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Summer Internship Project

FINANCIAL POSITION OF AIR INDIA BEFORE AND AFTER MERGER AND COMPARISON WITH OTHER AIRLINES Submitted in partial fulfillment of PGDM program 2010-2012

Submitted by Priyanka Sharma Roll no 77

Company guide Name-Mr.Daleep Malhotra Designation- Asst. Manager Finance Company- Air India Ltd

Faculty Guide Name- KBC Sexena

FORTUNE INSTITUTE
OF INTERNATIONAL BUSINESS

ACKNOWLEDGEMENT

A project starts with an objective but it is accomplished only with enormous efforts and tremendous support and guidance. It has been an utmost pleasure for me to work with Air India. The cordial environment here has always made me feel to be a part of the organization.

The process of completion of project report involves creation of debt towards innumerable persons. I am grateful to Mr. Daleep Kumar (Asst. Manager

Finance) who gave me time from his busy schedule & under whose guidance this project has been successfully completed.

TABLE OF CONTENTS

CHAPTER NUMBER

CONTENT

PAGE NUMBER

1 2 3 4 5 6 7 8

INTRODUTIN TO TOPIC COMPANY PROFILE ABOUT THE PROJECT RESEARCH METHODOLOGY DATA ANALYSIS AND FINDINGS CONCLUSIONS RECOMMENDATIONS BIBLIOGRAPHY

4 5 18 33 36 76 78 81

INTRODUCTION TO TOPIC

FINANCIAL POSITION OF AIR INDIA BEFORE AND AFTER MERGER AND COMPARISON WITH OTHER AIRLINES

To study the financial system existing in the organization & the study of financial performance of Air India & Indian, before and after the merger. Also a comparison has been done between the financial performances of Air India with Kingfisher, Jet Airways on the basis of Ratio Analysis.

COMPANY PROFILE

HISTROY OF CIVIL AVIATION


Air transport is the most modern, the quickest and the latest addition to the modes of transport. Because of speed with which aero planes can fly, travel by air is becoming increasingly popular. As far as the world trade is concerned it is still dominated by sea transport because air transport is very expensive and is also unsuitable for carrying heavy, bulky goods. However, transportation of high value light goods and perishable goods is increasingly being done by air transport. In 1929, Neville Vincent, a former RAF pilot came to India from Britain, joined TATA Sons and made a survey of all possible air routes. He presented the scheme to Director of TATA Sons. In Oct 1932 TATA Sons Ltd, which later become Air India International, commenced weekly airmail services between Karachi and Madras via Allahabad and Mumbai. Later two more airlines cameThe Indian National Airways came into existence in 1933 and Air Services of India into 1937. After the 2nd World War, the Government of India announced a new policy for the Development of Air Transport Services. In the first two years, it came into existence; the Government gave license to 11 companies to operate air services in different regions. At the time of independence there were 9 airlines operating with and beyond the frontiers of the country carrying both air cargo and passengers. It was reduced to 8 with Orient Airways shifting to Pakistan. These were: Airways India Ltd. Air Services India Ltd. Bharat Airways Ltd. Deccan Airways Ltd. Himalayan Aviation Ltd.
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Indian National Airways Ltd. Kalinga Airlines.

Taking into consideration to deteriorating financial position of the conglomeration of private airlines, the Govt. nationalized the Airlines Industry in 1953 through Air Corporation Act 1953. Nationalization resulted in creation of two companiesIndian Airlines Corporation (operating domestic services and short range International services to adjacent countries) & Air India International (operate for overseas services) & assets of all then existing companies transferred to those companies. Foreign airlines carrying international passenger traffic to and from India existed long before Independence. Their operations are governed by bilateral agreements signed from time to time between the Government of India and the governments of respective countries. In 1980-81, the number of such airlines was 35. It rose to 49 in 1996-97.

The share of foreign airlines in India's scheduled international traffic has increased. In 1971, their share was 55.58 per cent which went up to 65 per cent and declined to 58 per cent during 1972-75. It fell to 55.72 per cent in 1976 and further to 55.02 per cent in 1977. Between 1978 and 1990 it gradually increased and rose to 75.93 per cent. In 1996, the share was nearly 72 per cent. The act prohibited any other than two companies to operate any schedule air transport to or across India. The repeal of Air Corporation Act from 1st March 1994 enabled private operators to provide air transport services. Eight operators got the nod to commence operation out of which only two have survived: Jet airways Sahara India

Aviation services in developed countries are categorized into three levels: 1. Trunk Routes- Which connect major city pairs
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2. Regional Air Services - Which connect smaller towns, over shorter distances with small aircraft. 3. Non-Scheduled Services - Which include air taxi, charters, corporate or private aviation

In India unfortunately the regional and non-scheduled or Tier 2 and Tier 3 services are almost nonexistent. Even though such services normally constitute a small percentage of domestic air services, the importance of such services should not be under-estimated, as general aviation forms the entry point for personnel to enter the industry and gain grassroot experience. In 1953 a new dream took shape to air link the vast South Asian subcontinent by a single, modern and efficient airline. The airline was Indian Airlines. Today, Indian Airlines, together with its fully owned subsidiary Alliance Air, is one of the largest regional Airlines system in Asia with a fleet of 56 aircrafts, 8 wide bodied Airbus A300s, 34 Fly-by-wire Airbus A320s, 11 Boeing 737s and 3 Dornier D-288 aircrafts. Indian Airlines has been setting the standards for civil aviation in India since its inception in 1953. It has many firsts to its credit, including introduction of the wide bodied A300 aircraft on the domestic network, the fly-by-wire A320, Domestic Shuttle Service and Walk-in-Flights. Its unique orange and white logo emblazoned on the tails of all its aircrafts is perhaps the most widely recognized Indian brand symbol that, over the years has become synonymous with services, efficiency and reliability

MAJOR AIRLINE COMPANIES

AIRLINE
Air India Indian Airlines Air-India Express Air India Regional Blue Dart Aviation Club One Air Deccan Deccan Aviation Go Air Indigo Airlines Jagson Airlines Jet Airways Jet Lite Kingfisher Airlines MDLR Airlines Paramount Airways Spice Jet

COMMENCED OPERATIONS
October 1932 August 1953 April 2005 September 2007 May 1994 August 2005 August 2003 December 1997 June 2004 August 2006 November 1991 May 1993 April 2007 May 2005 March 2007 October 2005 May 2005

ABOUT AIR INDIA LIMILED

The Air India Limited is a company that was formed as National Aviation Company of India Limited by the government of India to oversee the merger of Air India and Indian. The company was renamed as Air India Limited on October 26, 2010. It was incorporated under the Companies Act 1956 on 30 March 2007 and was owned by the Government of India based at the Air India Building in Nariman Point, Mumbai. The Company was created to facilitate the merger of the two main state-owned airlines in India: Air India, with its subsidiary Air-India Express and Indian, together with its subsidiary Alliance Air (now called Air India Regional).
The previous structure was:

National Aviation Company of India Limited


o

Air India

Air India Express Air India Cargo Air India Charters Limited Air India Air Transport Services

Indian

Air India Regional (formerly Alliance Air)

Upon completion of the merger on 26 February 2011 there is now one primary airline, Air India, with two subsidiary carriers providing regional and low-cost, point-to-point services and a third subsidiary for cargo operations:

Air India
o o o

Air India Express Air India Regional Air India Cargo

AIL carriers connect 93 destinations (60 domestic and 33 international) in 24 countries as of February 2011.

Air India Limited is the national flag carrier airline of India, flying a worldwide network of passenger and cargo services. Air India is state-owned, and administered as part of the National Aviation Company of India Limited - which was created in 2007 to facilitate Air India's merger with Indian Airlines. The main bases of operation of the airline are Mumbai's Chhatrapati Shivaji International Airport and Delhi's Indira Gandhi International Airport.

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AIR INDIA LOGO

The logo of the new airline is a red colored flying swan with the `Konark Chakra' in orange, placed inside it. The flying swan had been morphed from Air India's characteristic logo, `The Centaur', whereas the `Konark Chakra was reminiscent of Indian's logo.

The new logo would feature prominently on the tail of the aircraft. While the aircraft will be ivory in color, the base will retain the red streak of Air India. Running parallel to each other will be the orange and red speed lines from front door to the rear door, subtly signifying the individual identities merged into one. The brand name `Air India will run across the tail of the aircraft.

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NETWORK

Air India serves 9 domestic destinations and 16 international destinations in 10 countries. Together with its subsidiaries the group connects 93 destinations worldwide in 24 countries across Africa, Asia, Europe and North America.
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DESTINATIONS

Short-haul routes
Air India's short-haul routes mainly include domestic cities and cities in South East Asia and South West Asia. For short-haul routes its Airbus A310, Airbus A330, Boeing 747400 and Boeing 777-200LR are used apart from Airbus A320 family aircraft of Indian which are operated with Air India call sign and code.

