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MANAGEMENT DISCUSSION & ANALYSIS REPORT

1. ANALYSIS OF THE FINANCIAL/PHYSICAL PERFORMANCE

I. REVENUE :

l Total revenue increased from Rs.194,807.4 million in 2013-14 to Rs.206,131.6 million (an increase of Rs.11,324.2 million) during 2014-15.

l Operating Revenue was Rs.198,017.1 million as against previous year's revenue of Rs.183,709.6 (increase of Rs.14,307.5 million)

l Passenger Revenue increased from Rs.141,507.3 million last year to Rs.157,933.6 million (an increase of Rs.16,426.3 million).

II. EXPENDITURE :

l The total expenditure incurred during the year was Rs.264,661.8 million as compared to the previous year's figure of Rs. 264,201.9 million (an increase of Rs.459.9 million)

l Operating expenses increased from Rs.223,488.5 million to Rs.224,370.0 million (an increase of Rs.890.5 million)

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Revenue Breakdown 2014-15

0.2% 1.3%0.2%5.2%1.9%5.8%

5.6%0.4%0.6%

Passenger Revenue SharingExcess Baggage Other RevenueMail Interest IncomeFreightReimbursement by Subsidiary Company Others

76.6%

Net Surplus onAssets Sold or

Scrapped 2.2%

Charters, Lease & BSA

Expenditure Breakdown 2014-159.3%

0.6%

31.9%

5.5%

8.6%1.5%

2.7%0.2%

4.1%

3.4%

7.3%

5.5%

15.2%

4.1%

Fuel & Oil AircraftInsuraceStaff Cost

Other Exp.DepreciationCommunication

Non Opt. Exp.

Traffic HandlingFood Hotel Cabin AmenitiesPublicity & Sales Promotion

Material & Outside RepairHire of AircraftLanding, Parking Navigation

Booking Agency Commission

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2. MEASURES TO IMPROVE PERFORMANCE 2.1 Plans to turnaround performance :

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

· Rationalization of certain loss making routes.

· Return of leased aircraft.

· Induction of brand new fleet on several domestic & international routes thereby increasing passenger appeal.

· Phasing out old fleet and consequent reduction of maintenance cost.

· Reduction of contractual employment & outsourced agencies.

· Critical analysis of Fuel consumption on all flights by setting up a Fuel Council and Fuel Manager.

· Implementation of the recommendations made by IATA Group of Fuel Efficiency Gap Analysis (FEGA).

· Increase in passenger, cargo, excess baggage revenue through aggressive sales & marketing strategy including a separate Cell for attracting Government traffic.

· Implementation of Quickwin IT Solutions including upgrade of Revenue Management System, introduction of SAP-ERP throughout the network.

· Upgradation of FFP and Introduction of several marketing initiatives including

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

· Operationalisation of the two subsidiary companies formed for Ground Handling and MRO activities.

· Implementation of the Financial Restructuring Plan and the Turnaround Plan to improve the Financial and Operating efficiencies.

2.2 Infusion of Additional Equity- Linked to the Turnaround Plan of the Company The Government infused Equity Capital of Rs.57,800 Million during 2014-15. The paid up

capital as on 31 March 2015 is Rs.171,780 Million (Rs.29,470 Million of Share Application Money Pending Allotment). During the year 2015-16 Air India had sought an Equity Infusion of Rs.42,770 Million against which the Government had initially approved an amount of Rs.25,000 Million. However, in the First Supplementary Grants for 2015-16, the Government has approved a further amount of Rs.8,000 Million to be infused as Equity Infusion thus leaving a balance of Rs.9,770 Million as at the end of 2015-16.

2.3 Going Concern

In order to improve operational and financial performance, the Company had formulated a Turn Around Plan (TAP) which entailed both operational and financial turnaround of the Company. Based on the assumptions on TAP, a Financial Restructuring Plan (FRP) was prepared and implemented effective 1 October 2011 which envisaged aligning of the debt repayments of the Company in line with the projected Cash Flows.

