - Tax Audit -100 52869 Audit Fees & Exp. Accts.-Other Audit Exp. 402,000

100 52870 Audit Fees - Internal Audit -

100 52871 Internal Audit Out Of Pocket Exps -

90 52821 Fees To DGCA 5,400

90 52825 IATA Fees & Expenses-Fees 307,440

90 52826 IATA Fees & Expenses - Comm.Cl.Hse. 1,440,000

90 52827 IATA Fees & Expenses - Comm.-Conf.Chr. -

90 52828 IATA Fees & Expenses - Misc. 161,190

90 52835 Exp.For Custom Office Comm.-Hotel Exp. 545,400

90 52836 Exp.For Custom Office Comm.-Other Exp. 5,400,000

90 52837 Exp.For Custom Office Comm.-Transport. 288,000

90 52838 Exp.For Custom Office Comm.-Overtime -

90 52839 Quarantine Fees - Commercial 130,050

90 52840 Transhipment Fees - Commercial 472,500

90 52804 Rent - M.T. 2,004,846

90 52847 Entertainment General 110,016

90 52862 Entertainment Expenses 1,790,07890 52807 Professional / Consultation Fees & Expenses 4,798,314


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90 52818 Donations -

100 53512 Cabin Material-Nonconsummable 12,000

100 21788 Social Security-IBO -

100 21789 Social Security-Local Staff -

100 51385 Staff Insurance 38,454

100 53511 CONSUMPTION OF CABIN SERVICE

MATERIAL

903,802

100 52217 Motor Transport Spares-Consumption 12,785,000

100 55456 Acct.Mach.Rent.Maint Accts.Rentals 12,864

100 55457 Acct.Mach.Rent.Maint Accts.Maint. 12,000

100 55458 Acct.Mach.Rent.Maint Accts.Services 40,000

100 61301 Lease Rental For Personal Computers 1,000,000

100 71521 Bank Charges 3,447,639

100 71702 General-MT & Others 177,120

100 55459 Hire Of Equipment 2,467,300

100 71515 Diff in Exchange 700,000

100 51373 XMAS Expenditure 2,000

100 51409 Medical Insurance Premium 130,000

100 51409 Fiscal Stamp Duty -

100 260,547,319

100 51383 Expenses on Retired Staff Welfare -

-TOTAL 8,575,712,305


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Chapter 7.

Revenue Expenditure Budget

Work of the section:

Preparation of the Annual Revenue & Expenditure Budget of the Corporation in theform of the booklet for submission to the board for its approval

Intimation of the Annual Budget allotments, to the Outstations as well as thedepartments at headquarters

Control over the expenditure of outstations by calling for quarterly returns of theactual expenditure incurred within the approved allotments under certain specificheads, and calling for explanations regarding variations

Comparison of Actual Expenses with the Budget Allotments Preparation of Direct / Revenue ratio of station for submission to the Commercial

department and bringing out in detail the performance of individual stations on the

basis of their direct expenditure viz-a-viz revenue

Preparations of Monthly Report on Estimated Financial Result for submission toHeadquarters

Preparations of Quarterly Report, Performance Budget and other returns forsubmission to Government Agencies

Preparations of Cost Analysis Statement Submission of Data to the IATA Information Required from the Stores & Purchases

Data obtained from the outstation and department at Headquarters:

The Corporations Overall revenue expenditure budget estimates for the current year

(revised) and next financial year are based on the information collected from outstation and

departments at headquarter. The information in the form of Budget Estimates is called for

the month of October. For this purpose standard formats (separate for online and offline) are

sent to outstation. (From 1) The format lists out the various Revenue Expenditure Account

Heads along with the account codes so that no errors may be made in grouping various

accounts under these specific heads. The outstations are also required to submit the


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worksheets for the certain account heads such as Landing and Handling Fess, Route

Navigation Charges, Rent Rates and Taxes, Crew Allowances and Hotel Expenses etc. as per

prescribed formats, in support of the estimates.

The Budget Estimates for the current year and next year are required to be sent by the

outstation to the Budget Section by 30th November every year.

The Actual expenditure incurred during the first half (April/September) of the current

financial year, and the estimated expenditure for the second half (October/March) of the

current financial year are required to be given in the Budget Estimates Form. The total actual

plus estimated expenditure of the current financial year together with the actual expenditure

of the previous year form the basis on which the budget Estimates for the next financial

year are required to be prepared. The Winter Time table for the next year circulated to

stations also forms the basis for preparation of Budget Estimates.

Some of the information called for department wise is a given below:

Planning Traffic Revenue:

Scheduled Services:The Estimates of Revenue from Scheduled Services in respect of each route, and each

aircraft type in fleet with detail working for the remaining period up to March and

also for the next year is provided category wise as follows:

1. Passenger2. Excess Baggage3. Mail4. Freight

The above information is broken down month wise by Planning Department

Revenue Pools:The revised Estimates of Receipts / Payments in the revenue pools for current year

and estimates for the next year.