Long-haul routes
The airline has long-haul destinations in East Asia, Europe and North America which are served using Boeing 777-200LR and -300ER aircraft

Air India fleet as of 27 February 2011


Air India Fleet Passengers Aircraft In service Orders F J Airbus A310-300 4 2 Airbus A319 19 3 0 0 0 0 Y Total To be phased out 7 June Notes

20 181 201 14 106 120 8 0 114 122 144 144

5 dry leased

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Airbus A320-200 Airbus A321-200 Airbus A330-200 Boeing 747-400

28 20 2 5

3 27 30

0 0 0

20 126 146 20 152 172 24 255 279

5 dry leased

Both dry leased Includes 3 under sale All owned All owned EIS: October 2011

12 26 385 423 8 4 35 195 238 35 303 342

Boeing 777-200LR 8 Boeing 777-300ER 12 Boeing 787-8 Total 103

TBA

The Boeing customer code for Air India is 37, meaning a model name of, for example, a 747-437 (an Air India 747-400). As of May 2010, the average age of the Air India fleet is 9.5 years. New aircraft orders

On 11 January 2006, Air India announced an order for fifty eight jets - eight Boeing 777-200LR Worldliners, twenty-three Boeing 777-300ER and twenty seven Boeing 787-8 Dreamliners

The airlines received its first Boeing 777-200LR aircraft on 26 July 2007 and Boeing 777-300ER on 10 October 2007.

In April 2010, the airline has ordered three Boeing 777-300ERs Air India expects to get its first Boeing 787 Dreamliner in June 20

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SERVICE
Frequent flyer programme

Flying Returns is Air India's frequent flyer programme. The programme is also shared by all other Air India Limited carriers.

Premium lounges
The Maharaja Lounge (English: "Emperor's Lounge") is offered to First and Business class passengers. Air India shares lounges with other international airlines at

international airports that do not have a Maharaja Lounge available. There are five Maharaja Lounges, one at each of the five major destinations of Air India, which are as following:

International
Air India's Maharaja Lounge at New York City's John F. Kennedy International Airport

London Heathrow Airport John F. Kennedy International Airport (New York)

India

Bengaluru International Airport (Bangalore) Chhatrapati Shivaji International Airport (Mumbai) Indira Gandhi International Airport (Delhi) Rajiv Gandhi International Airport (Hyderabad)

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In-flight entertainment
Air India's Boeing 777-200LR/-300ER as well as some refurbished Boeing 747-400 aircraft use the Thales TopSeries IFE systems[26] for onboard in-flight entertainment. Airbus A310s do not have personal LCD screens. Airbus A330s have widescreen displays in Business and Economy classes but no personal IFEs.

AWARDS AND RECOGNITIONS

Preferred International Airline award for travel and hospitality from Awaz Consumer Awards 2006

Best International West Bound Airline out of India for three successive years by Galileo Express TravelWorld Award

Best Corporate Social Responsibility Initiative. by Galileo Express TravelWorld Award

Best Short-Haul International Airline by Galileo Express TravelWorld Award 2008

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ORGANIZATION STRUCTURE: AIR INDIA

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ABOUT THE PROJECT

STUDY THE FINANCIAL SYSTEM EXISTING IN THE ORGANIZATION

Financial system of air india

The Management at the Center: The Airlines follows a centralized system for revenue handling and a decentralized system for booking of expenditures. The organization has two head quarters for finance. One of the head quarters deals with expenditures and is located in the Airlines House, New Delhi. The second headquarter deals with revenue and is known as the Central Revenue Accounts (CRA). The expenditure division is overseen by two general

managers, while the CRA has one general Manager. Below the headquarters are the regional offices which again have similar structure. Here also there is an expenditure division which in case of the Delhi region is in Palam. The revenue part is handled by an Area Revenue Division which in case of Delhi region is in Safdarjung. Each region is further subdivided into stations which are places where Indian Airlines has an office. All revenues except for those that are incidental in nature are booked by the CRA. Incidental revenues are booked by respective ARDs. All expenses related to the aircrafts are booked by the Head Quarters (Expenditure). All administrative expenditures incurred in the regions are booked by the region. The head quarters transfer a fixed sum of money to each region at prefixed dates so that they can meet their expenses. This is called Scheduled Transfer. If due to any reason the region needs more funds the head quarters can transfer it by way of Special Transfer
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FUNCTIONING OF THE FINANCE DEPARTMENT IN NORTHERN REGION

Finance Department [A] Area Revenue Division, Safdarjung:

Agency Section Screening Section Bills Receivable Section

[B]Expenditure Division, Palam:

Bill Passing - Local Bill Passing - Outstation Provident Fund Payroll Cash & Bank Bill Raising & Realization Finance & Budget

[A] Area Revenue Division

The basic function of Area Revenue Division (ARD) is to book "Traffic Revenue" earned by Indian Airlines in its books. The various components of Traffic Revenue are:
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1. Mail Revenue: This is the revenue derived from the carriage of Mail on the routes of the carrier. 2. Airfreight Revenue: It is the revenue derived from carriage of cargo on the routes of the carrier.

3. Excess Baggage Revenue: It is the revenue derived from carriage of excess


baggage on the routes of the carrier.

4. Passenger revenue: It is the revenue derived from the carriage of passengers


over the routes of the carrier. 5. Pool Revenue: Pool is an agreement entered into by two national carriers operating on the same route, to pool their revenue in a kitty and then share the same on a mutually agreed basis. The main object of such agreements is to make the services operated by the Pool Partners complementary and not competitive. Revenue generated by such a pool is Pool Revenue. 6. Charter Revenue: It is the revenue derived from the Chartering operations. Charter is a special arrangement, whereby for an agreed operation, the carrier places the entire capacity of an aircraft at the disposal of the person requesting for charter services.

All these revenues are booked by ARD in books of Indian Airlines with an instrument of maintaining records known as "Reporting Form".

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Hierarchy at Area Revenue Division Sections at ARD:

1. Agency: Deals with the agents of Indian Airlines and maintain records of all the transaction or sales done by Agents through Reporting Forms. 2. Screening: Performs the sequential screening of all the Reporting Forms and execute Interline Billing. 3. Bills Receivables (B/R): It maintains the records of all the credit parties of Indian Airlines and raise bill or debit notes to such parties for services rendered to them by Indian Airlines.

Foreign transactions:
For the Indian Airlines agents abroad, all the transactions are carried through BSP with the help of IATA agent. Sale of tickets, transfer of revenue and payment of commission to agents, everything is done through IATA agents.

Screening Section

This section performs the sequential screening or checking of all the reporting forms and executes Interline Billing. The basic function of the Screening Section is to screen:

a. Reporting Forms b. Sales Records (JVs)


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c. Interline Billing d. Mail Statements recovered from outstations

a. Reporting Forms:
Reporting Forms are standard formats designed to report the sale of Cash Value Documents (CVDs) that is basically the air tickets. The Reporting Forms in use in I.A.L. are as follows: Reporting Form-1: Issuance of Passenger Tickets, Excess Baggage Tickets and MCOs Reporting Form-2: Issuance of I.A.L. Air Waybills and carriage on other airlines AWBs on IAL routes. Reporting Form-3, 4, 5, 6, I (Insert) & D (Delete): Adjustments in Sundry Parties (Computerized) Accounts. Reporting Form-7: Outstanding Recoveries & Miscellaneous receipts. Reporting Form-8: Receipts form agents. Reporting Form-9 & 9A: Cash & Credit Refunds. Reporting Form - 10: Bank lodgment. Reporting Form 11 and 11A: Cash and Credit Carriage of Mail.

b. Journal Vouchers:
It confirms that the tickets are issued serially by the agents and that they report them along with the rates charged for the service along with details of any concession and discount offered. For any discrepancies Debit Notes are issued to agents for the same amount.

c. Interline Billing:

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Suppose a Dealer at Bangkok wants to deliver some goods to Jaipur, the transit will be as follows Bangkok ----- Delhi-------Jaipur Thus the dealer will deposit the entire sum at Bangkok and the transit of goods from Delhi to Jaipur will be by Indian Airlines thus the Indian Airlines will raise the Bill on Bangkok Air for the transit. This is known as Interline Billing.

d. Mail Statement:
This is to keep a check on the weights transited as Mails and charge on them. The various mail transits are as follows: State -to-State Region -to-Region Country-to-Country Speed Post etc.

Another job for the section is to keep a check on the money received for the transactions. It needs to prepare all the bank documents regarding receipts, refunds and concealed Net Receipts and dispatch them to the CRA or EDP along with the Bank Statements confirming the deposit in Bank.

Bills Receivable Section


Bills Receivable Section deals basically with the recovery of the credit from the credit parties. Indian Airlines as its policy, even issue tickets or provide service to certain parties on credit and Bills Receivable Section deals with the recovery of this credit from these credit parties.

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Bills Receivable Section deals with two kinds of recovery: Recovery from internal parties: Internal parties refer to the stations Recovery from the external parties: External parties refer to the credit parties

Two sub-sections under Bills Receivable Section are: 1. Computer cell: It deals with the external parties 2. Non-Computer Cell: It deals with the internal parties.

1. Computer Cell: Indian Airlines issues tickets and provides services to certain "credit parties" like Government Departments and big business houses. It recovers the credit amount due from them on monthly basis. These parties initially approach to the commercial department for the authorization. Once the terms & conditions are signed a permanent credit code is allotted to the party. Now with the authorization letter and the credit party code Indian Airlines services can be availed on credit and the bills are sent to the party directly. Authorities to avail services are given for a fixed period known as "Extension Period". After the extension period, bills are drawn, payment is collected and the parties are intimated to pay. However if the party fails to clear the bills within the stipulated time period the authority is suspended.

2. Non-Computer Cell: The non computer cell recovers any credit due from internal parties, that is, the employees. The collections from internal parties can be on account of the following:

Credit Cargo: It is when consignor agrees to pay a booking amount and


consignee is supposed to pay the cargo/freight charges at the destination on point

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of receiving the cargo. amount.

