Air India Engineering Services Limited Aiesl
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AIESL AIR INDIA ENGINEERING SERVICES LIMITED AIESL CONTENTS Page No. 1. Board of Directors 1 2. Chairman’s Message 2 3. Directors’ Report 4 4. Comments of the Comptroller & Auditor General of India 44 5. Independent Auditors’ Report 48 6. Balance Sheet as at 31 March 2017 64 7. Statement of Prot & Loss for the year ended 31 March 2017 65 8. Cash Flow Statement 66 9. Notes forming part of the Financial Statements for the year ended 31 March 2017 67 AIESL BOARD OF DIRECTORS (as on 20 SEPTEMBER 2017) Shri Rajiv Bansal Chairman Shri Vinod Hejmadi Director Smt. Gargi Kaul Director Shri Satyendra Kumar Mishra Director Chief Executive Ofcer Shri H.R. Jagannath Chief Financial Ofcer Smt. C.N. Hemalatha Company Secretary Shri Gagan Batra Auditors M/s. D.B Ketkar & Co. Chartered Accountants Registered Ofce Airlines House 113 Gurudwara Rakabganj Road New Delhi 110 001 1 AIESL CHAIRMAN'S SPEECH Dear Shareholders, It gives me great pleasure to present to you the thirteenth Annual Report of the Company for the year 2016-17. Air India Engineering Services Ltd. is leading MRO (Maintenance, Repair and Overhaul) service provider in the country providing both Line Maintenance and Major Maintenance for various type of aircraft in AI's eet, Third party Airlines as well as to the Defense forces. The engineering activities of Air India (AI) were hived off to the company following the implementation of a Turnaround / Financial Restructuring Plan of AI. In terms of the MoU, the parent company viz. AI transferred the movable assets (Workshop, Plant & Machinery and Tools etc.) to the company at its written down value (WDV) on the transfer date formed the equity investment made by AI. As per MoU, the Company was also expected to receive Equity from AI to the extent of Rs 375 Crs. in the rst three years of its operations in order to support its Capital acquisition program. The MRO industry is a Capital Intensive industry with high competitive environment with low returns and there is a long payback / cost absorption period in view of the xed overheads on infrastructure facilities and high wage costs due to licensed manpower. Besides this, the Company has to depend on internally generated AI's business for substantial portion of its Revenue. However, with the expected growth in third party business and the incentives expected from GOI for the MRO industry, it is anticipated that AIESL will be operationally protable in next few years. CIVIL AVIATION SCENARIO The Government of India had announced National Civil Aviation Policy in June 2016 and it is expected that this would have an impact on the size and structure of India's MRO sector which is expected to be transformed signicantly, increasing the requirement of third party operators for MRO services. This is the rst time that India has a single document vision for the aviation sector as a whole including MRO sector which is a welcome development. MRO SCENARIO India, with its growing aircraft eet size, strategic location advantage, rich pool of engineering expertise, and lower labour costs has huge potential to be a global MRO hub. At present, Airlines operating in India get nearly 90% of their MRO work done from abroad, mainly due to cost advantages resulting from the comparatively high tax burden in India, cumbersome operating procedures and the inadequate MRO service facilities available in India. India's MRO market size has been estimated to be around USD 750 million. As per Boeing, the market is expected to grow at 7% CAGR to reach USD 1.2 billion by 2020. With the eet size likely to double by 2020, the need for a strong domestic MRO industry is critical. CAPA (Centre for Asia Pacic Aviation) had projected Indian MRO market to reach USD 2 billion by 2020. PERFORMANCE OF THE COMPANY DURING THE YEAR During 2016-17, total revenue of the Company was Rs. 740.48 crores as against total revenue of Rs. 620.27 crores during 2015-16. The total expenditure after prior period adjustments were Rs. 1245.64 crores as against Rs. 1178.89 crores during 2015-16. 2 AIESL The net loss during the year ended 31 March 2017 was Rs. 505.16 Crores as against Rs. 558.62 Crores during 2015-16. CORPORATE GOVERNANCE The company was in compliance with the guidelines on Corporate Governance issued by Department of Public Enterprises (DPE), wherever applicable during the year. The evaluation of various parameters viz. Financial as well Technical was also done in terms of targets set in the Memorandum of Understanding entered into by the company. The aforesaid evaluation as well as report on Corporate Governance was led with the authorities concerned. ACKNOWLEDGEMENT I take this opportunity to thank Air India Limited, Airline Allied Services Ltd., Air India Express Limited, Ministry of Civil Aviation, Director General of Civil Aviation and vendors for their unstinted