AICL AIR INDIA CHARTERS LIMITED AICL CONTENTS Page No. 1. Board of Directors 1 2. Directors’ Report 2 3. Comments of the Comptroller & Auditor General of India 25 4. Independent Auditors’ Report 26 5. Balance Sheet as at 31 March 2015 47 6. Statement of Profit & Loss for the year ended 31 March 2015 48 7. Cash Flow Statement 49 8. Notes forming part of the Financial Statements for the year ended 31 March 2015 50 AICL BOARD OF DIRECTORS (as on 29 DECEMBER 2015) Shri Ashwani Lohani Chairman Shri V. Hejmadi Dr. (Smt.) Shefali Juneja Smt. Puja Jindal SECRETARY Smt. Aditi Khandekar AUDITORS M/s. Kirtane & Pandit Chartered Accountants Mumbai. LEGAL ADVISORS M/s. Kini & Co. BANKERS ICICI Bank HDFC Bank State Bank of India Bank of Baroda Dena Bank Bank of India Indian Overseas Bank REGISTERED OFFICE 21st Floor, Air India Building, Nariman Point, Mumbai 400 021. 1 AICL DIRECTORS' REPORT 2014-15 The Directors take pleasure in presenting the 44th Annual Report of the Company together with the Audited Accounts and Auditor's Report for the year ended 31 March 2015. INDIAN CIVIL AVIATION SCENARIO Financial year 2014-15 has been a very satisfactory one for most airlines in India including Air India Express as the year saw progressive decline in fuel rates starting from the middle of the 2nd Quarter leading to lower fares and increased demand. As per the air traffic statistics published by the DGCA, India, the Indian domestic air market registered growth of about 10.5% in the year 2014, with the domestic passenger traffic rising from about 60.1 million in 2013 to about 66.4 million in 2014 while the international traffic to and from India estimated at about 46.3 million in 2014-15, also registering a growth of about 9% over the 2013-14 level. In this connection, it is pertinent to note that the eight countries to which Air India Express operates contribute to about 50% of the total traffic to and from India. Furthermore, the air market on the routes between the countries served by Air India Express and India grew at a far higher rate of over 14% in the year 2014-15. In a forecast report released in 2013, IATA had estimated that the international traffic to and from India would grow at CAGR of 6.6% between 2013 and 2020. The forecast for the on-line markets of Air India Express upto 2020 was well above the national average, ranging between 7 and 8%. Going by the actual growth seen in 2014-15 and in the current financial year up to August 2015, the traffic growth in these markets could well end up closer to double digit. Responding to the opportunities presented by the markets between Kerala and destinations in the Gulf region, the larger Indian private carriers such as Indigo, Jet Airways and Spice jet and Etihad have commenced competitive direct international flights to the Gulf from Airports in Kerala – Kochi and Kozhikode effective Winter 2014-15 schedule. They have further added to their presence in these markets in the Summer 2015 schedule. Air India Express would be in a position to take advantage of the growing opportunities in the international markets to / from India with the induction of 6 dry leased aircraft in its fleet. The dry leased aircraft are scheduled to be delivered to the Airline between March and November 2016. REVIEW OF PERFORMANCE For the first time in the history of AICL, the Company has recorded an Operating Profit of Rs. 662.12 crores (before Revenue Sharing) besides generating a Cash profit of Rs. 172.49 crores (as against a net loss of Rs. 345.32 crores in FY 2013-14) mainly through increased revenue of Rs. 257.01 crores during FY 2014-15. The company has doubled the Cargo Revenue in the current fiscal over the previous year and also surpassed the excess baggage revenue by 39.22 % compared to previous year. The Scheduled Services Revenue, before revenue sharing with AI, increased substantially from Rs. 2,359.45 crores in 2013-14 to Rs. 2,616.46 crores in 2014-15, representing an increase of 10.8%. The total expenditure of the Company was Rs. 2,356.12 crores as against Rs. 2,412.43 crores for the year 2013-14, representing a decrease of 2.33 %. The turnaround in the financial performance of the Company may be attributed to more intense asset / resource utilization, greater operational efficiency, robust demand, lower ATF costs and elimination of lease rentals. In the year 2014-15 the demand on the routes served by Air India Express was strong enough to enable the Airline to not only improve the passenger load factor but achieve significant improvement in yield. The Company has also achieved “Excellent” Grade as per the MoU parameters defined for the year 