Thus, it is duty of station manager to recover such

Issuing Recovery Section: Sometimes due to human error there are short
collections on account of booking amount on cargo or packs at the stations. When the Screening Section identifies such short collections it either asks the EDP or itself raises the bill on Station. The Station manager follows it up and recovers the amount.

Staff Clearance: Bills Receivable Section also recovers the pending


clearances from the staff. Non Computer Cell maintains the records of the recovery from the employees and raise the bills on staff accordingly which are further dispatched to the payroll Section so as to be recovered from the salary of the employee

[B] Expenditure Division


Expenditure Division is responsible for accounting for the expenses made in the region. This includes expenses on salary bills, purchase of stationery and any other administrative expenses. The division however does not book any expenditure that is related to the aircraft in any way.

1. Bill Passing-Local
All the goods, products and equipment that are required for the day-to-day operations by the supporting departments are purchased in bulk to be stored in anticipation of future requirement. The Bill Passing-Local passes all the bills regarding purchases like centralized purchasing of uniform, catering, stationary etc. for all 5 regions.

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The major functions of this section are: a. Purchasing b. Deductions c. Security Deposits

a. Purchasing: The Store & Purchase Section places the purchase order for every local purchase (including all cash sales). purchase order are: a) Initial proposal by vendor. b) Invoice by seller. c) Confirmation by Receive & Dispatch Section. Three documents required for the

b. Deductions: Another important job of Bill Passing-Local is to deduct TDS from the commission or charge paid to vendors for the labor services provided by them. Certain goods in stores are such that they possess the Indian Airlines logo on them for e.g. stationary, bags, tags, folders, batches etc. Thus the Indian Airlines gets those goods printed form the vendors. Generally Indian Airlines provides goods to the printers and thus a TDS of 2.05% is deducted from the service charges provided to them by Indian Airlines.

c. Security Deposit: This is the sum of amount that the vendors need to pay as a security for the transactions with Indian Airlines. All the vendors have to deposit a 10% amount of the order with Indian Airlines for all catering purchases. Even for the items for printing, the vendors are required to deposit a sum equivalent to 10% of the value to goods or material advanced to them by Indian airlines.

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2. Bill Passing-Outstation
The northern region of Indian Airlines has its dealings in 15 outstation of which 14 are online and 1(Bhillai) is offline. Bill Passing-Outstation is the controlling authority for these outstations. They issue advance Imprested Cheques of a predetermined value to all the stations on weekly basis. These cheques are always in name of Station Manager & he is the designated person who has the authority to encash it. The Imprested amounts for various outstations are as follows:Agra Bhopal Gwalior Jodhpur Leh Raipur Srinagar Varanasi - Rs. 10,000 - Rs. 20,000 - Rs. 10,000 - Rs. 12,500 - Rs. 10,000 - Rs. 12,500 - Rs. 40,000 - Rs. 35,000 Amritsar Chandigarh Jammu Khajuraho Lucknow Bhillai Udaipur - Rs.50, 000 - Rs.15, 000 - Rs.30, 000 - Rs.15, 000 - Rs.40, 000 - Rs.500 - Rs.20, 000

The major expenses for outstations are: a) Hotel Bills: for the packs offered by Indian Airlines or stay over of packs, Cabin crew & Cockpit crew. b) Catering Bills: for the catering services provided onboard by various caterers like Taj Caterers, Shelf Air Catering and Ambassador etc. c) Medical bills: Bills of all the medical facilities provided to Indian Airlines employees by hospitals, doctors or chemists. d) Rent: All the land with Indian Airlines is on Lease, thus a monthly rent is given to the Leaser (owner).
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3. Provident Fund
The facility for provident fund is available to any employee only after the completion of one complete year service. A 9% p.a. rate of interest is payable to employee on the amount in Provident Fund. The amount of Provident Fund is calculated as follows:

Contribution to Provident Fund: 10% of Provident Fund Salary Where Provident Fund Salary = Basic Salary + VDA + Special Allowances (There is a provision for a Special pay or any Technical pay for engineers & Technicians etc.)

Employees however have the option of withdrawing the amount from their Provident Fund if ever required. The Provident Fund amount can be withdrawn in two ways:

Repayable withdrawal: Withdrawal that is to be returned back within a stipulated time span, exceeding maximum up to a period of 33 months. An interest of 10.5% p.a. is payable on such a withdrawal on 6 months reducing balance Employee can withdraw maximum of 6 times of his/her Provident Fund salary Refundable withdrawal can be availed for any religious ceremony, which an employee is incumbent to perform

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Non-Refundable Withdrawal: Withdrawal, which need not be returned


by the employee. An employee can avail such a non-refundable withdrawal only after 15 years of service. It is available for the following purposes: For the purpose of marriage of siblings or any Female dependent Purchase of Land, House etc Construction of House- Payable in two equal installments Non-Refundable withdrawal is payable after completion of 15 yrs service or within 10 yr before the date of retirement.

Income Tax is charged on Provident Fund amount as per the taxation norms existing in the country from time to time.

4. Payroll
This section is responsible for making the salary slips of the employees. When a person is appointed the payroll section receives his joining letter and the various terms and conditions on which he is appointed. The section issues the person a Staff Number. Thus every employee has a staff number and is recognized by that. The salary slip of the person includes basic data about the employee like the Staff Number, Name, Designation Code, Designation, Station Code, Department Code, Date of Birth (DOB), Date of Joining (DOJ), Bank Account number. Other than these details it includes Basic Pay, Dearness Allowance (DA) and other allowances. Even if the Government increases the DA the company does not increase it, unless decided by their various unions. Some allowances are common to all employees whereas some vary according to the agreements with the person. The next items in the salary slip are the Statuary Deductions like Provident Fund, Income Tax and Employee State Insurance (ESI). Salary slip also includes annual salary, taxable salary, tax and rebates etc.
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5. Cash & Bank Section


Cash and Bank section controls all payment and receipts relating to the particulars region. Bank Book maintains the records of disbursement accounts at the outstations. Cash Section deals with and maintains all the records concerning the cash payments and Bank Section provides the concerned Banking treatment. It receives an advance sum of Rs. 1 crore 20 lakhs per month from the Head Quarters to meet all expenses in the region.

They are engaged in the following:

a. Payment of vouchers: They entertain and make payments for the vouchers like Telephone Bills, Entertainment etc. b. Salary Distribution: The cash payment of pay slips and the corresponding accounting. c. Advances for employees: Advancing money to the employees, receiving back the left-out amount and accounting the same. d. Miscellaneous Items: Maintain tenders, canteen sales, sale of scrap etc.

Another job with the section is to handle all the cash receipts, although Bank Section does the concerned accounting. Cash Section is required to compile a concealed,

summarized monthly report for all the expenditure incurred by the Cash Section or all the cash payments made by it. This report is to be forwarded to the "Finance and Budget Section" every month. The retention period for such records is about 5 years.

6. Bill Raising & Realization:

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Indian Airlines provide ground handling to various other airlines for which they charge them. Indian Airlines has its own infrastructure, which other small airlines lack. Thus it provides various infrastructure facilities to other airlines on a predetermined charge. For recovering such charges due on other airlines Bill Raising & Realization Section raise bills on such airlines. Thus the main job of the Section is to raise bills on other airlines for the services provided and maintaining records for the same. The Bureau of Civil Aviation Security under Indian Airlines provides security to other airlines on charge basis for which similar billing is done by Bill Raising & Realization Section. Whenever any service is provided, corresponding handling forms like Ground Handling Form, Security Handling Form etc. are to be filled and on basis of these handling forms bills are raised on other airlines. There are two kinds of parties:

a. Cash Parties: These parties are supposed to make cash payment at the time of handling only, in regard of the service provided to them by Indian Airlines.

b. Credit Parties: These parties avail the handling services of Indian Airlines on credit and to them. The Bill Raising & Realization Section raises bills and receives the amount from them thereafter

All the bills to foreign Airlines are raised and settled through IATA clearance house. Billing for all private VIP flights i.e. chartered flights for President, Prime Minister, Vice President, is also done by Bill Raising & Realization Section. Bills are raised to the concerned ministries and settlement is done thereafter. Indian Airlines provide all Handling & Security services to Alliance Air, its subsidiary, for which Bill Raising & Realization Section raises the bills on Alliance Air. These bills

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are booked under the head "Handling Receipt". The revenue earned by Handling is booked in Balance Sheet under the head "Non-Operating Revenue".

7.

Finance & Budget

Finance &Budget Section is responsible for maintaining the Journal, Subsidiary Books and General Ledger for facilitating reconciliation of the inter-region accounts, maintaining a record of assets, providing deprecation thereon and keeping record of deposits revived from contractor and supplier etc. The section also compiles budget estimates and annual accounts relating to the region, which are submitted to the Head Quarters.

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RESEARCH METHODOLOGY

OBJECTIVE OF THE PROJECT

Financial Performance Appraisal of Indian Airlines:The objective behind this project is to understand the working of aviation industry, because aviation industry is a unique industry. This uniqueness is due to the working of finance department which is different. Merger of Air India and Indian Airlines:This primary focus of my project is to ascertain the future outcomes after the merger of Indian Airlines & Air India. The financial comparisons between Air India, kingfisher, Jet Airways will be done with the help of ratio which are helpful to do this ascertainment. And other related aspects would also be taken care of.

METHODOLOGY

The methodology involves descriptive research design. Data is collected from both primary and secondary sources. The data so collected was subjected to analysis using the necessary tools that are relevant and realistic. The nature of the data is both qualitative and quantitative.