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Due to the support of GOI as well as the various measures taken by the Company towards

improving operating and financial position, it is expected that the financial condition of the Company would continue to improve in the future. With the recent steep fall in fuel prices in Financial Year 2015-16 and softening of interest rates, it is expected that the Company would become operationally profitable and a operating profit of Rs 60.0 Million has been projected in the Financial Year 2015-16. However, Exchange rate continues to be a worrying factor. Barring unforeseen circumstances, the Company hopes to return to Cash Positive status earlier than contemplated under the TAP. Accordingly, the Accounts are prepared by the Management on the Going Concern Basis.

2.4 Product Development

a) Premier Clubs

The Flying Returns Programme has four levels of membership viz. Base, The Silver Edge Club, The Golden Edge Club and the Maharajah Club :

The Maharajah Club (TMC)

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

Bonus mileage points, additional baggage allowance, priority check-in, priority confirmation from the waitlist and lounge access, etc.

The membership base as on 30 September 2015 was 1561.

Golden Edge Club (GEC)

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

Bonus mileage points, additional baggage allowance, priority check-in, priority confirmation from the waitlist and lounge access at select airports, etc.


Silver Edge Club (SEC)

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

Bonus mileage points, additional baggage allowance and priority check-in.


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b) Flying Returns Programme Flying Returns Programme is designed to recognise and reward frequent flyers of Air

India. The benefits and privileges of Flying Returns include :

· Increased check-in baggage allowance, tele check-in, personalized check-in counters at select airports, priority for confirmation from the waitlist, priority baggage handling, pooling of mileage points and wide array of special offers.

· Apart from earning and redeeming on Air India, members can also earn and redeem on all 27 Star Alliance partner carriers.

· Members can accrue miles while traveling on select flights of our code share partner airlines.

· Members can transfer reward points from our non-airline partners to Flying Returns.

· Non-airline partners are American Express, HDFC Bank, ITC Welcome Group, Emirates Bank Group, SBI Cards, Kotak Bank, Citibank Travelling Connect, Holiday IQ.

Total Flying Returns membership base as on 30 September 2015 was 18,78,726 as under:

Region India (including Premium Clubs) Overseas (including Premium Clubs)

11,83,597 6,95,129

Total 18,78,726

The highlights of Flying Returns Programme are as follows :

·

·

·

·

·

·

·

Earn and redeem miles on 27 Star Alliance partner airlines

Access to more than 1000 airport lounges worldwide

Premium passenger benefits across the partner flights

Membership extended worldwide

Redeem miles online at www.flyingreturns.co.in

No redemption threshold limit for redemption tickets

Purchase miles at Re.1 per mile on shortfall of redemption

2.5 Marketing Initiatives :

Corporate House Scheme Corporate House Scheme was launched for the period 1 November 2013 to 31 March 2014,

under which special offers are made to Corporate Houses having significant travel budgets. Target or growth based incentives are offered separately for international sales and domestic sales. The incentives are based on front end or cut and pay as well as growth based back end incentives.

Performance Linked Bonus (PLB)

PLB Scheme has been renewed and launched for the year 2014-15, based on the feedback

from the field and industry practices. Like last year, this year also PLB was offered only on International Sales and not on Domestic Sales. The PLB Scheme is expected to achieve higher growth and increased productivity on Air India. Separate incentives were also offered for increase in F&J class International Sales.

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5. FLEET SIZE, NETWORK, JOINT VENTURES ETC.

