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MANAGEMENT DISCUSSION & ANALYSIS REPORT

1. ANALYSIS OF THE FINANCIAL/PHYSICAL PERFORMANCE

I. REVENUE :

TotalrevenueincreasedfromRs.160,721.1Millionin2012-13toRs.190,934.9Million(anincreaseofRs.30,213.8Million)during2013-14.

Operating Revenue was Rs.183,709.6 Million as against previous year’s revenue of Rs.160,278.4 (increase of Rs.23,431.2 Million)

Passenger Revenue increased from Rs.124,944.4 Million last year to Rs.141,507.3 Million (an increaseofRs.16,562.9Million)whichwasmainlyduetoincreaseinPassengerLoadFactorfrom72.4% to 73.3%.

II EXPENDITURE :

The total expenditure incurred during the year was Rs.264,201.9 Million as compared to the previous year’sfigureofRs.237,039.5Million(anincreaseofRs.27,162.4Million)

Operating expenses increased from Rs.198,349.9 Million to Rs.223,488.5 Million (an increase of Rs.25,138.6 Million)

EXPENDITURE BREAKDOWN 2013-14

4 8%11.9%

0.5%7 2%

3.0% 1.0% 4.8%

7.2%

15.4%

35.7%3.4%

5.3%2.6%5.6%1.3%2.3%

Staff Costs Insurance Fuel & OilStaff Costs Insurance Fuel & OilLanding / Navigation Hire of Aircraft Material & Outside RepairsCommission Pax Amenities HandlingFinance Cost Depreciation Reservation SystemsTravelling Expenses Other Expenses

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2. MEASURES TO IMPROVE PERFORMANCE

2.1 Plans to turnaround performance :

The Company continued to take several initiatives to improve the performance of the Company including inter-alia

• Rationalizationofcertainlossmakingroutes.• Returnofleasedaircraft.• Inductionofbrandnewfleetonseveraldomestic&internationalroutestherebyincreasingpassenger

appeal.• Phasingoutoldfleetandconsequentreductionofmaintenancecost.• Reductionofcontractualemployment&outsourcedagencies.• CriticalanalysisofFuelconsumptiononallflightsbysettingupaFuelCouncilandFuelManager.• Implementation of the recommendations made by IATA Group of Fuel Efficiency Gap Analysis

(FEGA).• Increaseinpassenger,cargo,excessbaggagerevenuethroughaggressivesales&marketingstrategy

includingaseparateCellforattractingGovernmenttraffic.• Implementation of Quickwin IT Solutions including upgrade of Revenue Management System,

introductionofSAP-ERPthroughoutthenetwork.• Upgradation of FFP and Introduction of several marketing initiatives including Companion Free

Schemes, Apex fare, GOI packages, Preferred Agents Partnership, Promotion of web bookings and other promotional schemes like AI Holidays, etc.

• OperationalisationofthetwosubsidiarycompaniesformedforGroundHandlingandMROactivitieseffective February 2013.

• ImplementationoftheFinancialRestructuringPlanandtheTurnaroundPlantoimprovetheFinancialandOperatingefficiencies.

2.2 Infusion of Additional Equity-Linked to the Turnaround Plan of the Company

TheGovernment infusedEquityCapitalofRs60,000Millionduring2013-14 thusbringing the totalpaidupCapitaltoRs.153,450Million.Duringtheyear2014-15theGovernmentwasexpectedtobringEquityCapital of Rs.71,060 Million including the arrears of the earlier years. However, the Government could infuse onlyRs.57,800Millionduetocertainbudgetaryconstraints.Duringtheyear2013-14,theCompanycouldachievesignificant improvements in itsoperatingperformanceascompared to thecorrespondingperiodlast year. ItsOn-timepunctuality (OTP) improvedondomestic sectors to80.4%andon International to73.6% resulting in a network OTP of 77.9%. Similarly, its domestic load factors improved to 75.3% despite manychallengesfacedfromtheLowCostCarriersandInternationalLoadfactorsimprovedto72.4%takingtheNetworkLoad factor to73.3%.Therewasalsoan increase in theyieldperkilometer throughout thenetwork with domestic yield improving to Rs.6.05 and international to Rs.3.52. The utilization of the Airbus fleetcontinuedtoimproveto10.3hoursadayontotalfleetand12.8hoursonoperatingfleetandthatoftheBoeing777fleetto11.1hoursadayontotalfleetand14.9hoursonoperatingfleet.Similarly,the787aircraftaveragedaround12.5hoursaday.Duringtheyear2013-14sevenDreamliners(787)weredeliveredto AI by M/s Boeing Company which were deployed in its network. These 787 were used both for domestic and international operations from Delhi. The domestic routes which were covered were Kolkatta, Chennai andBangaluru and the international routes coveredwereParis, London,Frankfurt,Sydney,Melbourne,Singapore, Hong Kong, Osaka, Tokyo, Birmingham, Seoul, Dubai and Shanghai. The 787 will continue to be the mainstay of the Company’s wide body operations as the Company plans to take delivery of 14 more aircraft up to the period September 2016.

2.3 Product Development

a) Premier Clubs

The Flying Returns Programme has four levels of membership viz. Base, The Silver Edge Club, The GoldenEdgeClubandtheMaharajahClub:

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The Maharajah Club (TMC)

The Maharajah Club is the highest Tier in the Flying Returns Programme. Membership of this Club is on the basis of earning 75,000 miles in a span of twelve months. Members may also be invited to join the Club on the basis of their status. Membership of the Club entitles members to enhanced privileges whichare:

Bonusmileagepoints,additionalbaggageallowance,prioritycheck-in,priorityconfirmationfromthewaitlist and lounge access, etc.