Secondary data:
Secondary data that is already available and published. It could be internal and external source of data.
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Internal source: which originates from the specific field or area where research is carried out e.g. published broachers, official reports etc. External source: This originates outside the field of study like books, periodicals, journals, newspapers and the Internet.

Data Collection
Secondary data has been used which is collected through Articles Reports Journals Magazines Newspapers and Internet.

LIMITATIONS OF THE STUDY

The data included in the project comprises of only secondary or historical data collected from the company internal circulars, financial reports and historical records. Suggestions and findings are relevant for the present study only. Non-availability of vital information, which the company feels is internal to the organization. 100% accuracy cannot be claimed. Report is made from secondary data only

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LIMITIONS OF RATIO ANALYSIS


Although ratio analysis is very important tool to judge the companys performance, following are the limitations of it. Ratios are tools of quantitative analysis, which ignore qualitative points of view. Ratios give false result, if they are calculated from incorrect accounting data. Ratios are calculated on the basis of past data. Therefore, they do not provide complete information for future forecasting. Ratios may be misleading, if they are based on false accounting information.

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DATA ANALYSIS AND FINDINGS

CONCEPT OF MERGERS AND ACQUISITIONS

MERGERS

In business or economics a merger is a combination of two companies into one larger company. Such actions are commonly voluntary and involve stock swap or cash payment to the target. Stock swap is often used as it allows the shareholders of the two companies to share the risk involved in the deal. A merger can resemble a takeover but result in a new company name (often combining the names of the original companies) and in new branding; in some cases, terming the combination a "merger" rather than an acquisition is done purely for political or marketing reasons.

TYPES OF MERGERS From the perception of business organizations, there is a whole host of different mergers. However, from an economist point of view i.e. based on the relationship between the two merging companies, mergers are classified into following:

HORIZONTAL MERGER Two companies that are in direct competition and share the same product lines and markets i.e. it results in the consolidation of firms that are direct rivals. VERTICAL MERGER A customer and company or a supplier and company i.e. merger of firms that have actual or potential buyer-seller relationship. CONGLOMERATE MERGER

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Generally a merger between companies which do not have any common business areas or no common relationship of any kind. Such kind of merger may be broadly classified into following:

1. PRODUCT-EXTENSION MERGER Conglomerate mergers which involve companies selling different but related products in the same market or sells non-competing products and use same marketing channels of production process.

2. MARKET-EXTENSION MERGER Conglomerate mergers wherein companies that sell the same products in different markets/ geographic markets. 3. PURE CONGLOMERATE MERGER Two companies which merge have no obvious relationship of any kind.

ACQUISITION

An acquisition, also known as a takeover, is the buying of one company (the target) by another. An acquisition may be Friendly or Hostile. In the former case, the companies cooperate in negotiations; in the latter case, the takeover target is unwilling to be bought or the target's board has no prior knowledge of the offer. Acquisition usually refers to a purchase of a smaller firm by a larger one. Sometimes, however, a smaller firm will acquire management control of a larger or longer established company and keep its name for the combined entity. This is known as Reverse Takeover. Another type of

acquisition is Reverse Merger a deal that enables a private company to get publicly listed in a short time period. A reverse merger occurs when a private company that has strong prospects and is eager to raise financing buys a publicly listed shell company,
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usually one with no business and limited assets. Achieving acquisition success has proven to be very difficult, while various studies have showed that 50% of acquisitions were unsuccessful. The acquisition process is very complex, with many dimensions influencing its outcome. This model provides a good overview of all dimensions of the acquisition process.

TYPES OF ACQUISITION

The buyer buys the shares, and therefore control, of the target company being purchased. Ownership control of the company in turn conveys effective control over the assets of the company, but since the company is acquired intact as a going business, this form of transaction carries with it all of the liabilities accrued by that business over its past and all of the risks that company faces in its commercial environment.

The buyer buys the assets of the target company. The cash the target receives from the sell-off is paid back to its shareholders by dividend or through liquidation. This type of transaction leaves the target company as an empty shell, if the buyer buys out the entire assets. A buyer often structures the transaction as an asset purchase to Cherry-Pick the assets that it wants and leave out the assets and liabilities that it does not. This can be particularly important where foreseeable liabilities may include future, unquantified damage awards such as those that could arise from litigation over defective products, employee benefits or terminations, or environmental damage. A disadvantage of this structure is the tax that many jurisdictions, particularly outside the United States, impose on transfers of the individual assets, whereas stock transactions can frequently be structured as like-kind exchanges or other arrangements that are tax-free or taxneutral, both to the buyer and to the seller's shareholders.

On a general analysis, it can be concluded that Horizontal mergers eliminate sellers and hence reshape the market structure i.e. they have direct impact on seller concentration whereas vertical and conglomerate mergers do not affect market structures e.g. the seller concentration directly. They do not have anticompetitive consequences.
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The circumstances and reasons for every merger are different and these circumstances impact the way the deal is dealt, approached, managed and executed. However, the success of mergers depends on how well the deal makers can integrate two companies while maintaining day-to-day operations. Each deal has its own flips which are

influenced by various extraneous factors such as human capital component and the leadership. Much of it depends on the companys leadership and the ability to retain people who are key to the ongoing success of the company. It is important, that both the parties should be clear in their mind as to the motive of such acquisition i.e. there should be censusad-idiom. Profits, intellectual property, costumer base are peripheral or central to the acquiring company, the motive will determine the risk profile of such M&A. Generally before the onset of any deal, due diligence is conducted so as to gauze the risks involved, the quantum of assets and liabilities that are acquired etc.

DISTINCTION BETWEEN MERGERS AND ACQUISITIONS


Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things. When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded. In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "Merger of Equals". Both companies' stocks are surrendered and new company stock is issued in its place. For example, Both Daimler-Benz and Chrysler ceased to exist when the two firms merged, and a new company, DaimlerChrysler, was created. In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm
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to proclaim that the action is a merger of equals, even if it is technically an acquisition. Being bought out often carries negative connotations, therefore, by describing the deal euphemistically as a merger, deal makers and top managers try to make the takeover more palatable. A purchase deal will also be called a merger when both CEOs agree that joining together is in the best interest of both of their companies. But when the deal is unfriendly - that is, when the target company does not want to be purchased - it is always regarded as an acquisition. Whether a purchase is considered a merger or an acquisition really depends on whether the purchase is friendly or hostile and how it is announced. In other words, the real difference lies in how the purchase is communicated to and received by the target company's board of directors, employees and shareholders. It is quite normal though for M&A deal communications to take place in a so called 'Confidentiality Bubble' whereby information flows are restricted due to confidentiality agreements.

ADVANTAGES OF M&AS

ECONOMIES OF SCALE
This generally refers to a method in which the average cost per unit is decreased through increased production, since fixed costs are shared over an increased number of goods. In a laymans language, more the products, more is the bargaining power. This is possible only when the companies merge/ combine/ acquired, as the same can often obliterate duplicate departments or operation, thereby lowering the cost of the company relative to theoretically the same revenue stream, thus increasing profit. It also provides varied pool of resources of both the combining companies along with a larger share in the market, wherein the resources can be exercised. INCREASED REVENUE/INCREASED MARKET SHARE
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This motive assumes that the company will be absorbing the major competitor and thus increase its power (by capturing increased market share) to set prices.

CROSS SELLING For example, a bank buying a stock broker could then he can sell banking products to the stock brokers customers, while the broker can sign up the banks customers for brokerage account. Or, a manufacturer can acquire and sell complimentary products. CORPORATE SYNERGY Better use of complimentary resources. It may take the form of Revenue Enhancement (To generate more revenue than its two predecessor standalone companies would be able to generate) and Cost Savings (To reduce or eliminate expenses associated with running a business). TAXES A profitable can buy a loss maker to use the targets tax right off i.e. wherein a sick company is bought by giants.

GEOGRAPHICAL OR OTHER DIVERSIFICATION This is designed for smooth earning results of a company, which smoothens over long term the stock price of the company giving conservative investors more confidence for investing in the company. shareholders. RESOURCE TRANSFER Resources are unevenly distributed across firms and interaction of target and acquiring firm resources can create value through either overcoming information asymmetry or by combining scarce resources. E.g.: Laying off employees, reducing taxes etc. However, this does not always deliver value to the

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IMPROVED MARKET REACH AND INDUSTRY VISIBILITY Companies buy companies to reach new markets and grow revenues and earnings. A merger may expand two companies' marketing and distribution, giving them new sales opportunities. A merger can also improve a company's standing in the investment

community; bigger firms often have an easier time raising capital than smaller ones. SYNERGY Another commonly cited motive for mergers is the pursuit of synergistic benefits. This is the new financial mathematics that shows that 2 + 2 = 5. That is, as the equation shows, the combination of two firms will yield a more valuable entity than the value of the sum of the two firms if they were to stay independent: Value (A + B) > Value (A) + Value (B) Although many merger partners cite synergy as the motive for their transaction, synergistic gains are often hard to realize. There are two types of synergy: That which is derived from cost economies and that which comes from revenue enhancement. Cost economies are the easier of the two to achieve because they often involve eliminating duplicate cost factors such as redundant personnel and overhead. When such synergies are realized, the merged company generally has lower per-unit costs. Many of the consolidating mergers of the fifth merger wave are partially based upon the pursuit of such synergistic economies. Because this is an important part of the fifth merger wave, it is discussed separately in the section that follows this one. Revenue enhancing synergy is more difficult to predict and to achieve. An example would be where each firm believes that it can sell its products and services to the other firms customer base. Another example would be a situation where one companys capability, such as research prowess, is combined with another companys capability, such as marketing skills, to significantly increase the combined revenues

TRENDS IN M&A DEALS

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Merger and Acquisition Trends are important to study in order to judge the market movements of any particular economy. Not only the markets of particular countries, but also the World Market gets influenced by the significant Mergers and Acquisitions. So, one can easily understand how determining the Merger and Acquisition Trends are in the overall development growth of any economy. In the years 2006 and 2007, the world experienced numerous mergers and acquisitions. All over the world, in the developed and developing nations, record number of merger and acquisition deals took place of these mergers and acquisitions actually led to decrease in number of public undertakings and increase in number of private enterprises. This happened as many public organizations all over the world, were either merged into or acquired by big private institutions. The reason of this particular Merger and Acquisition trend was the emergence and rapid growth of Private Equity Funds. Moreover, the regulatory environment of the publicly owned companies and the urge to attain growth of short term earnings were also behind the specific trend of Mergers and Acquisitions.