support. I also acknowledge the support extended by all other authorities including Banks and regulatory agencies. I would like to thank my colleagues on the Board for their valuable guidance. I would like to thank all employees of the company for their support in making this Company operationalise and for their efforts and team spirit towards making the company protable in the near future. On behalf of the Board, I seek your continued support, as always. Sd/- (Pradeep Singh Kharola) Chairman 3 AIESL VISION To provide best in class and timely quality services to the customers by maintaining highest standards of regulatory and safety compliance. Mission Customer l Maintaining all aircraft of the captive work load of the eet of Air India in a continuous state of airworthiness by the system of preventive and corrective maintenance to secure a high level of safety. l Provide a “One Stop” solution to the customer. l Faster Turn Around Time. l To capture maximum Third Party work from in and around India. Process l To get DGCA approval under CAR 147 approval. l To obtain FAA and EASA approval for all its establishment and facilities. l Aggressive Marketing policy for more and more third party work. l It needs to Department centric so, every Departmental Heads need to be responsible for the deliverables so as to fulll the overall vision. l Continuous monitoring of Quality through quality audit etc. l Constant endeavor to upgrade the services, delivering highest customer satisfaction in terms of Quality, Service and Cost effective and ensuring long term strategic relationship. l All-out effort to be the world class MRO without compromising the quality standard. l Updating and enhancing the capability through training of the personnel and equipment of latest technology. l Multiskilling of the personnel through cross training to enhance the productivity. l Optimising operational cost. 4 AIESL DIRECTORS’ REPORT The Directors have pleasure in presenting the Thirteenth Annual Report on the business and operations of the Company together with the Audited accounts, Auditors' Report and comments by the Comptroller and Auditor General of India, for the Financial Year ended March 31, 2017. 1.1. Financial summary and highlights The Company's nancial performance is given hereunder: (Rs. in crore) Particulars Financial Year Financial Year ended 31.03.2016 ended 31.03.2017 Total Revenue 620.27 740.48 Total Expenses 1178.89 1245.64 Prot (Loss) before tax (558.62) (505.16) Less Provision of Tax Nil Nil Prot after tax (558.62) (505.16) Balance of prot brought forward from previous year (242.67) (801.29) Balance carried to Balance Sheet (801.29) (1306.45) 1.2. Details of revision of Financial Statements or Board's Report The Company has not revised its Financial Statements or Board's Report in respect of any of the three preceding nancial years as mentioned in Section 131 (1) of the Companies Act, 2013. 1.3. Dividend The directors are not recommending any dividend as the company has not earned any prots. 1.4. Transfer of unclaimed dividend to investor education and protection fund Since there was no unpaid / unclaimed dividend for the past years, the provisions of Section 125 of the Companies Act, 2013 did not apply. 1.5. Amount which the Board proposes to carry to reserves The Board of the company has decided/proposed to carry NIL amounts to its reserves. 1.6. State of the company's affairs: 1.6.1 The operations of the company have been divided into separate prot centers. The status of affairs at these prot centers is as given below: 5 AIESL I. NAGPUR MRO: The Time Line & Capability addition at Nagpur MRO is as given below: 1. 26th Oct. 2016 Addition of Capability: 4A-Check, Airbus A319/320/321 series tted with CFM56- B/V2500 A1 series engines, for Base & Line (Ratings A1- Aeroplanes) 2. 09th May 2017 Addition of Capability: Upto 15000FH/10000FC/60months for B737-700/800/900 aircraft tted with CFM56 series Engines, for Base & Line (Ratings A1-Aereoplanes) 3. November 2017 Proposed Enhancement of Capability of B737 to MPD Full Task Cards. 4. January 2018 Proposed enhancement of Airbus A320 series aircraft to C- Check. The achievement of the Nagpur MRO is highlighted below: 1 As on (12TH OCT. 2017) Certied 21 B777 aircrafts 2 As on Date Certied one A320 aircraft 3 As on Date Certied one Spice Jet B737 aircraft 4 FY 2016-2017 Earned USD 9.61 millon. II. CHENNAI : A) The Signicant Achievements of Chennai center during the year April, 2016 to March 2017 were as below: 1) Technical Certication provided to Client Airlines and revenue earned: Ø Engineering Certication of Client Airlines Aircraft (A320 family A/c) of M/s Silk Air, M/s Qatar Airways, M/s Kuwait Airways, M/s Etihad Airways, M/s Air Vistara, M/s Nepal Airways and A330 A/c M/s Qatar Airways & M/s Kuwait Airways are provided at various Stations in Southern Region as given under : 6 AIESL Client APRIL 2016 to MARCH 2017 (No.