The membership base as on 30 September 2014 was 1629.

Golden Edge Club (GEC)

The Golden Edge Club is the second highest Tier in the Flying Returns Programme. Membership of this Club is on the basis of earning 50,000 miles in a span of twelve months. Members may also be invited to join the Club on the basis of their status. Membership of the Club entitles members to enhancedprivilegeswhichare:

Bonusmileagepoints,additionalbaggageallowance,prioritycheck-in,priorityconfirmationfromthewaitlist and lounge access at select airports, etc.

The membership base as on 30 September 2014 was 3300.

Silver Edge Club (SEC)

The Silver Edge Club is the third highest Tier in the Flying Returns Programme. Membership of this Club is on the basis of earning 25,000 miles in a span of twelve months. Members may also be invited to join the Club on the basis of their status. Membership of the Club entitles members to enhanced privilegeswhichare:

Bonusmileagepoints,additionalbaggageallowanceandprioritycheck-in.

The membership base as on 30 September 2014 was 15014.

b) Flying Returns Programme

Flying Returns Programme is designed to recognise and reward frequent flyers ofAir India. ThebenefitsandprivilegesofFlyingReturnsinclude:

• Increasedcheck-inbaggageallowance,telecheck-in,personalizedcheck-incountersatselectairports,priorityforconfirmationfromthewaitlist,prioritybaggagehandling,poolingofmileagepoints and wide array of special offers.

• ApartfromearningandredeemingonAirIndia,memberscanalsoearnandredeemonall26Star Alliance partner carriers.

• Memberscanaccruemileswhiletravelingonselectflightsofourcodesharepartnerairlines.

• Memberscantransferrewardpointsfromournon-airlinepartnerstoFlyingReturns.

• Non-airlinepartnersareAmericanExpress,HDFCBank,ITCWelcomeGroup,EmiratesBankGroup, SBI Cards, Kotak Bank, Citibank Travelling Connect, UAE Exchange, Holiday IQ.

BASECardmembershipbaseason30September2014was15,40,240asunder:

RegionIndia (including Premium Clubs)Overseas (including Premium Clubs)

9,70,3505,69,890

Total 15,40,240

ThehighlightsofFlyingReturnsProgrammeareasfollows:

• Earnandredeemmileson27StarAlliancepartnerairlines• Accesstomorethan1000airportloungesworldwide

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• Premiumpassengerbenefitsacrossthepartnerflights• Membershipextendedworldwide• Updateprofiledetailsonline• Claimmissingmilesonline• Redeemmilesonlineatwww.flyingreturns.co.in• Noredemptionthresholdlimitforredemptiontickets• PurchasemilesatRe.1permileonshortfallofredemption

2.4 Marketing Initiatives :

Corporate House Scheme

Corporate House Scheme was launched for the period 1 November 2013 to 31 March 2014, under which special offers aremade toCorporateHouses having significant travel budgets.Target or growth basedincentives are offered separately for international sales and domestic sales. The incentives are based on front end or cut and pay as well as growth based back end incentives.

Performance Linked Bonus (PLB)

PLBSchemehasbeenrenewedandlaunchedfortheyear2013-14,basedonthefeedbackfromthefieldandindustrypractices.Likelastyear,thisyearalsoPLBwasofferedonlyonInternationalSalesandnotonDomesticSales.ThePLBSchemeisexpectedtoachievehighergrowthandincreasedproductivityonAirIndia. Separate incentives were also offered for increase in F&J class International Sales.

Short Term Promotions

Variousshorttermpromotionalinitiativeswereundertaken:

• CutandpayincentivesforDomesticLegofInternationalFlightsandHub&SpokeFlights• JointpromotionwithAmadeus• AdditionalIncentivestoagentsforalimitedshorttermperiod(cutandpay)

2.5 Going Concern

Inordertoimproveoperationalandfinancialperformance,theCompanyhadformulatedaTurnAroundPlan (TAP)which entailed both operational and financial turnaround of theCompany.Based on theassumptions on TAP, a Financial Restructuring Plan (FRP) was prepared and implemented effective 1 October 2011 which envisaged aligning of the debt repayments of the Company in line with the projected Cash Flows.

Asproposed in theTAP, theMROandGroundHandlingactivitieswerehived-offandoperationalised inFebruary 2013, the assets would be monetized and cargo and mail revenues would be enhanced, the HR Policy has also been reviewed across the Company and a new Organisation Structure was approved by theBoardinordertoright-sizethepositionatvariouslevelsintheOrganisationhierarchy.AnintegratedITSystem has been put in place for improving operational performance. An Oversight Committee has also beenformedattheGovernmentofIndiaLeveltoensureimplementationoftheTAPandcloselymonitortheactual performance against the milestones.

As on 31 March 2014, GOI has infused Rs.132,000 Million by way of equity into the Company from the time the FRP was implemented. An amount of Rs.65,000 Million is provided in Union Budget for the Financial year2014-15asequitytoAirIndia.

Due to the support of GOI as well as the various measures taken by the Company towards improving operatingandfinancialposition,itisexpectedthatthefinancialconditionoftheCompanywouldcontinueto improve in the future. Accordingly, the Accounts are prepared by the Management on the Going Concern Basis.