AMALGAMATION OF AIR INDIA & INDIAN AIRLINES


The Government of India, on 1 March 2007, approved the merger of Air India and Indian Airlines. Consequent to the above, a new Company viz National Aviation Company of India Limited (NACIL) was incorporated under the Companies Act, 1956 on 30 March 2007 with its Registered Office at Airlines House, 113 Gurudwara Rakabganj Road, New Delhi. The Certificate to Commence Business was obtained on 14 May 2007. Presently, the Board of NACIL consists of: Shri Raghu Menon, Addl Secretary & Financial Advisor, Ministry of Civil Aviation Shri R K Singh, Jt Secretary, Ministry of Civil Aviation Shri Rajiv Bansal, Director, Ministry of Civil Aviation
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The most important development with respect to the company Indian Airlines has been the merger of both the Public Sector carriers of India namely Indian Airlines Ltd. And Air India Ltd With a new company namely National Aviation Company of India Ltd. The company was renamed as Air India Limited on October 26, 2010. After the approval to the scheme of merger by the government of India, the ministry of corporate Affairs vides their Order dated 22nd August 2007 has approved the scheme of Amalgamation of Air India Limited and Indian Airlines Ltd With the National Aviation Company of India Ltd (NACIL) with effect from 1st April 2007. The merger of new company will enable the new company to generate further momentum, as the combined strength of two companies will give various synergy benefits resulting into financial benefits to NACIL. Some of the benefits which will accrue to NACIL are: Route Rationalization Fuel Procurement Engineering Stores & Inventory Purchase both aircraft and non aircraft Insurance benefits Handling of flights Employee Productivity The Scheme of Amalgamation of Air India Limited and Indian Airlines Limited with NACIL was approved by the Board of Directors of all the three Companies. Thereafter, the Meetings of Secured and Unsecured Creditors of Air India and Indian Airlines were held in New Delhi on 28 June 2007, in which the Scheme of Amalgamation was approved by the Creditors. The final hearing of the merger petition was held on 31 July 2007 wherein the last date for submissions of objections was fixed on 8 August 2007 and the Order of the Ministry of Corporate Affairs is awaited.

The Authorized and Paid-Up Share Capital of the merged entity will be Rs.1500, 05, 00,000/Maharaja will be retained as its mascot. and Rs.145,00,00,000/-,respectively. It has been decided that post merger, the new entity will be known as Air India while The logo of the new airline will be a red colored flying swan with the Konark Chakra in orange placed inside it. The flying
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swan has been morphed from Air Indias characteristic logo The Centaur whereas the Konark Chakra was reminiscent of Indians logo. The Corporate Office of NACIL will be at Mumbai.

The Government has approved the appointment of Shri V Thulasidas and Dr V Trivedi as Chairman & Managing Director and Joint Managing Director, respectively, of the merged entity, with effect from the date of merger.

This amalgamation results to:


Transfer of assets: As per the section 391-394 all the assets of both the companies are managed by the NATIONAL AVIATION COMPANY OF INDIA LIMITED (AIR INDIA). It includes all intangible assets, land, buildings etc. As well as all the: Subsidiary companies Of Indian Airlines i.e, Airlines Allied Services Ltd. Vayoodoot Limited IAL Airports Services Limited& Subsidiary Companies of Air India i.e. Air India Engineering Services Limited Air India Air Transport Services Limited Hotel Corporation Of India Limited Air India Charters Limited Shall become the subsidiaries of the NATIONAL AVIATION COMPANY OF INDIA LIMITED (AIR INDIA).

Transfer of Liabilities All loans raised and used and liabilities incurred by both the companies are transferred to the NATIONAL AVIATION COMPANY OF INDIA LIMITED (AIR INDIA).

Contracts, Deeds, Approvals, Exemption etc All the Contracts ,Deeds, Bonds, Agreements, Schemes, Arrangement, insurance policies ,indemnities ,guarantees ,and other instruments whatsoever in nature of both the

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companies shall be in full force of NATIONAL AVIATION COMPANY OF INDIA LIMITED. All the rights and licenses of trademarks, know how, trade names, trading style, logos, emblem, label designs etc. shall be in full force of NATIONAL AVIATION COMPANY OF INDIA LIMITED.

Employees state after merger After merger all the employees of both the company will become the employee of NATIONAL AVIATION COMPANY OF INDIA LIMITED. The services of officers and other employees of both the companies when transfer to the NATIONAL AVIATION COMPANY OF INDIA LIMITED shall not entitle such officer or employee to any compensation under any act or law for the time being in force. With regard to Provident Fund, Gratuity or any other funds created by any of the company will continued after merger and the NATIONAL AVIATION COMPANY OF INDIA LIMITED act as substitute for both the companies The NATIONAL AVIATION COMPANY OF INDIA LIMITED undertakes to continue to abide by any agreement/settlements with the labor unions / employees by both the companies.

Conduct of business after merger Both the Companies shall be deemed to have been carrying on and to be carrying on all business and activities relating to both Indian Airlines and Air India, for and on behalf of NATIONAL AVIATION COMPANY OF INDIA LIMITED. The profit or losses earned by both the companies are treated as a profit and loss NATIONAL AVIATION COMPANY OF INDIA LIMITED.

Why only amalgamation?

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The Indian aviation environment has changed significantly over the last few years with rapid increase in demand for domestic and international air services. Expansion of

capacity by current airline players (domestic private and global) as well as entry of new players has helped meet this demand and at the same time significantly altered the competitive landscape. Rising fuel prices and shortages of skilled manpower as expected to put further pressure on all current airline operators. Both the companies i.e., Indian Airlines and Air India, which were operating in a largely protected environment, are now faced with the fierce competition from domestic private and global airline companies. Market shares have declined substantially for both airlines. Significant increase in competitive activity has eroded historical advantage of both carriers. Leading international carriers have increased coverage and frequency to major cities in India. Domestic carriers too have significantly ramped up operations. Fleet renewal and expansion are imperative from a business perspective but the same will add further pressure on account of interest dues and depreciation expenses. Thus, the declining market operating and financial performance poses a serious threat to future survival of the two airlines on a standalone basis. Value for and entry into one of the global airline alliances, which control almost 70% of global passenger traffic, is best facilities through a single Flag carrier with an integrated international and domestic footprints. This is even more imperative given that both the companies, which historically had distinctive roles (air India focusing largely on international sectors and Indian airlines focusing largely on domestic sector), now have increasingly overlapping networks, as Indian airlines has expanded its foot prints to key international locations. Finally, in an increasingly consolidating global aviation environment where critical mass/size is a key success factor, combining the two state owned airlines into a single merged entity will better equip them to survive and proper amidst fierce global and domestic competition.

MOTIVES BEHIND THE MERGER

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The merger of both the companies with the NATIONAL AVIATION COMPANY OF INDIA LIMITED, along with a comprehensive transformation program, is imperative to improve competitiveness. It will provide an opportunity to leverage combined assets and capital better and build a stronger sustainable business, the merger will Create the largest airline in India and comparable to other airline in Asia Provide an integrated international/ domestic footprint which will significantly enhance customer proposition and allow easy entry into one of the three global airline alliances. Enable optimal utilization of existing resources through improvement in load factor and yields on commonly serviced routes as well as deploy freed up aircraft capacity on alternative routes. Provide an opportunity to fully leverage strong assets, capabilities and infrastructure. Provide an opportunity to leverage skilled and experienced manpower available with both the companies to the optimum potential. Provide a larger and growth oriented company for the people and same shall be in large public interest. Potential to launch high growth & profitability businesses (ground handling services, maintenance repair and overhaul etc.). Provide maximum flexibility to achieve financial and capital restructuring through revaluation of assets Provide an increased thrust and focus on airline support businesses. Revenue synergy will be driven by integration of the complementary networks of both Indian airlines and air India. Cost and capital productivity synergies will be driven by opportunities for leveraging economies of scale and opportunities for rationalizing overlapping facilities and infrastructure. In addition to these synergies, the amalgamation will also provide an opportunity to initiate a comprehensive transformation program to improve the overall competitiveness of the merged airline i.e., Indian Airlines and Air India. This while improving the financial position would help position and equip the merged entity to better face the
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current and future challenges arising out of intense competition and declining industry profitability .

WHAT PEOPLE SAY ABOUT THE MERGER?