5.1 Fleet Size

As of 31 March 2015, Air India had the following aircraft in its fleet :

Aircraft Type Owned Leased Sale & Lease Back Total

B777-200LR 3 - - 3

B777-300ER 12 - - 12

B747-400 3 - 2 5

B787-800 9 - 4 13

A320 18 - - 18

A319 19 3 - 22

A321 20 - - 20

A330-200 - 2 - 2

TOTAL 84 5 6 95

As on 30 September 2015, the fleet consisted of :

Aircraft Type Owned Leased Sale & Lease Back Total

B777-200LR 3 - - 3

B777-300ER 12 - - 12

B747-400 3 - 2 5

B787-800 9 - 12 21

A320 18 1 1 20

A319

19

3

-

22

A321 20 - - 20

A330-200 - 2 - 2

TOTAL 84 6 15 105

Short Term Promotions Various short term promotional initiatives were undertaken :

· Cut and pay incentives for Domestic Leg of International Flights and Hub & Spoke Flights

· Joint promotion with Amadeus

· Additional Incentives to agents for a limited short term period (cut and pay)

3. HIGHLIGHTS

Awards & Recognition Air India was awarded the Asian Voice Political & Public Life-Airlines of the year for 2014 at a function

held in the House of Commons in London, UK.

4. REVENUE GENERATION THROUGH OTHER SERVICES

Cargo Revenue Cargo Revenue increased from Rs.10,659.1 million in 2013-14 to Rs.11,550.3 million during 2014-15.

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5.2 Network

The pattern of operations during 2014-15 for international operation was as under :

India/New York 7 7 7 7

Routes Summer 2015 Winter 2015 Summer 2014 Winter 2014

India/Chicago 7 7 7 7

India/Newark 7 7 7 7

India/San Francisco - 3 (eff 1 December 2015)

- -

India/London 21 28 21 21

India/Birmingham 7 7 4 7

India/Frankfurt 7 7 7 7

India/Paris 7 7 7 7

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

7

India/Russian Federation

4 4 4(eff 18 July 2014)

7

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India/Gulf 141 140 141 141

India/Australia 7 7 7 7

India/Tokyo 3 4 3 3

India/Shanghai 4 5 4 4

India/Hong Kong/Osaka 3 3 3 3

India/Hong Kong/Seoul 4 4 4 4

India/Singapore 21 21 21 21

India/Bangkok 14 14 14 14

India/Yangon 4 4 3 3

India/Kathmandu 18 18 22 22

India/Colombo 14 14 7 7

India/Male 14 14 14 14

India/Dhaka 7 7 14 14

India/Kabul 6 4 6 6

Routes Summer 2015 Winter 2015 Summer 2014 Winter 2014

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5.3 Joint Ventures and Code Share Arrangements

As on 31 March 2015, Air India had code share arrangements with the following foreign carriers :

To : Operating Airline Marketing Airline Type of Code Share

London - New York v.v. Kuwait Airways Air India Block Space

Frankfurt - India v.v. Lufthansa Air India Free Flow

Munich - India v.v. Lufthansa Air India Free Flow

Frankfurt -Berlin/Munich/

Dusseldorf/Stuttgart/

Amsterdam/Copenhagen/Oslo/

Stockholm v.v.*

Lufthansa Air India Free Flow

Frankfurt -Chicago/Los Angeles/Washington/

Denver/Detroit v.v.*

Lufthansa Air India Free Flow

Delhi -Frankfurt v.v. Air India Lufthansa Free Flow

Mauritius -Bangalore Chennai Mauritius

Air Mauritius Air India Free Flow

Mauritius -India v.v. Air Mauritius Air India Free Flow

Vienna –Delhi v.v. Austrian Airlines Air India Block Space

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

Air India South African Airways

Free Flow

Mumbai - Johannesburg v.v. South African Airways

Air India Free Flow

Johannesburg - Durban, Capetown v.v.*

South African Airways

Air India Free Flow

Colombo - India v.v. Sri Lankan Airlines Air India Block Space

India - Zurich v.v. Swiss Air India Block Space

Singapore - Kolkata, Bangkok, Kualalumpur, San Francisco, Los Angeles v.v.