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3. HIGHLIGHTS

Awards & Recognition

Air India was chosen by the Selection Committee of Business Initiative Directions (BID), Spain for the International Quality Crown Award (IQC) in the Diamond Category in the year 2014. Air India won this award for the third consecutive year for commitment to quality and excellence and on the basis of IQS Regulations and criteria of the QC100 Total Quality Management Model.

4. REVENUE GENERATION THROUGH OTHER SERVICES

4.1 The Revenue earned by Ground Handling Department/ Security Department by providing services to about 59 Customer Airlines at Indian Stations and Engineering Department during the year 2013-14 is Rs.5,042.62Million.

4.2 Cargo Revenue

ForthefirsttimeAirIndiaCargoachievedrevenueofmorethan 10,000Million. During 2012-13 the cargo revenuewas Rs.8,549.0 Million.

5. FLEET SIZE, NETWORK, JOINT VENTURES ETC.

5.1 Fleet Size

Asof31March2014,AirIndiahadthefollowingaircraftinitsfleet:

Aircraft Type Owned Leased Sale & Lease Back TotalB777-200LR 3 - - 3B777-300ER 12 - - 12B747-400 3 - 2 5B787-800 9 - 4 13A320 18 - - 18A319 19 3 - 22A321 20 - - 20A330-200 - 2 - 2TOTAL 84 5 6 95

Ason30September2014,thefleetconsistedof:

Aircraft Type Owned Leased Sale & Lease Back TotalB777-200LR 3 - - 3

B777-300ER 12 - - 12

B747-400 3 - 2 5

B787-800 12 - 5 17

A320 17 - - 17

A319 19 3 - 22

A321 20 - - 20

A330-200 - 2 - 2TOTAL 86 5 7 98

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5.2 Network

Thepatternofoperationsduring2013-14forinternationaloperationwasasunder:

Routes Summer 2014 Winter 2014 Summer 2013 Winter 2013

India/New York 7 7 7 7

India/Chicago 7 7 7 7

India/Newark 7 7 7 7

India/London 21 21 21 21

India/Birmingham 4 7 4 (eff. 1 August 2013) 4

India/Frankfurt 7 7 7 7

India/Paris 7 7 7 7

India/Italy 7 (eff. 6 June 2014) 7 - -

India/Russian Federation 4(eff. 18 July 2014) 7 - -

India/Gulf 141 141 155 141

India/Australia 7 7 7 (eff. 29 August 2013)

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India/Tokyo 3 3 3 3

India/Shanghai 4 4 4 4

India/Hong Kong/Osaka 3 3 3 3

India/Hong Kong/Seoul 4 4 4 4

India/Singapore 21 21 28 21

India/Bangkok 14 14 14 14

India/Yangon 3 3 3 3

India/Kathmandu 22 22 22 22

India/Colombo 7 7 6 6

India/Male 14 14 14 14

India/Dhaka 14 14 14 14

India/Kabul 6 6 6 6

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5.3 Joint Ventures and Code Share Arrangements

Ason31March2014,AirIndiahadcodesharearrangementswiththefollowingforeigncarriers:

To : Operating Airline Marketing Airline Type of Code Share

London-NewYorkv.v. Kuwait Airways Air India Block Space

Frankfurt-Indiav.v. Lufthansa Air India Free Flow

Munich-Indiav.v. Lufthansa Air India Free Flow

Frankfurt-Berlin/Munich/Dusseldorf/Stuttgart/Amsterdam/Copenhagen/Oslo/Stockholm v.v.*

Lufthansa Air India Free Flow

Frankfurt-Chicago/LosAngeles/Washington/Denver/Detroit v.v.*

Lufthansa Air India Free Flow

Delhi-Frankfurtv.v. Air India Lufthansa Free Flow

Mauritius-BangaluruChennaiMauritius Air Mauritius Air India Block Space

Mauritius-Indiav.v. Air Mauritius Air India Block Space

Vienna-Delhiv.v. Austrian Airlines Air India Block Space

Mumbai-Bangaluru,Chennai,Delhi,Hyderabad, Trivandraum v.v.*

Air India South African Airways

Free Flow

Mumbai-Johannesburgv.v. South African Airways Air India Free Flow

Johannesburg-Durban,Capetownv.v.* South African Airways Air India Free Flow

Columbo-Indiav.v. SriLankanAirlines Air India Block Space

India-Zurichv.v. Swiss Air India Block Space

Singapore-Kolkata,Bangkok,Kualalumpur,SanFrancisco,LosAngeles v.v.

Singapore Airlines Air India Free Flow

AddisAbaba-Indiav.v. Ethiopian Airlines Air India Free Flow

AddisAbaba-DaresSalaamv.v.* Ethiopian Airlines Air India Free Flow

AddisAbaba-Nairobiv.v.* Ethiopian Airlines Air India Free Flow

Mumbai-Bangaluru/Kolkata/Delhi/Hyderabad/Ahmedabad/Chennai v.v.*

Air India Turkish Airlines Free Flow

Delhi-Bangaluru/Kolkata/Hyderabad/Ahmedabad/Chennai/Amritsar v.v.*

Air India Turkish Airlines Free Flow

India-Istanbulv.v. Turkish Airlines Air India Free Flow

Istanbul-Ankara/Izmir/Antalya/Adana/Dalaman v.v.*

Turkish Airlines Air India Free Flow

Mumbai-Delhiv.v.* Air India Egypt Air Free Flow

Mumbai-Cairov.v. Egypt Air Air India Free Flow

Delhi-Seoulv.v. Air India Asiana Airlines Free Flow

Seoul-Delhiv.v. Asiana Airlines Air India Free Flow

* For carriage of through 3rd/4th freedom traffic only and subject to connectivity.