ON AUGUST 1, 2007 at the function 55th nationalized day of air corporation employees unions (ACEU) the former civil aviation minister Shanhnawaz hussain said If they had plans to merge the two airlines, then why did they change the logo? By what authority did they do so? They did not even discuss it in parliament. "It is only because they want to remove the identity of Indian. They just want to promote private airlines and want only players like Jet Airways and Kingfisher to remain in the business," he alleged. As per the news published in March 29, 2007: The amalgamation is indeed going to be one of the land marks in Indias aviation history. With Air India and Indian Airlines boasting of a combined fleet of 122 aircraft and over 34,000 employees, including 1,315 pilots, the merger will create one of the largest airlines in the world in terms of the number of aircraft. According to reports the government expects the merged entity to save around Rs 5,000 crore on an annual basis from synergies in operations and sharing common facilities. Meanwhile, a sticky issue is also being sorted out simultaneously as the two carriers speed ahead towards the merger. The Union government has assured airline employees that their interests, including employment conditions, wages, seniority and career progression, would be taken care of and a grievance redressal mechanism would be in place to protect their interests. The suggestion is that a careful integration of manpower needs be done at various levels. Consultant Accenture has reportedly mooted a top-to bottom integration of the employees and has proposed that the pay scales be revised to bring parity in promotion procedures, according to a report. So with almost all issues now being sorted out, the runway is hassle free, well almost. The biggest airline will see more planes flying into its stables too. The two carriers have placed orders for more aircraft. Reports said that Air-India has ordered 68 Boeings, while Indian has finalized the acquisition of 43 Airbus
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aircraft. So by year 2011, these new planes will also be Air Indians own, making its stock soar high in the industry and service circles. Mr. kapil kaul , chief executive for South Asia for Centre for Asia Pacific Aviation, a leading airline industry think tank said 'The two state-owned carriers have both suffered from years of under-investment in their fleet and products, A combined Air India-Indian Airlines has the potential to become a major global player if the merger is completed quickly. A full restructuring must also follow to allow them to realize their potential, Finally, there must be partial sale of equity by way of an initial public offer to help induce professionalism and market dynamics, followed by privatization over the next five years or so.'

AFTER MERGER SCENARIO Positive aspects According to industry experts, the merged entity will have a fleet size of 125 new generation aircraft by 2010 after new aircraft are added and some of the existing ones are phased out to emerge among the top 30 carriers globally. The turnover will also top Rs.150 billion. At a macro level, experts say the merger between the two state-run carriers will see the beginning of the process of consolidation in the Indian aviation space - the fastest growing in the world followed by China, Indonesia and Thailand. The merger to create an airline with 125-130 aircraft which is Asias biggest airlines and soon more aircrafts are to be purchase. The cost is also going to reduce because the new routes and timetables of flights are made according to the need and through which proper utilization of resources are made.

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Negative aspects Despite the bullish growth potential, overseas experience shows that it is extremely difficult for a market to absorb this many new entrants, particularly in such a short space of time,' the study said, adding that the losses by airlines industry is expected to top $500 million in the current fiscal year. But experts said the merger would also pose some serious challenges in the months to come, especially in integration of two companies that have had completely divergent operations.

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SWOT ANALYSIS OF AIR INDIA

Air India is the leading airlines in the India. Air India is based on domestic enplaned passengers and scheduled domestic departures. Air India has shown a strong

performance in revenues in 2008. Strong operating performance lends financial stability to the company which could be leveraged to seek more growth avenues of growth in future. However, the rising prices of aviation turbine fuel could adversely affect Air India operating margins.

STRENGTHS
OPERATIONAL PERFORMANCE During fiscal year 2008, the companys revenue growth was driven by increase in passenger segment revenue and merger with Indian airlines. The increase in passenger revenues primarily was due to an increase in capacity, and an increase in load factor. In addition the revenue growth is backed by growth in freight and cargo revenues, which was a result of higher rates charged. This growth was also partly driven by improved efficiency in the companys operations. Strong operating performance lends financial stability to the company which could be leveraged to seek more growth avenues in the future. MARKET LEADERSHIP Air India is the leading airlines in the India. The airline has been ranked the top in Indias domestic airline (in terms of number of passengers) by the bureau of transportation statistics (BTS) in 2005. Air India newly orders about 68 from Boeing and 43 from Airbus. Air India dominates the markets it serves, ranking first in market share in India. Its strong market position is driven not just by consistent delivery of low fares but also due to reliable service, frequent and convenient flights, comfortable cabins, inflight experience, frequent flyer programs, hassle-free airports, and friendly customer
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service. Strong market position gives the company the advantage of scale and helps it in strengthening its brand image.

WEAKNESSES
HIGH DEPENDENCE ON PASENGER REVENUES

Passenger revenues accounted for major part of the Air India total revenue. Cargo services allow airlines to generate additional revenues from existing passenger flights. In addition, cargo revenues are usually counter-cyclical to passenger revenues and have lower demand elasticity than passenger business, which allows airlines to pass on fuel price hikes to customers. Small cargo business exposes Air India to the demand

fluctuations in passenger business. UNDER UTILISATION OF CAPACITY

Air India sells space, which is highly perishable. This is because idle capacity would imply opportunity lost. Capacity means the total number of seats offered by Air India daily to its passengers.

OPPORTUNITIES
GROWING DEMAND FOR LOW COST AIRLINES

In mature markets demand for air travel is increasingly being driven by ticket price and consumer confidence. A survey by the US Commerce Department shows that ticket price is the number one criterion for passengers when selecting a flight, well ahead of the availability of a non-stop service. As markets have progressively matured, the GDP elasticity of air travel demand has declined. In the US for example, a 1% growth in GDP will typically result in a 1.2% growth in domestic air travel, compared with a growth of almost 2% in air travel some 20 years ago.

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GROWTH IN FREIGHT BUSINESS

The Indian economy is one of the fastest growing in the world, but the boom is not without its stops, starts, and bottlenecks, all of which also make themselves felt in the countrys freight transport sector. Air India had also launched a major cargo incentive scheme for cargo agents of Air India and erstwhile Indian on the entire network. The scheme, which generated enormous response, entitled top producing agents of each region to become eligible for an all-inclusive incentive trip on Star Cruise.

EXPANDING PASSENGER TRAFFIC IN ASIA-PACIFIC

The demand for air travel to the Asia Pacific is rising driven by increased economic activity in emerging Asian countries such as China and India. Traffic is projected to grow at 7% in China and India combined, above the world average of 5%. Further, the share of Asia Pacific region in world passenger traffic (revenue passenger kilometers) is forecast to rise from 25% in 2003 to 31% in 2023. Against this backdrop, Air India well positioned to benefit with its increasing emphasis on Asia-Pacific operations.

THREATS

INCREASING AVIATION TURBINE FUEL PRICES

The price of aviation turbine fuel (ATF) has soared to record highs in the past few years and continues to hold at that level. Last few years have once again clearly highlighted the highly cyclical nature of the Aviation industry worldwide. The ATF prices in India are substantially higher than its price in international markets. Aircraft fuel is a major contributor to Air India operating expenses. Moreover, the bonded price applicable for international flights ex-India is higher than the ATF price in the international markets. Priced 65% higher in India on an average, compared to international benchmarks.

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Therefore, this will need stronger revenue growth and greater cost controls in other areas to overcome the increase in fuel prices.

HIGH INTEREST RATES

The past few years have seen Central Banks impose higher interest rates to check inflation and the overheating of regional economies. The Reserve Bank of India has led the way raising interest rates. Inflation fears in the India may see another raise in the short-term. According to Economics times, the India real GDP growth is 9.20% in 2007 to 9.00% in 2008 and this downward trend is also seen in 2009. This in turn could depress consumer spending and offset some of the positive trends in the India for the company.

INTENSIFYNG COMPETITION

AIR INDIA is now competing against more credible low cost carriers such as Spice jet, Go air, Indigo Airline, and Jetlite etc. Indigo Airlines remains Air India strongest

competitor because of its competitive cost structure, strong brand name and ambitious growth plans over the next seven years. Air India also faces increased competition from Air Deccan low-fares subsidiary, Song. Moreover, major legacy airlines have been focusing on restructuring costs, which has improved their competitiveness. With costs restructured, the legacy airlines are becoming more formidable competitors in terms of increasing capacity, matching prices and leveraging their frequent flier programs. Increasing competition could adversely affect the companys margins.

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FINANCIAL PERFORMANCE OF NACIL (AIR INDIA) BEFORE & AFTER MERGER


Financial analysis is the starting point of making plans, before using any sophisticated forecasting and planning procedures. anticipating the future. Management should be particularly interested in knowing financial strength of the firm to make their best use and to be able to spot out financial weakness of the firm to take suitable corrective action. The future plans of the firm should be laid down in view of the firms financial strengths and weakness. Following ratios have been calculated:Liquidity Ratios: 1. Current Ratio 2. Quick Ratio Leverage Ratios: 1. Debt Equity Ratio Activity Ratios: 1. Fixed Assets Turnover Ratio 2. Inventory Turnover Ratio Profitability Ratios: 1. Net Profit Ratio 2. Return on equity 3. Return on long term fund Understanding the past is a prerequisite for

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CURRENT RATIO
2004-05 0.45 0.73 2005-06 0.67 1.28 2006-07 0.75 2.3 2007-08 2008-09

Indian Airlines Air India NACIL

1.44

1.66

2.5

1.5 Indian Airlines Air India 1 NACIL

0.5

0 2004-05 2005-06 2006-07 2007-08 2008-09

The current ratio is the ratio of total current assets to current liabilities. It is calculated by dividing current assets by current liabilities. Current Ratio is considered satisfactory if it is 2:1. If the value of current assets becomes half, the organization will be able to meet its obligation. The current ratio of NACIL (AIR INDIA) meets the bare minimum of 1.66, which is considered by banks as the minimum acceptable level for providing working capital finance. The ratio indicates that the company not enjoys a better financial health and would not be able to meet its immediate debts.

