1-AIR INDIA BOOK-2017-2018.Cdr
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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 6 4. Management Discussion & Analysis Report 26 5. Comments of the Comptroller & Auditor General of India 45 6. Independent Auditors’ Report 49 7. Balance Sheet as at 31 March 2018 57 8. Statement of Prot & Loss for the year ended 31 March 2018 58 9. Statement of Change in Equity for the year ended 31 March 2018 59 10. Cash Flow Statement for the year ended 31 March 2018 60 11. Notes forming part of the Financial Statements for the year ended 31 March 2018 61 AIESL BOARD OF DIRECTORS (as on 26 DECEMBER 2018) Shri Pradeep Singh Kharola Chairman Shri Vinod Hejmadi Director Smt. Gargi Kaul Director Shri Satyendra Kumar Mishra Director Chief Executive Officer Shri H.R. Jagannath Chief Financial Officer Shri Kapil Aseri Company Secretary Shri Gagan Batra Auditors M/s. D.B Ketkar & Co. Chartered Accountants Registered Office Airlines House 113 Gurudwara Rakabganj Road New Delhi 110 001 1 AIESL CHAIRMAN'S SPEECH Dear Shareholders, It gives me great pleasure to present the fourteenth Annual Report of the Company for the year 2017-18. Air India Engineering Services Ltd. is a leading MRO service provider in the country providing both Line Maintenance and Major Maintenance for various type of aircraft in AI's eet/Air India Express/Alliance Air/Third party Airlines as well as Defense forces. The MRO industry is a Capital Intensive industry with high competitive environment and 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. 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. PERFORMANCE OF THE COMPANY The nancial performance of your company during FY 2017-18 was as under: l The operating revenue has increased from Rs. 740.45 crores in previous year to Rs. 783.26 crores in current year and the total revenue increased from Rs. 740.48 crores to Rs. 794.43 during the period i.e. an increase of Approx Rs. 54 crores (7.3%). l As against this, the total expenditure of the company increased from Rs. 1251.36 crores to Rs. 1290.09 crores in the same period which an increase of approx Rs. 39 crores (3.1%). l The loss of the company during FY 2017-18 was reduced to Rs. 495.66 crores as compared to Rs. 510.88 crores in FY 2016-17 which resulted decrease in loss by approx Rs.15.22 crores (2.98%). Further, your company had in past technical handling agreement with 8 International Airlines and 2 Domestic Airlines for Line Maintenance work. During the year 2017-2018, AIESL signed SGHAs (Standard Ground Handling Agreements) with new International Airlines namely- Druk Air, Unitop Airlines, Air Asia Berhad, Thai Smile, VietJet and Cebu Pacic for diversion. Your company had approval from 5 foreign Civil Aviation authorities and in 2017-2018; we submitted our application to 4 more foreign Civil Aviation authorities, viz. CAA Thailand, CAA Malaysia, CAA Vietnam and CAA Srilankan. At present, AIESL has 6 foreign CAA approvals namely Qatar, Kuwait, GACA(UAE & Saudia), CAA Singapore, CAASL, CAA Nepal and 2 approvals are under progress viz. CAA Thailand and CAA Malaysia. Your company carried out base maintenance work for Domestic operators namely –Jet Airways, Go Air, TATA SIA Airlines, Air Asia India and Spicejet in 2017-2018. In addition, AIESL has also carried out major maintenance work for ARC, Indian Navy, Indian Air Force, Indian Coast Guard, HAL, BSF Airwing and Pawan Hans. In 2017-2018, AIESL undertook maintenance of private parties aircraft like – Reliance RCDL, Jindal Steel, Taj Air Charters, Bluedart, GMR Hyderabad, Nepal Airlines Corporation and Air Mauritius. In Dec 2017, changes in CAR 147 Basic was made by DGCA and approximately 24-25 institutes approached AIESL for Agreement to provide practical training to their students. In 2017-2018, we have signed up with 12 Institutes for imparting training to their students. And, similar numbers of Institute are interested in signing up with AIESL in 2018-2019. 2 AIESL STRENGTHS AND CHALLENGES The company is well known in Indian as well as in South Asian Region for providing one stop solution to its clients for their MRO related work requirements that too at competitive prices and world class standards of commitments. The technically skilled manpower is the main strength of the company. However, the company would need to upgrade the skills and constantly engage more young and energetic manpower to keep pace with the time and changes in technologies as well as to stand with the increasing competition in the industry. MRO SCENARIO- WORLD Maintenance, repair and overhaul (MRO) in the aeronautical industry is a complex process that has strict and precise requirements dened by airworthiness authorities to guarantee the safety of passengers and aircrew. Billions of dollars are spent by airlines every year to comply with such requirements, which represent a relevant portion of their total operational costs. The importance of MRO can be judged by the fact that it typically constitutes 12-15 per cent of an airline's operating cost. The MRO sector describes different types of aircraft repair as:- (1) Aircraft Structural Repairs, (2) Engine/ APU's Overhauls/ Repairs (3) Component repairs, The supply chain in the aeronautical industry is very complex. Each component has to be manufactured by an approved organization (OEM) and the product is certied after vigorous testing of all conditions of ight. Due to the high level of requirements, there are limited number of companies authorized to provide parts and services in the aeronautical industry. Aviation Sector, to which MRO services are provided, can be broadly categorized into three (3) groups:- Commercial Aviation Industry -The commercial aviation industry is composed of airline companies that offer passenger and cargo transportation services. Approximately 230 major airlines operate throughout the world and are registered with the International Air Transport Association (IATA). Boeing explains that the industry continuously adapts to various market forces. Key market forces that impact the airline industry are fuel prices, economic growth and development, environmental regulations, infrastructure, market liberalization, airplane capabilities, other modes of transport, business models, and emerging markets. Business Aviation Industry -Worldwide demand for business jets is highly correlated with wealth creation, which, in turn, is largely driven by economic growth. Since the introduction of the business jet, in 1965, the business aircraft market has been highly cyclical. The crisis in the nancial markets at the end of 2008 precipitated a sharp downturn in business aviation and new business aircraft orders. Military Aviation Industry: Political decisions determine when and how the military, as a whole, will be employed and this employment has a direct impact on the MRO industry. MRO providers are expanding their geographical reach and capabilities in a bid to become regional and global full service providers. The number of MRO businesses in emerging countries is increasing due to low labor costs and joint ventures between suppliers and aircraft manufacturers. In the Fully Integrated MRO model, all MRO activities are provided internally; in addition, the capabilities are extended to support other airlines. While many airlines have treated MRO as an expense, other airlines have successfully transformed their MRO into a prot generation units. 3 AIESL MRO SCENARIO - INDIA The Ministry of Civil Aviation (MoCA), Government of India released the National Civil Aviation Policy 2016 (NCAP 2016). As per the new Civil Aviation Policy, the MRO business of Indian Carriers is around Rs. 5000 crores and approx 90 % of this is currently spent outside India. The government is keen to develop India as an MRO hub in Asia, attracting business from foreign Airlines. FUTURE PLANS The company is planning to establish its footprints overseas also. In a rst step towards that AIESL has established its rst overseas branch at Sharjah, UAE. Based on the experience and backed by cost benet analysis, the opportunity to expand to other international stations is also being explored. I am condent in the years to come with the increase in business and recovery of xed capital and manpower costs the Company will be able to steer its way to protability. CORPORATE GOVERNANCE AIESL 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 evaluation reports as well as return on Corporate Governance were 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 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 protable in the future. On behalf of the Board, I seek your continued support, as always. Sd/- (Pradeep Singh Kharola) Chairman 4 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.