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6. FINANCING INITIATIVES

Aircraft Financing:

AIfinancedfiveofthe787aircraftthroughBridgeLoansobtainedfromtheStandardCharteredBankandBoeingCapitalCorporation.Sincethecollateralvaluesofthe787wasnotdeterminedsomeofthefinancialinstitutionsaskedforalternatesecurityofaircraftinsteadoftheB787.ThetakeoutfinancingoftheseaircraftwillbethroughaSaleandLeaseBackarrangementwherebytheCompanywouldselltheseaircrafttoaselectedbidderandinturnleasetheseaircraftunderanoperatingleasefor12years.TilldatetheSaleandLeasebackarrangementshave already been completed on 7 of the 13 delivered B787 aircraft as of 31 March 2014 and the bridge loans from variousfinancialinstitutionshavebeenrepaid.

TheCompanyhasalsosold5of its8B777-200LRaircraft toEtihadsince the200LRaircraft isbeingslowlyremovedfromthefleetduetothehighcostofoperationsofthisaircraft.Thedeliveryoftheseaircrafthavebeenplannedtotakeplacein2013-14and2014-15.Till31March2014,theCompanyhasalreadydelivered3oftheseaircrafttoEtihadandtherestweredeliveredinthefirstquarteroffinancialyear2014-15.

7. AIR SAFETY

• Adedicatedwebsiteflightsafety@airindia.in has been set up which aids dissemination of vital safety related information in a cost effective manner to all employees of the Company.

• CockpitandCabinSurveillancechecksareroutinelycarriedouttomonitorsafeoperationofflights.• CockpitVoiceRecorder(CVR)monitoringonaregularbasiswithcrewinteractionthroughemailtoensure

adherenceofSOPinflight.• Counselingofpersonnelisregularlyconductedforsafetyenhancementandrecommendationsaresentto

various departments requiring time bound ATRs (Action Taken Reports).• FlightDutyTimeLimitations (FDTL) for pilots andCabinCrewaremonitoredwith violations addressed

appropriately.• InternationalandDomesticSafetyAuditsarecarriedoutonaperiodicbasis.• AnInternalAuditisconductedforsafetyevaluationoftheairlineandfindingsareactionedinatimebound

manner.TheassociatedreportisfiledwiththeDGCA.• Airport Surveys/RiskAssessments are carried out before commencement of flight operations to a new

airport.• SafetyActionGroup(SAG)meetingsareconductedonmonthlybasis.• QuarterlyExceedanceTrendAnalysisaregeneratedwhichanalyseexceedanceofoperationalparameters.

These reports are sent to Operations/Training Departments for necessary remedial measures.• BaseauditsatMumbaiandDelhiareconductedonceayear.Atotherstationsauditsareconductedoncein

two years.• Compliance checks of DGCA CAR, MEL requirements, Safety Enhancement Training (SET)/Safety

EnhancementRecommendations(SER)/CorrectiveTraining(CT)andFlightDutyTimeLimitations(FDTL)are carried out on a periodic basis.

• SafetyReviewMeetingswithDGCAbeingheldonmonthlybasistobriefDGCAonsafetyrelatedissues.

8. GROUND HANDLING

As on 31 March 2014, Air India provided Ground Handling services at 43 domestic airports and 18 international airports. Apart from this, AISATS, a Joint Venture Company of Air India is providing ground handling services at 5 international airports viz. Bangaluru, Hyderabad, Mangalore, Delhi and Thiruvananthapuram. During the period 2013-14flightshandledwereasfollows:

2013-14 2012-13Air India 74,397 1,33,884Foreign Carriers 30,004 27,759Air India Express 9,141 7,193Otherflights 402 138Hajflights 176 272Total flights handled 1,14,120 1,69,246

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RenewalofGroundHandlingAgreements forvariousgroundhandlingserviceswereundertakenandfinalizedatChicago,Colombo,Doha,Dubai,Frankfurt,HongKong,Jeddah,Kabul,Kuwait,London,Madinah,Muscat,Newark, New York, Paris, Rihyadh, Seoul, Shanghai, Singapore and Tokyo. Further tender process undertaken for arrangementofgroundhandlingservicesandGroundHandlingAgreementsfinalizedatnewonlinestationsviz.Birmingham, Melbourne and Sydney.

Joint Venture Agreement between Air India Limited and Singapore Airport Terminal Services (SATS) on ground handling :

TheCompanyhasenteredintoaJointVenture(JV)agreementwithSATS,Singaporeintheequityratioof50:50to provide ground handling services to airlines at certain metro airport. This was in pursuance of Government of IndiaNotificationontheGroundHandlingpolicy.

During the year, total bills raised by AI SATS towards handling charges and other services provided to Air India amounted to Rs.2,196.0 Million and total bills raised by Air India on AI SATS amounted to Rs.1,311.7 Million. As per the books of the Company, the net balance payable to AI SATS as on 31 March 2014 was Rs.430.7 Million andasperthebalanceconfirmationreceivedfromAISATS,netbalancepayableisRs.442.7Million.Thenetdifference of Rs.12 Million is under reconciliation and necessary accounting adjustment will be dealt with in due course.

AISATShasmadeaProfitafterTaxofRs.421.5Millionduringtheyearended31March2014.Dividendof15%was declared by the Joint Venture during the year.