Singapore Airlines Air India Free Flow

Addis Ababa - India v.v. Ethiopian Airlines Air India Free Flow

Addis Ababa –Dar es Salaam v.v.* Ethiopian Airlines Air India Free Flow

Addis Ababa -Nairobi v.v.* Ethiopian Airlines Air India Free Flow

Addis Ababa -Harare v.v.* Ethiopian Airlines Air India Free Flow

Addis Ababa -Entebbe v.v.* Ethiopian Airlines Air India Free Flow

Addis Ababa -Kigali v.v.* Ethiopian Airlines Air India

Bom -MAA/HYD/BLR/TRV/

COK/AMD v.v.*

Air India Ethiopian Airlines Free Flow

Del-Maa/Hyd/Blr/Trv/Cok/Amd v.v.* Air India Ethiopian Airlines Free Flow

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To : Operating Airline Marketing Airline Type of Code Share

Mumbai -Bangaluru/Kolkata/

Delhi/Hyderabad/Ahmedabad/

Chennai v.v.*

Air India Turkish Airlines Free Flow

Delhi-Bangaluru/Kolkata/

Hyderabad/Ahmedabad/

Chennai/Amritsar v.v.*

Air India Turkish Airlines Free Flow

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

Istanbul -Ankara/Izmir/Antalya/

Adana/Dalaman v.v.*

Turkish Airlines Air India Free Flow

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

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

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

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

Del-Hkg v.v. Air India Hong Kong Airlines Free Flow

Hkg-Osa/Seoul v.v Air India Hong Kong Airlines Free Flow

Lon -Del/Bom v.v.* Air India Air Canada Free Flow

Milan -Del v.v.* Air India Air Canada Free Flow

Par-Del v.v.* Air India Air Canada Free Flow

Hkg-Del v.v.* Air India Air Canada Free Flow

Tyo-Del v.v.* Air India Air Canada Free Flow

Del-Bom/Amd/Amritsar/Blr/

CCU/HYD/MAA

Air India Air Canada Free Flow

Bom -Amd/Blr/CCU/HYD/MAA Air India Air Canada Free Flow

Lon -YYZ/Vancouver/Calgary/

Edmonton/St Johns/Halifax/

Montreal/Ottawa v.v.*

Air Canada Air India Free Flow

Par-YYZ/Montreal v.v.* Air Canada Air India Free Flow

Milan -YYZ v.v.* Air Canada Air India Free Flow

HKG/TYO-Vancouver v.v.* Air Canada Air India Free Flow

TYO-Calgary v.v.* Air Canada Air India Free Flow

Almaty -Del v.v. Air Astana Air India Free Flow

Fra-Ljubljana v.v.* Adria Airways Air India Free Flow

Fra-Del v.v.* Air India Adria Airways Free Flow

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

The Company has also sold five of its eight B777-200LR aircraft to Etihad Airways the delivery of these aircraft have been completed in 2013-14 (3 aircraft) and 2014-15 (2 aircraft). The remaining three B777-200LRs are now being operated on the DEL/SFO sector effective 2 December 2015.

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6. FINANCING INITIATIVES

Aircraft Financing :

During 2014-15, Air India financed seven B787 aircraft through Bridge Loans obtained from Bank of India and Deutsche Bank jointly with Standard Chartered Bank. The take out financing of these aircraft will be through a Sale and Lease Back arrangement whereby the Company would sell these aircraft to a selected bidder and in turn lease these aircraft under an operating lease for 12 years. As on 31 March 2015 the Sale and Lease Back arrangements have been completed on 11 of the 21 delivered B787 aircraft and the Bridge Loans from various financial institutions have been repaid.

7. AIR SAFETY

· A dedicated website [email protected] has been set up which aids dissemination of vital safety related information in a cost effective manner to all employees of the Company.

· Cockpit and Cabin Surveillance checks are routinely carried out to monitor safe operation of flights.

· Cockpit Voice Recorder (CVR) monitoring on a regular basis with crew interaction through email to ensure adherence of SOP in flight.

· Counseling of personnel is regularly conducted for safety enhancement and recommendations are sent to various departments requiring time bound ATRs (Action Taken Reports).

· Flight Duty Time Limitations (FDTL) for pilots and Cabin Crew are monitored with violations addressed appropriately.

· International and Domestic Safety Audits are carried out on a periodic basis.