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RTKM and PKMS:Aircraft type wise, category wise and route wise for both years with month wise

years.

Commercial Department:

Opening of new Online / Offline officesParticulars relating to opening of new online / offline offices during the remainder of

the current year and the next year giving estimated recurring expenditure

Closure of Online / Offline OfficesParticulars relating to the effective date of closure transfer of sales staff and available

details of saving in cost / estimated loss of revenue.

Charters:

The estimate of number of flights, flying hours, route, revenue and load factors should be

give for the following:

Open Market Charters Cargo Sub-Charters

The information is given for each aircraft type

Billing:

Handling and servicing receipts (Current yearrevised and next year)1. Handling Revenue: - An estimate of station wise handling revenue shows the

revenue from regular contracts and casual operations. Details of additional

handling contracts which are likely to be obtained during the above period and

information on any of the existing contracts I likely to be terminated. Aboveinformation is given aircraft wise.

2. Servicing Revenue: - The estimated revenue under this head covers overhauland defect rectification jobs form outside parties.

3. Aircraft type wise number of flights of other carriers handled at IndianStations.


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Miscellaneous receipts under the following heads1. Sale of Scrap2. Hire of transport to outside parties3. Loan of equipment to outside parties4. Storage Commission

Number of staff to be taken for calculation of ATKM per employee

Operations

Fuel and Oil (Aircraft)

Block fuel and oil consumption (US gallons per hour) in respect of scheduled flying

on each route and by aircraft type. Estimates of overflying Charges payable during the

current year and next year country wise. As regards Euro control charges, the anticipated

percentage increase in charges and the effective period is also advised by Engineering

Department. Estimated expenditure on Procurement and Issue Of Operating crew uniforms

during current year and next year separately giving details of item wise uniforms long with

cost thereof and the number of crew entitled for such uniform. A current list of Operating

crew, category wise stating Name of the Crew, Staff Number and Type of aircraft operated.

The crew layover pattern for the current year (winter time table) and the next year.

Information is given station wise, on number of sets and weekly layover days.

In-flight Services:

Estimated expenditure on Procurement and Consumption during the current yearand next year, in respect of:

1. Cabin services material (Consumable)2. Cabin services material (Non Consumable)

Estimated expenditure on Procurement and Issueof cabin crew uniforms duringcurrent year and next year given separately, giving details of item wise uniform along

with the cost thereof and the number of crew entitled for such uniforms.


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Aircraft type wise cabin crew complement Crew layover pattern for current year and next year. Information is given station wise

and aircraft type wise

Airport Services:

Estimated cost of consumption of spares for maintenance of ground supportEquipment and Transport Separately-Station wise

Estimates station wise cost of consumption of fuel and oil on operation of GroundSupport Equipment and Transport separately

Estimated station wise cost of outside repairs to above equipment Estimated cost of spares on maintenance of Equipment, Provision required for

replacement of existing equipment and additional equipment is to be furnished

separately

Aircraft type wise number of flights handled for other carriers Number of staff handling such flights category wise

This information is required both for the current year (revised) and next year the basis on

which the expenditure on Ground Support Equipment to be allocated to each aircraft type.

The other departments that give in their information are Publicity, Engineering, Stores,

Computer Division, Communication Division, Pay Accounts, Staff Claim, etc.


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PREPARATION OF REVENUEEXPENDITURE BUDGET

The Preparation of the revenue expenditure budget is done in MIS section of the Finance

department in Air India. The MIS section sends a circular to the various stations and the

departments regarding the estimates needed for the preparation of the budget, This circular is

sent in the month of October November every Year. The stations and departments are

supposed to submit their budget Estimates by December. The estimates received from the

outstations and the departments are thoroughly scrutinized and subjected to various checks

based on the latest available data in MIS section as well as the other sections of the

Accounts Department. The estimates after scrutiny are tabulated Account Head wise to arrive

at total estimated expenditure of the corporation for each account head. The estimated for

some expenditure Account Head such as Landing Fees, Handling Charges, Route Navigation

Charges, Crew Layover and Crew Hotel expenses etc. are independently worked out in MIS

section and compare with the stations estimates and differences if any investigated. The

outstations are advised to breakdown the annual allotment into monthly/quarterly allotments

according to the expenditure anticipated to be incurred by them during each month/quarter.

The reasons for increase or decrease in the allotment as compared to the estimates given by

the station are mention in the remarks Column.


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LAYOUT OF PREPARATION OF REVENUE EXPENDITURE BUDGET

Budget preparation

Revenue Expenditure

Scheduled

services revenue

Other revenue Department Stations

Estimates are scrutinized,

checked and tabulated account

Estimates of some expenditure account

heads such as landing fees, handling fees

etc. worked out independently i

Documents

Air India Finance calculation under Dr. kinnarry Thakkar