9. QUALITY MANAGEMENT SYSTEM (QMS)

Emergency Response Plan

As continuous efforts to be prepared to face an emergency, mock drills and table top exercises as per the Emergency Management Manual (EMM) requirements were carried out. Also, various activities carried out as per the Corporate Emergency Response Plan prepared for the year 2014. As a part of Air India becoming member of Star Alliance, EMM was completely revised and now ERP is part of Star Alliance.

Documentation Management System(DMS)

Since 1 January 2013 when DMS went live, fair amount of DMS usage has been done by Departments. DMS repository is used for safe keeping of documents as per Guidelines of Public Record Act, 1993 and Rules 1997. Regular trainings are organized for Air India personnel on usage of DMS.

DMSisamajorinitiativemovingtowardsnearpaperlessofficeandforbettertransparencyanddocumentrepositoryto comply with Government requirements as well as regulatory requirements. This not only generates cost savings fortheCompanybutalsoimprovesefficiency,savestimeaswellasenvironment.

IATA Safety Audit for Ground Operations (ISAGO)

HeadofQMSattendedISAGOOversightCouncil(GOC)MeetingasChairpersonon23-24September2014.

TheISAGORenewalAuditofHeadquartersofAirIndiaAirTransportServicesLimited(AIATSL),awhollyownedsubsidiaryofAirIndia,wasconductedbyM/sAQSAuditorfrom2-3June2014withNilfindingsandtheRegistryhasbeenrenewedtill2016.Further,auditofAIATSL,MumbaiStationwasconductedbytheSouthAfricanAirlinesAuditorsfrom28-30July2014andtheRegistryhasbeenrenewedtill2016.

Operational Efficiency & Fuel Management

Environment Management System/Fuel Management Information System have been monitoring and ensuringqualityenhancementinallareasoffuelmanagement,operationalefficiency,costreductionbesidesimplementation of green initiatives as well as emission reduction. Aviation Fuel Consulting group of IATS wereentrustedwith theworkof conducting theFuelEfficiencyGapAnalysis (FEGA)on the consumptionof aviation turbine fuel aswell as implementation of specific cost saving opportunities. Implementation ofthe recommendations of FEGA helped in saving fuel. Huge monetary, fuel savings and reduction in Carbon Dioxide emission were achieved. Upto March 2014, 316,121,673 kgs of fuel was saved and carbon dioxide emissions were reduced by 995,783,274 kgs.

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Flight Planning System

TheFlightPlanningSystemhasbeenimplementedonallfleetsi.e.B777,B787,B747andA320family.BesidesAirIndia,thesystemtrialsforAirIndiaExpresshavecommencedwiththetargetdateofprojectcut-overforB737-800aircraft from 1 January 2015.

Corporate Safety Management System (CSMS)

Corporate SMS Plan 2014 covering various activities as per Audit Plan 2014 was prepared and followed.

Personnel in Air India and its subsidiary Companies are encouraged to make use of every channel to report issues of concern which affect quality, safety and security of operations through the detailed standardised formats.

IATA Operational Safety Audits (IOSA)

ForcontinuousimprovementaspertheE-IOSArequirement,aninternalQuality&SafetyAuditwasconductedaspertheE-IOSAAuditProgramme.

IOSA validity of Air India is upto January 2016. For timely renewal of IOSA Registry, an agreement has been signed withM/sQuali-Audit,France(AuditingOrganisation)forconductingIOSARenewalAuditintheyear2015.

10. INFORMATION TECHNOLOGY

Web Application for Visitor Entry Pass (WAVE)

WAVEwas implemented inMay2013 foronline registrationofvisitorsvisiting theCompany’spremisesandgenerating Visitor Entry Passes. A Unique Reference Number and Unique Entry Pass Number is generated for every visit. All the details of the visitors such as passport details, visa details, company information, etc. are captured during registration which is valid for six months. The visitor can quote his reference number for subsequent visits and need not provide his details again.

Fuel & Oil Bill Verification Application

An in-housedeveloped server basedapplicationwas implemented in July 2013 to cater thebill verificationpertaining to duty paid fuel.

Air India Datamart

AIDatamartwasimplementedon22October2013byrollingouttheinitialfifteenreportsmainlypertainingtoDeparture Control Services.

Air India Website

Air India website www.airindia.inwasredesignedandlaunchedon5September2013.Themulti-lingualmulti-country website has a Dynamic portion which interacts with Passenger Service System to provide real time informationonschedule,fares,flightstatusandPNRstatusetc.,aswellasprovidingintegrationtothebookingengine, sales promotion activities and customer services. The Static portion provides passenger and corporate information in addition to mandatory government information. Flight Tracking application has been developed to providereal-timeflightstatusbasedontheflightdataextractedfromIOCC/Sabre.

11. SECURITY

The Security Department of the Company has a well defined security policy for safety and security of itsoperations.Ithasaprofessionallymanagedset-upheadedbyExecutiveDirector-Security,whoisaseniorlevelIPSOfficer ondeputation from theGovernment andpermanent and contract security personnel through itssubsidiaryCompaniesviz.AirIndiaAirTransportServicesLimited(AIATSL),AirIndiaChartersLimited(AICL),AirlineAlliedServicesLimited(AASL)and throughJointVentureofAISATS,whoaredeployed forprovidingsecuritycoveragetoallAirIndiaflightsandthoseofourcustomerairlines.