· An Internal Audit is conducted for safety evaluation of the airline and findings are actioned in a time bound manner. The associated report is filed with the DGCA.

· Airport Surveys/Risk Assessments are carried out before commencement of flight operations to a new airport.

· Safety Action Group (SAG) meetings are conducted on monthly basis.

· Quarterly Exceedance Trend Analysis are generated which analyse exceedance of operational parameters. These reports are sent to Operations/Training Departments for necessary remedial measures.

· Base audits at Mumbai and Delhi are conducted once a year. At other stations audits are conducted once in two years.

· Compliance checks of DGCA CAR, MEL requirements, Safety Enhancement Training (SET)/Safety Enhancement Recommendations (SER)/Corrective Training (CT) and Flight Duty Time Limitations (FDTL) are carried out on a periodic basis.

· Safety Review Meetings with DGCA being held on monthly basis to brief DGCA on safety related issues.

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The Company has entered into a Joint Venture (JV) agreement with SATS, Singapore in the equity ratio of 50:50 to provide ground handling services to airlines at certain metro airport. This was in pursuance of Government of India Notification on the Ground Handling policy.

During the year, total bills raised by AI SATS towards handling charges and other services provided to Air India amounted to Rs.2,196.0 million and total bills raised by Air India on AI SATS amounted to Rs.1,311.7 million. As per the books of the Company, the net balance payable to AI SATS as on 31 March 2015 was Rs.644.6 million and as per the balance confirmation received from AI SATS, net balance payable is Rs.636.7 million. The net difference of Rs.7.9 million is under reconciliation and necessary accounting adjustment will be dealt with in due course.

AISATS has been declaring Dividends @ 15% on Equity Capital for the last three years.

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QUALITY MANAGEMENT SYSTEM (QMS)

ISO Certification of QMS Department

The Bureau of Indian Standards (BIS) had carried out the Surveillance Audit of QMS for conforming to the ISO Certificate requirements on 3 December 2015 and the Auditor confirmed that the QMS implemented by the Organisation was found to be conforming to the Certificate requirements IS/ISO 9001:2008 and the documented system was found to be effective and adequate.

Documentation Management System(DMS)

A centralized Corporate Document Management System provides creation, version management, search, retrieval and dissemination of documents over a browser to all authorised personnel based on individual rights, across all Departments and all three AOP Holders and Strategic Business Units. It effectively complies with IOSA, DGCA, ISAGO, Star Alliance standards as well as organization requirements. DMS is a major initiative moving towards near paperless office and for better transparency and document repository to comply with Government requirements as well as regulatory requirements. This not only generates cost savings for the Company but also improves efficiency, saves times as well as environment.

IATA Safety Audit for Ground Operations (ISAGO) After the successful clearance of ISAGO Renewal Audit of Headquarters of Air India Air Transport Services Limited (AIATSL), a wholly owned subsidiary of Air India, by M/s Aviation Quality Services Auditor from 2-3 June 2014 and of Mumbai Station by South African Airways Auditors from 28-30 July 2014, the certification for AIATSL Chennai Station was co-ordinated with IATA and was carried out by Malaysian Airlines Auditors from 16-18 June 2015. There were two findings, action for which were initiated and the same have been closed. IATA Operational Safety Audits (IOSA)

For continuous improvement as per the E-IOSA requirement, an internal Quality & Safety Audit was conducted as per the E-IOSA Audit Programme.

JOINT VENTURE AGREEMENT BETWEEN AIR INDIA LIMITED AND SINGAPORE AIRPORT TERMINAL SERVICES (SATS) ON GROUND HANDLING:

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IOSA validity of Air India is upto January 2016. For timely renewal of IOSA Registry, an agreement was signed with M/s Quali-Audit, France (Auditing Organisation) for conducting IOSA Renewal Audit in the year 2015. The IOSA Renewal Audit was conducted from 7 to 11 September 2015 by M/s Quali-Audit wherein there was one observation for which necessary action was taken and the same was accepted / closed by M/s Quali-Audit of IATA. The IOSA Registry will soon be renewed till the year 2018.