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QUICK RATIO
2004-05 0.42 0.61 2005-06 0.64 1.09 2006-07 0.71 1.91 2007-08 2008-09

Indian Airlines Air India NACIL

1.02

0.93

2.5

1.5 Indian Airlines Air India 1 NACIL

0.5

0 2004-05 2005-06 2006-07 2007-08 2008-09

Quick ratio refers to current assets which can be converted into cash immediately or at a short notice. The quick ratio is the ratio between quick current assets and current

liabilities and is calculated by dividing the quick assets by current liabilities. The Quick Ratio is quite satisfactory.

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DEBT-EQUITY RATIO
2004-05 1.11 2.3 2005-06 1.34 1.48 2006-07 2.34 3.45 2007-08 2008-09

Indian Airlines Air India NACIL

3.17

148.35

160 140 120 100 Indian Airlines 80 60 40 20 0 2004-05 2005-06 2006-07 2007-08 2008-09 Air India NACIL

Debt-Equity ratio is a measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without the outside financing. The Debt-Equity ratio of NACIL is not satisfactory at all.
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FIXED ASSETS TURNOVER RATIO


2004-05 .0330 .0308 2005-06 .0440 .0.70 2006-07 .0320 .0130 2007-08 2008-09

INDIAN AIRLINES AIR INDIA NACIL

.73

0.54

0.8 0.7 0.6 0.5 Indian Airlines 0.4 0.3 0.2 0.1 0 2004-05 2005-06 2006-07 2007-08 2008-09 Air India NACIL

Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed assets (on the balance sheet). It indicates how well the business is using its fixed assets to generate sales Higher the ratio, the better, because a high ratio indicates the business has less money tied up in fixed assets for each dollar of sales revenue. A declining ratio may indicate that the business is over-invested in plant, equipment, or other fixed assets. This ratio shows the firms ability in generating sales from all

financial resources committed to Total Assets. It is calculated to know the utilization of fixed assets. Here we see that FATR for NACIL is very high, the reasons for this high FATR is the fact that the combined assets of Air India & Indian Airlines which have been

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merged into NACIL have been booked at fair value i.e. their current values, hence high FTR for NACIL.

INVENTORY TURNOVER RATIO

Indian Airlines Air India NACIL

2004-05 54.04 21.46

2005-06 58.52 19.15

2006-07 50.35 11.48

2007-08

2008-09

13.62

13.72

70 60 50 40 30 20 10 0 2004-05 2005-06 2006-07 2007-08 2008-09

Indian Airlines Air India NACIL

It indicates that how quickly the inventory is sold. High ratio is always better than low ratio as it shows good inventory management. Low ratio adversely affects the ability to meet customer demand which is bad for companys image. The ITR of NACIL is quite low.

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NET PROFIT RATIO


2004-05 .0123 .0124 2005-06 0.0085 0.0016 2006-07 -.04 -.053 2007-08 2008-09

Indian Airlines Air India NACIL

-0.14

-0.41

0.05 0 2004-05 -0.05 -0.1 -0.15 -0.2 -0.25 -0.3 -0.35 -0.4 -0.45 Indian Airlines Air India NACIL 2005-06 2006-07 2007-08 2008-09

Net Profit Ratio indicates management efficiency in manufacturing, administration and selling the products. This ratio is the overall measure of firms ability to turn each rupees sale into net profit. It also indicates the firm capacity to withstand adverse economic condition. The NPR of both the airlines has declined sharply in 2006-07, it is due to the increasing operating expenses it has to focus on increasing its NPR as it would really be difficult to a low net margin firm to withstand the adversities i.e. declining demand etc. Also NPR for NACIL has gone negative; the reasons for this declining demand are
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increase in fuel prices as well increase in taxes, which in turn has led to increase in price of tickets. Also security threat has been a major reason for declining demands.

RETURN ON EQUITY
2004-05 .0975 .0062 2005-06 .0494 .0009 2006-07 -.0240 -.0110 2007-08 2008-09

Indian Airlines Air India NACIL

-.27

NO EQITY

0.15 0.1 0.05 0 2004-05 -0.05 -0.1 -0.15 -0.2 -0.25 -0.3 2005-06 2006-07 2007-08 2008-09 Indian Airlines Air India NACIL

Return on Equity measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. It measures a firm's efficiency at generating profits from every dollar of shareholders' equity. It shows how well a company uses investment dollars to generate earnings growth. ROE is equal to a fiscal year's net income (after preferred stock dividends but before common stock dividends) divided by total equity (excluding preferred shares), expressed as a percentage. Here the ROE for Indian

Airlines is much higher as compared to Air India. Return on Equity for NACIL is
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negative in the year 2007-08, it shows that investors will not really be interested in investing in NACIL. And in the year 2008-09 the equity has been not raisedwhich shows no ROE.

RETURN ON LONG TERM FUNDS

Indian Airlines air India NACIL


0.08 0.06 0.04 0.02 0 2004-05 -0.02 -0.04 -0.06 -0.08 -0.1 -0.12

2004-05 .0470 .0610

2005-06 .0440 .0479

2006-07 -.11 -.0210

2007-08

2008-09

-.010

-.017

2005-06

2006-07

2007-08

2008-09

Indian Airlines Air India NACIL

It explains the relationship between EBIT (net of taxes) and Long term funds raised. ROL has sharply declined due to decline in EBIT, after 2005-06. It shows that the investment is not yielding a satisfactory return due to increase in expenses and decline in EBIT. Return on long term funds for NACIL is also negative, which shows that

investing in NACIL is not beneficial.


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ABOUT KINGFISHER AIRLINES

Kingfisher airlines were launched in May 2005 by Dr.Vijay Mallya as a part of the UB Group, the world's second-largest alcohol manufacturer. In fact Dr. Mallaya had pitched for taking Air Deccan prior to the launch of his airlines. Dr. Mallayas vision was to build India's largest domestic carrier by 2010. Kingfisher targets the well-heeled passenger and the business traveler with promises of pampering customers with quality, full-flight service. It promises to consistently deliver a safe, value-based and enjoyable travel experience to all our guests, with special emphasis on safety and world class customer service. Dr.Mallya wanted to build an organization with people who choose to be happy, and would also endeavor to influence their guests and co-workers to be happy. Each one of its employees would be held accountable for the successful execution of the airlines duties, commitments and obligations, and would strive to lead by example. Kingfisher currently operates with a fleet of 28 planes. This includes: A brand new fleet of 22 Airbus A320 aircrafts. 6 ATR turboprop aircraft. Kingfisher holds an 11% market share in terms of passengers carried.

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ABOUT JET AIRWAYS

Jet Airways was incorporated as an air taxi operator on 1 April 1992. It started Indian commercial airline operations on 5 May 1993 with a fleet of four leased Boeing 737300 aircraft. In January 1994, a change in the law enabled Jet Airways to apply for scheduled airline status, which was granted on 4 January 1995. It began international operations to Sri Lanka in March 2004. While the company is listed on the Bombay Stock Exchange, 80% of its stock is controlled by Naresh Goyal (through his ownership of Jets parent company, Tailwinds, and has 10,017 employees (at March 2007). Naresh Goyal, who already owned Jetair (Private) Limited, which provided sales and marketing for foreign airlines in India, set up Jet Airways as a full-service scheduled airline to compete against state-owned Indian Airlines. Indian Airlines had enjoyed a monopoly in the domestic market between 1953, when all major Indian air transport providers were nationalized under the Air Corporations Act (1953), and January 1994, when the Air Corporations Act was repealed, following which Jet Airways received scheduled airline status. Jet Airways and Air Sahara were the only private airlines to survive the Indian business downturn of the early 1990s. In January 2006, Jet Airways announced that it would buy Air Sahara for US$500 million in an all-cash deal, making it the biggest takeover in Indian aviation history. The resulting airline would have been the country's largest but the deal fell through in June 2006.
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On 12 April 2007, Jet Airways agreed to buy out Air Sahara for 14.5 billion rupees (US$340 million). Air Sahara was renamed JetLite, and was marketed between a low-cost carrier and a full service airline. In August 2008, Jet Airways

announced its plans to completely integrate JetLite into Jet Airways. In October 2008, Jet Airways laid off 1900 of its employees, resulting in the largest layoff in the history of Indian aviation. However, later, the employees have been asked to return to work. Civil Aviation Minister Praful Patel said that the management reviewed its decision after he analyzed the decision with them. In October 2008, Jet Airways and rival Kingfisher Airlines announced an alliance which primarily includes an agreement on code-sharing on both domestic and international flights, joint fuel management to reduce expenses, common ground handling, joint utilization of crew and sharing of similar frequent flier programs.