2014-15. SUMMARISED FINANCIAL PERFORMANCE Rupees in crores Operating Revenue (before Rev. Sharing) 2,621.88 Operating Expenses 1,959.76 Operating Profit (before Revenue Sharing) 662.12 2 AICL Operating Revenue (after Revenue Sharing) 2,294.82 Operating Expenses 1,959.76 Operating Profit (after Revenue Sharing) 335.06 Total Revenue 2,294.96 Total Expenses 2,356.12 Loss before taxation & Exceptional Items 61.16 Less: Exceptional Items (0.13) Provision for Taxation - Net Loss 61.03 Add: Balance brought forward from previous years 2,404.90 Net Loss carried forward 2,465.93 Cash Profit of AICL for 2014-15 172.49 SUMMARISED PHYSICAL / REVENUE PERFORMANCE (FY 2014-15 Vs. FY 2013-14) APR-MAR 2014-15 APR-MAR 2013-14 Variance ASK (million) 8,161 8,121 0.5% Carriage (million) 2.62 2.72 -3.7% RPK (millions) 6,639 6,396 3.8% Load Factor (%) 81.4% 78.8% 3.3% Revenue (Rs. Cr.) 2,560 2,287 11.9% Yield/RPK (Rs) 3.82 3.62 5.5% RASK (Rs.) 3.11 2.81 10.7% Flying Hours 66,620.63 67,316.00 -1.0% SHARE CAPITAL Authorised Share Capital As on 31 March 2015, the Authorised Capital of the Company was Rs.800 crores divided into 8 Crores Equity Shares of Rs.100 each. Issued, Subscribed and Paid up Share Capital As on 31 March 2015, the Issued, Subscribed and Paid up Share Capital of the Company was Rs.780 crores divided into 7.8 Crores Equity Shares of Rs.100 each. AIRCRAFT FINANCING As on 31 March 2015, the position of foreign currency borrowing for Aircraft was as under: Rupees in Cr. Total Loan due as on 1April 2014 2,008.05 Less: Amount repaid during April 2014 to March 2015 (319.48) Add: Exchange adjustments due to revision in rates of currencies 79.13 Balance as on 31 March 2015 1,767.70 3 AICL AIR INDIA EXPRESS OPERATIONS Fleet Size As on 31 March 2015 the Airline's fleet strength stood reduced from 21 to 17 B737-800 aircraft, as 4 leased aircraft were grounded to prepare them for return to the lessors. Operations Despite a reduction of nearly 20% in the Airline's fleet size, there was only a marginal (1%) decline in the number of flying hours in FY 2015. As a result, the average daily utilization of the aircraft on the Airline's fleet went up sharply from 8.9 hours per day to 10.5 hours per day in Summer 2014 and further to 10.7 hours per day in the Winter 2013-14 Schedule. The number of weekly services operated by the Airline rose from 159 to 165 round-trip flights/week. With concerted focus on increasing resource utilization and judicious rationalization of domestic services, the Airline was able to restore the direct services between Mangalore and Kuwait besides improving the timings / increasing frequency of flights in several of its core markets. Summer 2014 schedule Between 1 May and 20 July 2014, Notice to Airmen (NOTAM) issued at Dubai International Airport had resulted in partial closure of the runway at that airport. Air India Express was able to obtain alternative slots at Sharjah International Airport and thereby continued its scheduled services from Tiruchirapalli, Amritsar, Lucknow, Pune, Jaipur and Mangalore. The Summer 2014 schedule comprised of 149 international flights and 11 domestic flights. The average aircraft utilization was approximately 10.5 hours per day per aircraft. Winter 2014 schedule In the Winter Schedule aircraft rotations were further rationalized so as to increase aircraft utilization and cater to the traffic demands for direct links / increased frequencies. The notable highlights of the Winter 2013-14 Schedule were as follows: l Kochi/Muscat/Kochi – Frequency of flights increased to 4 flights per week from 3 flights per week. l Trivandrum/Muscat/Trivandrum – Frequency of flights increased to 4 flights per week from 3 flights per week. l Mangalore / Abu Dhabi – Muscat/Mangalore - Frequency of flights increased to 4 flights per week from 3 flights per week. l Mangalore/Doha/Bahrain/Mangalore - These flights have been restructured to operate 2 non-stop flights per week between Mangalore and Doha and 3 non-stop flights per week from Mangalore to Bahrain extended in round-robin fashion to Kuwait. This schedule initiative helped to meet the legitimate and increasingly strident demand for restoring direct air links between Mangalore and Kuwait. l Kozhikode / Doha/ Kozhikode – Two additional terminator flights per week in addition to the daily flight operated on the Kochi / Kozhikode/Bahrain /Doha / Kozhikode / Kochi route. l Mumbai / Doha / Mumbai – Frequency of flights increased to 4 flights per week from 3 flights per week. The route-wise breakup of the flights operated by the Airline at the end of the Winter 2014-15 schedule was as under: 4 AICL Sr.No.