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

Investigation & Fraud Prevention Cell (I&FP Cell)

The Investigation & Fraud Prevention Cell, a vital wing of the Security Department, deals with all revenue and property crimes/frauds, including policies and procedures to prevent the travel of inadmissible passengers on our flights to western countries with improper documents/documentation such as stolen/counterfeit/forged passports and visae, counterfeit/forged/stolen revenue documents like tickets, Miscellaneous Charges Order (MCO), credit card frauds, etc. Owning to this, the British Government has, through the Home Office (Her Majesty’s Immigration Service), bestowed upon Air India the Approved Gate Checks status, which enabled the waiver of several fines/penalties imposed by them for the carriage of inadmissible passengers (inadvertently) to the UK on a case to case basis. In March 2014, Air India I&FP Cell was commended by US High Commission, Mumbai for their efforts in detecting, deterring and dismantling Alien Smuggling operation in India during the year 2013.

Training

High emphasis is assigned to training in the form of basic/first time, refresher and security awareness programmes to Security personnel and officers/staff from other departments viz., Operations, Customer Services, Commercial Department, by the Security Training Centre (STGC), Mumbai and Central Training Establishment (CTE), Hyderabad. Both the training centres are authorised by the BCAS to conduct security training programmes based on the National Civil Aviation Security Programme (NCASTP), which in turn has been formulated on the basis of the Standards and Recommended Practices (SARPs) contained in Annexure 17 to the ICAO Convention on International Civil Aviation, Chicago. New Training Centres are being established at Delhi, Bengalaru, Chennai and Kolkata to facilitate speedy and economically viable security training to Air India and other Airlines’ staff, within the four Indian Regions.

The Investigation & Fraud Prevention (I&FP) Cell has also been actively conducting training for the benefit of all the frontline staff at the Booking Office (Reservations), Airport Offices and Check-in Counters at the Domestic Stations. Till date, the I&FP Cell has trained over thousands of staff from Air India, other Customer Airlines, Customs and Immigration Authorities (Government of India), in the field of fraud prevention.

12. HUMAN RESOURCES

12.1 Staff Strength

The staff strength as on 31 March 2014 was 23258.

12.2 Long Service Mementoes

Every year all the employees of the Company who had completed 25 years of service are presented with a long service memento i.e. a wrist watch and a Certificate, on 27 August. Accordingly, this year on 27 August 2013, the Long Service Mementoes presentation function was held Region-wise and 684 employees were felicitated.

13. MEDICAL SERVICES

During 2013-14, a revenue of Rs.2,83,185/- was generated by way of calibrating Alcosensor IV Instruments for commercial airlines for conducting pre-flight medical checks.

A number of measures have also been initiated to reduce expenditure and achieve savings in Medical Services Department :

Purchase of life saving medicines for terminally ill patients directly from the manufacturers resulting in saving of Rs.9,30,18,068/-.

Availing institution discounts by stocking a large number of medicines in-house resulting in saving of Rs.1,51,51,731/-.

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Issue of prescription was curtailed and 5% discount was obtained from Panel Chemist resulting in savings ofRs.59,33,650/-.

Rs.1,87,000/-wassavedonthecostofpreemploymentmedicalexaminationasthecostisbornebythecandidates as per the new policy.

TotalsavingsbytheMedicalServicesDepartmentduringtheyearunderreviewamountedtoRs.11,42,90,449/-.

14. SPORTS

The Air India Cricket Team won the Atharva Patson Cricket Tournament held in Pune in November 2013, All India Public Sector Cricket Tournament held in March 2014, Nepal Cup held in Kathmandu in March 2014.

TheAirIndiaHockeyTeamwontheSrNationalTournamentsheldinPuneandLucknowinMay2013andFebruary2014,respectively.TheTeamalsowonSahibzadaAjitSinghHockeyTournamentheldinLudhianainDecember2013.

TheAir IndiaFootballTeamwonMLACupheld inDecember2013,All IndiaPublicSectorTournamentheld inKolkatainJanuary2014,HarwoodLeagueheldinMarch-May2013andKashmirInvitationCupheldinSrinagarin June 2014.

TheKabaddiTeamwonTournamentsorganizedbyMarathaLancerSportsClub inNagpur from7-10January2014,PanchganiVyayamMandalinPachganifrom18-21January2014,DaspatiKridaMandal,Chiplunfrom20-23February2014–bothStateLevelTournamentsandMumbaiDistrictChampionshipheldinMumbaifrom18-24October 2013.

Air India won the All India Public Sector Cultural Competition held in Dehradun in 2013. The team was 1stRunners-Up in the Cultural Competition held in Bangaluru in 2014 for its outstanding achievements by Sports persons in Public Sector Units and overall achievement by Public Sector Units. The trophy was presented by All India Public Sector Sports Promotion Board in the Annual Sports Award on 29 June 2014 at Bangaluru.

InTableTennisMen’sATeamandWomen’sATeamwon the InterOfficeTableTennisChampionshipheld inMumbaiinMay2013.YouthTeam-Girls,YouthTeam-BoyswonBronzeMedalin43rd All India Inter Institutional TT TournamentwhereBronzewasalsowoninWomen’sDoubles.AirIndiaTeamwonthe75th Maharashtra State TT Championship.AirIndiaWomen’sTeamwonBronzeinAllIndiaPublicSectorTTTournamentheldatTrivandrumin December 2013.

AirIndiaCarromTeamwonStateRankingTournamentheldinMumbaiinOctober2013.TheteamwasRunners-UpinStateRankingTournamentheld inMumbai inMarch2014.TheteamwasalsoRunners-Upin15th Inter-Institutional Carrom Championships held at Gwalior.

AirIndiawon4GoldMedalsinCentralZoneTournamentheldinBangaluruon26-27September2013.DuringSeniorNationalChampionshipheldatNewDelhi from16-23December2013,1Gold,2Silverand3BronzeMedals were won.