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COMPARISON OF FINANCIAL PERFORMANCE OF NACIL, KINGFISHER AIRLINES & JET AIRWAYS

CURRENT RATIO

2008-09
1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 NACIL KINGFISHER JET AIRWAYS 2008-09 1.09 1.66 1.26

The current ratio is the ratio of total current assets to current liabilities. It is calculated by dividing current assets by current liabilities. The current ratio of NACIL meets the bare minimum of 1.66, which is considered by banks as the minimum acceptable level for providing working capital finance. The ratio indicates that the company not enjoys a better financial health and would not be able to meet its immediate debts. A ratio under 1 suggests that the company would be unable to pay its debts if they come due at that point. While this shows the company is not in good financial health, it does not necessarily mean it would go bankrupt- as there are many ways to access financing. NACIL dealings consists a major of Letter of Credits and bill of Exchanges. Apart from this the policy of NACIL to issue the ticket only on cash basis has helped NACIL in maintaining this ratio.
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For Jet & Kingfisher the ratio is even weaker and hence they have more current liabilities than the current assets.

QUICK RATIO

2008-09
1.2 0.93 1 0.8 0.52 0.6 0.4 0.2 0 NACIL KINGFISHER JET AIRWAYS 2008-09 1.09

The quick ratio is more conservative than the current ratio, a more well-known liquidity measure, because it excludes inventory from current assets. Inventory

is excluded because some companies have difficulty turning their inventory into cash. In the event that short-term obligations need to be paid off immediately, there are situations in which the current ratio would overestimate a company's short-term financial strength. The liquidity position of NACIL is better when compared with Kingfisher Airlines and as satisfactory as Jet Airways.

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DEBT/EQUITY RATIO

2008-09
148.35 160 140 120 100 80 60 40 20 0 NACIL KINGFISHER JET AIRWAYS 0 12.61 2008-09

A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. If a lot of debt is u used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to
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bankruptcy, which would leave shareholders with nothing. Financial institutions consider 2:1 as the ideal debt equity ratio. In that regard both NACIL and JET AIRWAYS are not satisfactory. This year the kingfisher is having no equity, thats why the company didnt have any debt/equity ratio.

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FIXED ASSEST TURNOVER RATIO

2008-09
2.85 3 2.5 2 1.5 1 0.5 0 NACIL KINGFISHER JET AIRWAYS 0.54 0.62 2008-09

Fixed asset turnover is the ratio of sales (on the Profit and loss account) to the value of fixed assets (on the balance sheet). It indicates how well the business is using its fixed assets to generate sales. Generally speaking, the higher the ratio, the better, because a high ratio indicates the business has less money tied up in fixed assets for each rupees of sales revenue. A declining ratio may indicate that the business is over-invested in fixed assets. However, financial analysts claim that such a ratio is inconclusive: Companies do not generally cite or reference these figures. The fixed asset turnover ratio of AIR INDIA has been on the lower side. That means it shows that the company has been not effective in using the investment in fixed assets to generate revenue. There is no exact number that determines whether a company is doing a good job of generating revenue from its investment in fixed assets. Kingfisher is doing quite well as compared to the other two airlines.

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INVENTORY TURNOVER RATIO

2008-09
80 70 60 50 40 30 20 10 0 NACIL KINGFISHER JET AIRWAYS 13.72 2008-09 57.38 73.7

It indicates that how quickly the inventory is sold. High ratio is always better than low ratio as it shows good inventory management. Low ratio adversely affects the ability to meet customer demand which is bad for companys image. Here JET AIRWAYS is better placed as compared to the other two airlines.

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RETURN ON LONG TERM FUNDS(%)

2008-09
0 -2 -4 -6 -8 -10 -12 -14 -16 -18 -17.4 -7.9 2008-09 NACIL KINGFISHER JET AIRWAYS -1.41

It explains the relationship between EBIT (net of taxes) and Long term funds raised. ROL has sharply declined due to decline in EBIT. It shows that the investment is not yielding a satisfactory return due to increase in expenses and decline in EBIT. Return on long term funds for NACIL is also negative, which shows that investing in NACIL is not beneficial for the investors.

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NET PROFIT

2008-09
0 -5 -10 -15 -20 -25 -30 -35 -40 -45 2008-09 NACIL KINGFISHER JET AIRWAYS

Net Profit Ratio indicates management efficiency in manufacturing, administration and selling the products. This ratio is the overall measure of firms ability to turn each rupees sale into net profit. It also indicates the firm capacity to withstand adverse economic condition. The NPR for NACIL and other two is also negative, the reasons for this are increase in fuel prices as well increase in taxes, which in turn has led to increase in price of tickets. Also security threat has been a major reason for declining demands. The NPR for Kingfisher is even poorer whereas Jet Airways position is slightly better.

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CONCLUSION

From the above brief discussion of the facts and figure we can easily conclude that the merger plays huge advantage not only for the growth and survival of the companies but also to be in market. As we know, the merged entity will have a fleet size of 125 new generation aircraft by 2010 after new aircraft are added and some of the existing ones are phased out to emerge among the top 30 carriers globally. The turnover will also top Rs.150 billion. This will showing that both Indian airlines and air India going on right track and soon it will become the No.1 Airline player. NACIL now is the largest domestic carrier in the world in terms of fleet strength. Right now celebrating over fifty years of operations, it has seen both the ups and downs of the industry. It has faced losses and made gains. It had adopted a big loss so as to bolster its profits and managerial efficiency. Today, financial managers round the world do not consider it wrong for a company to have negative loss. However, the evils of illiquidity in the short term are too dangerous to overlook. Thus, it is always better to take up things, instead worrying about the

situations. This not only helps the company to increase its efficiency in managing its funds but also gives the company enough liquidity in the short term to overcome the short term liquidity problems. The report does not foresee any liquidity problem for the company in near future. However a company must prepare itself such that it does not face any problem even in the worst case scenario.

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LEARNINGS

I was placed in a branch of Air India Ltd. at IGI Airport, TR- 1 New Delhi. It was a great experience. Studying the history of the company. Studying how Air India is working. A Little bit about how expenditure division is work. See how these different sub division of expenditure division are working like expenditure division is dividing into 6 sub divisions: Bill Passing Local Bill Passing Out Station Provident Fund Payroll Cash and Bank Finance and Budget

Study how these divisions are working. They gives us to analysis the balance sheets after merger and told us to check why air India facing losses. What are the factors due to which air India facing losses? Study why merger take place between these two companies.

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RECOMMENDATIONS
The Indian Aviation industry has hit an air pocket, forcing three largest airlines NACIL (AIR INDIA), KINGFISHER and JET AIRWAYS to scramble into salvage mode. In India, on the back of soaring fuel prices and dwindling passenger loads, there is need for cost cutting initiatives. Following are the recommendations:-

REDUCING IN-FLIGHT CATERING EXPENSES There is need for reduction in-flight catering expenses on short-haul flights and restructuring functional arms.

AXING FLIGHT IN SOME SECTORS With the increase in losses there is need for axing the flights in those sectors where passengers are very less.

CHANGING SCHEDULES To overcome the losses NACIL (AIR INDIA) can change the schedules of flights to increase passenger loads.

OPERATING DIFFERENT SIZE AIRCRAFT NACIL (AIR INDIA) can operate with small aircraft where passengers are low to avoid loses.

LOWERING DISTRIBUTION COSTS As NACIL (AIR INDIA) is suffering from big loss there is need for lowering of distribution costs.

LOOK FOR INCRESING AVERAGE SEAT FACTOR

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Twenty-Four airlines across the world have gone bankrupt on account of high and unsustainable fuel costs, thus they should look for increasing average seat factor.

REDUCTION OF MAINTENANCE COST The airline can also look for reducing of maintenance cost by stationing officers at hubs instead of allowing them to travel at regular intervals.

NO NEW RECRUITMENTS NACIL (AIR INDIA) is suffering from the problem of overstaffing so they should not do fresh recruitments unless it is essentially required. Beside cost cutting initiative other recommendation to attain zero net working capital are:-

IMPROVING COLLECTION AND PAYMENT PERIODS The company should aim at reducing its collections period to around 25 to 30 days while bringing the payment period down to 35 to 40 days over the next three years. This will help it in increasing its debtor turnover resulting in a decrease in the collection period and increase in the availability of the funds with the organization. At the same time a fall in payment period will improve the working capital position of the company. Thus NACIL (AIR INDIA) would be able to decrease its creditors to a great extent and at the same time improve its creditworthiness.

RAISING LONG TERM FUNDS The company should raise long term funds either by issuing shares or debentures or any other long term credit. It may also raise debt by issuing External Commercial

Borrowings (ECBs). As the rates of interest are lower in Japan, European Countries and America, it can raise low cost long term debt to partly replace the current liabilities that

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are being used to finance the fixed assets. Other than ECBs shares and debentures are also sustainable sources of long term finance.

INCREASING INVESTMENT IN MARKETABLE SECURITIES NACIL (AIR INDIA) can cover a part of the increased financing costs due to resorting to long term finance by investing a part of its funds in short term marketable securities. This will serve the dual purpose of having productive and yet liquid funds. For more profitable short term funds NACIL (AIR INDIA) can form a special team of investment managers who can manage both the long term and short term funds.

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BIBLIOGRAPHY

Internet

http://www.scribd.com/doc/55787671/3/Figure-1-3-Organizational-Structure-of-Air-India http://home.airindia.in/SBCMS/Webpages/Annual-Report-2009-10.aspx?MID=196# http://www.moneycontrol.com/financials/jetairways/balance-sheet/JA01# http://www.moneycontrol.com/competition/jetairways/comparison/JA01 http://www.moneycontrol.com/financials/jetairways/balance-sheet/JA01#

Annual Reports / Financial Statements

Annual Report of NACIL Financial Statements of Air India Financial Statements of Indian Airlines Annual Report of Kingfisher Airlines Annual Report of Jet Airways

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