DuringSeniorAllIndiaMajorRankingBadmintonTournamentheldatthefollowingstations,AirIndiaTeamwon:

Cochinduring29January–2February2014

Bangaluruduring4–8February2014) 2Goldand2BronzeMedals

Hyderabad 3 Gold and 2 Bronze Medals

Puneduring17–21July2014 1Gold,1Silver,1BronzeMedals

Bareillyduring10–14January2014 2Goldand2BronzeMedals

Ms Arti Rao won Gold Medal and Mr Gagan Narang won 1 Silver and 1 Bronze during 57th National Shooting ChampionshipheldatNewDelhifrom11–24December2013.

Mr Narang also became the winner of 1 Silver and 1 Bronze Medal for India in 2014 Commonwealth Games held at Glasgow.

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15. PUBLIC GRIEVANCES

Duringtheyear2013-14,293PublicGrievancecaseswerereceived.Outofthese,264caseshavebeensettledduring2013-14and29arepending.

16. STATUTORY COMPLIANCE

AirIndiahassixsubsidiarycompanies.ThefinancialstatementsofthesubsidiariesareincludedinthisAnnualReportelsewhere.Theirperformanceisbrieflydiscussedhere:

16.1 Air India Air Transport Services Limited (AIATSL):

(Rs.in Million)

Particulars 2013-14 2012-13

Air India’s investment in equity 0.5 0.5

Total Income 1018.2 750.1

Profit/(Loss)AfterTax 21.9 5.1

AIATSLpresentlyprovidesgroundhandlingservicesat63airports.Apart fromhandling theflightsofAirIndiaLimitedand itsSubsidiaryCompanies,groundhandling isalsoprovided for29 foreignairlinesand4domesticairlinesfor115000flights(AirIndiaandSubsidiaries)and27256flightsofcustomerairlines.Atotal of 3865 staff on contract have been employed to carry out the work of ground handling on behalf of the Company at various airports.

WiththegrowthoftheinternationaltrafficinandoutofIndiaandwithAirIndia,theparentcompany,joiningStar Alliance, the number of airlines operating to and from India is likely to considerably increase in the future.

AIATSLhasanadvantageofhavingthelateststate-of-the-artequipmentandskilledmanpowertohandlethese flights at various airports in India which no other Operator posseses presently. The Company isthereforeconfidentthatlookingintothefuture,thegroundhandlingrevenuewouldconsiderablyincreasefrom handling foreign airlines and local domestic airlines.

WiththeGroundHandlingPolicystillundecided,AIATSLwouldalsohaveadvantageofoperatingfromanyairportinIndiabeingtheSubsidiaryofAirIndiaLimited.

AsperCAPA, thegrowth in traffic in andout of India is likely to growmanifold. India, a growing Asian economy, is amongst the fastest growing and currently the 9th largest aviation market handling 121 Million domestic and 41 Million international passengers, is expected to become the third largest aviation market by 2020 with the Country’s airports handling 336 Million domestic and 85 Million international passengers withprojectedinvestmenttothetuneofUS$120Billionby2020.This would lead to considerable growth in groundhandlingandancillaryactivitiesandAIATSLwouldstandtogainbythisdevelopment.

AIATSLwithpanIndiapresenceistobethemarketleaderinthecountryandwithitscapabilityshouldbeable to venture into few of the foreign countries wherever Air India is operating.

AtallthestationsSecurityHandlingofalltheflightsiscarriedoutexclusivelybyAIATSLstaff,asthesameis not permitted to be outsourced to any agency.

16.2 Air India Charters Limited (AICL):(Rs.in Million)

Particulars 2013-14 2012-13

Air India’s investment in equity 300.0 300.0

Total Income 20694.1 15608.8

Profit/(Loss)AfterTax (3453.3) (3511.5)

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AICLoperatesaLowCostAirlineunderthebrandname“AirIndiaExpress”.Launchedon29April2005withafleetof3leasedB737-800aircraft,itoperatedfrom3stationsinKeralato5stationsintheGulf.Ason31March2013,AICLhadafleetof21B737-800aircraft(including4dryleasedaircraft).Afterthereturnof4leasedaircraftduringthefirstquarterof2014,theCompanycurrentlyhas17ownedB737-800aircraft.Itoperatedto11Indianand12foreignon-linestations.

During2013-14AICLhascarried2.72Millionpassengersasagainst2.15Millionduring2012-13,anincreaseof 26% against capacity increase of 17%. The Scheduled Services Revenue, before revenue sharing with the holding companyAir India Limited, increased substantially from Rs.17,750.9 Million in 2012-13 toRs.23,594.5Millionin2013-14.

AirIndiaExpressbeganthewinter2013-14withatotalof188flightsperweek.AirIndiaExpressendedtheWinter2013-14schedulewith143 internationaland20domesticflightsperweek.TheCompanymadealossofRs.3,453.2Millionduringtheyear2013-14asagainstRs.3,519.7Millionduringtheyear2012-13.

16.3 Air India Engineering Services Limited (AIESL):

(Rs. in Million)

Particulars 2013-14 2012-13Air India’s investment in equity 0.5 0.5Total Income - -Profit/(Loss)AfterTax (0.03) (0.02)

TheBoard ofDirectors ofAir India Limited, the parent company, at itsMeeting held on 7August 2010approvedoperationalisationofAirIndiaEngineeringServicesLimited.CabinetNoteforoperationalisationwas submitted to theMinistry of CivilAviation. Cabinet has approved operationalisation ofAIESL on 6September2012.ItisproposedthattheassetsandmanpowerfromAirIndiaLimited,willbetransferredtoAirIndiaEngineeringServicesLimitedasperthedecisionoftheCabinet.TheCompanywillbetreatedasaseparateprofitcentreforcarryingouttheMaintenance,RepairandOverhaul(MRO)activitiesofAirbusandBoeingfleet.Theprocessofoperationalisationhasaccordinglystartedw.e.f.1 February, 2013 with transfer ofManpower to theCompany. Further, steps have been initiated to obtain/fulfil variousRegulatory andStatutory approvals/compliances in order to start MRO activities.

16.4 Airline Allied Services Limited (AASL):

(Rs. in Million)

Particulars 2013-14 2012-13Air India’s investment in equity 22.5 22.5Total Income 2423.9 2692.6Profit/(Loss)AfterTax (2494.0) (1333.9)

The Company operates under the brand Alliance Air.

Ason31March2014theCompanyhad4ATR-42-320sand4CRJ-700sleasedaircraftinitsfleet.Asattheend of the year, the network of the Company consisted of 24 stations within the country. Presently, it has beenoperatingaround180flightsperweek.Ason31March2014,thestaffstrengthoftheCompanywas938 including 23 employees on deputation from the parent Company.

Alliance Air operated air services in the North East Region under an MoU with the North Eastern Council (NEC) from January 2003 to December 2012. As the Viability Gap Funding (VGF) had been withdrawn by NEC,theoperationswerere-structuredandultimatelywithdrawninJune2014.

The matter was subsequently reviewed by the NEC and operations were restored effective 1 August 2014.

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AllianceAiralsooperatesflightsbetweenAgattiandthemainlandunderanundertakingofgrantofVGFbytheLakshadweepAdministration.

16.5 Hotel Corporation of India Limited (HCI):

(Rs. in Million)

Particulars 2013-14 2012-13

Air India’s investment in equity 406.0 406.0

Total Income 505.0 463.6

Profit/(Loss)AfterTax (404.7) (356.2)

Chefair Flight Catering, Mumbai

AsalleffortstooffertheunitunderManagementContractfailed,theBoardofAirIndiaLimitedhadadvisedtheManagementtomaketheunitasaseparateprofitcentreandgive30%ofitscateringbusinesstoHCIwithout following the tender procedure. Accordingly, 30% catering business of Air India was granted to Chefair without following the tender procedure.

The Unit earned a revenue of Rs.96.66 Million as against Rs.72.09 Million previous year. Expenditure increased from Rs.182.63 Million during previous year to Rs.213.10 Million. The Unit made net loss of Rs.137.06 Million as against Rs.120.43 Million in the previous year.

Centaur Lake View Hotel, Srinagar :

SubsequenttofailuretooffertheUnitofCLVHunderManagementContractduetotheinterventionoftheStateGovernmentofJammu&Kashmir, theBoardofAir IndiaLimitedhaddirectedtheManagement tocontinue running the hotel after carrying out necessary renovation for upgrading the Unit.

The Unit incurred a net loss of Rs.65.06 Million as against Rs.36.08 Million previous year.

Centaur Hotel, Delhi and Chefair, Delhi

Chefair Flight Catering, Delhi (CFCD) and Centaur Hotel Delhi Airport (CHDA) were being upgraded.

During the year Centaur Hotel, Delhi and Chefair Flight Catering, Delhi incurred net loss of Rs.148.34 Million and Rs.76.38 Million, respectively.

T3 Lounge, Delhi

TheUnitstartedoperationsinJanuary2013andearnedarevenueofRs.51.09Millionduringtheyear2013-14asagainstRs.5.09MillionduringtheperiodJanuary-March2013.TheUnitmadeanOperatingProfitofRs.17.58Millionduring2013-14andafterprovidingfordepreciation,thenetprofitfortheyearwasRs.17.51Million.

16.6 Vayudoot Limited

As perMinistry ofCivilAviationOrderNo.AV.18013/44/92-ACVL dated 25May 1993, Vayudoot LimitedwastobemergedwitherstwhileIndianAirlines(nowAirIndiaLimited).TheMinistryvideitsOrderdated6February2014accordeditsapprovalandVayudootLimitedwasamalgamatedwithAirIndiaLimitedwitheffect from 1 April 2013.

17. RISK MITIGATION STRATEGIES

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

18. INTERNAL CONTROL SYSTEMS

The Company continues to ensure proper and adequate internal control systems and procedures commensurate with its size and nature of business to ensure that all assets are safeguarded and protected against loss from unauthorized use and that transactions are authorized, recorded and reported correctly. The internal control

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

The Company has an extensive system of internal controls which ensures optimal utilization and protection of resources, ITsecurity,accurate reportingoffinancial transactionsandcompliancewithapplicable lawsandregulations as also internal policies and procedures. The internal control system is supplemented by extensive internal audits, regular reviews by management and well documented policies and guidelines to ensure reliability offinancialandotherrecordstopreparefinancialstatementsandotherdata.

TheCompanyhasawelldefinedmanualondelegationofauthorityandadministrativepowers,basedonwhich,the authorities exercise their powers. This manual is reviewed periodically to cope with the changes necessitated by the needs of the organization. The said manual, along with the Company’s key functional process manuals, further strengthens the internal control system of the organization. The Company has independent internal audit systems to monitor the entire operations and services spanning over all locations, business and functions on a regular basis. The Company has also employed outside consultants in its various areas of functioning in order to reduce/monitor its cost platform.