10. INFORMATION TECHNOLOGY

eFile Management

eFile Management application has been rolled out effective 1 January 2015. It is a product from eOffice suite, pioneered by NIC (National Informatics Centre), a Government of India organization and being implemented under the eGovernance initiative of Ministry of Civil Aviation. It fulfills Air India’s aim for a simplified, responsive, paperless, effective and transparent work environment. eFile system has increased the accessibility and life of the documents.

Mobile App

Air India has launched its Mobile Application Module for its domestic and international (ex India) network in October 2014 and February 2015, respectively. The travelers are able to book / cancel / check booking status, perform safe and secure payments using credit or debit cards / internet banking / check-in / manage their bookings and other relevant activities on their mobile devices.

Cabin Crew Recruitment Portal

Online Recruitment Portal for hiring Cabin Crew has been developed in-house, which is a comprehensive portal starting from submission of online applications, validation of data, automated selection of eligible candidates, sending call letters to eligible candidates on their registered emails. This has significantly reduced the cost, time and effort of Personnel Department in cabin crew hiring process.

Haj 2014

In order to fulfill the Saudi Government’s directive for mandatory APP for 2014 Haj operations, it was decided to use the SITA system for the entire booking and check-in operations. The required modifications in DCS module were carried out to suit Haj operations processes which involved extracting passenger booking and passport details from Haj website and then using data in SITA system for booking and check-in process. This facility will be used for Haj operations from 2014 onwards. AI Datamart AI Datamart has enabled culling of important information and quality data for generation of exception based reports with respect to bookings, ticketing, check-in, FFP, etc as per user requirements. Nagpur MRO IT Enablement A state-of-the-art data centre with all modern amenities viz. Fire Protection & Alarm System, Biometric Access Control, Water leakage detection system, etc alongwith other technological facilities like structured cabling, 500+ I/O & voice points with IP telephones, Wi-Fi facility in Hanger area have been set up in Nagpur MRO Hanger Location. Networking and Application connectivity have been

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established to provide access of various applications such as RAMCO MRO, Intranet Applications, Boeing Site and other external applications by users.

Cyber Security

CISO has been designated to co-ordinate the Cyber Security activities for AI with regulatory bodies like CERT-In, NCIIPC to incorporate best industry practices and mitigating any threat originating in the cyber world. Creation of Security Operation Center (SOC) is in progress.

Multimedia Applications

Video Conference facility at six locations of Finance Department has been provisioned. Total 17 such set ups exist in AI network. IP compatible Telephone has been positioned at Airlines House with DID (Direct in Dialing) facility on OPEX (Revenue) Model through MTNL.

Vigilance Application

Region-wise implementation of Vigilance Application was carried out in September 2014 which is a web based application for tracking of vigilance complaints and other vigilance activities such as Procedural Audit, Surprise Checks, etc.

Implementation of Operation Performance Training (OPT)

BOE has a standalone application known as Boeing Operation Performance Training Application which facilitates Operations Crew Members to download the updated data of B777-300ER and B787 aircraft on regular basis. IT Department has facilitated the auto download of data from this standalone application and upload the database on Air India Operations Website / user’s laptop or PC.

Flight Safety Magazine in CLICK Portal Effective November 2014, Flight Safety Magazines can be downloaded from Click Portal.

Uploading of tenders in CPPP Website

As SAP System could not be directly connected to Central Public Procurement Portal (CPPP), a utility was developed to access, validate, process and upload the tenders from SAP to CPPP, Government of India site automatically, which was implemented in January 2015.

ICICI EMD Return Payment Gateway

This facility, implemented in March 2015, enables the vendor to get EMD Amount directly in his account from SAP.

SSIM Exchange

AI Standard Schedule Information Messages (SSIM) was enabled for the Star Alliance Carrier Airlines.

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Postal Mail Billing

International mails from India Post and from Foreign Post are billed to the respective posts and the bills are raised as per each post requirement in terms of the formats and currency. An in-house web based application was developed and implemented in December 2014 for regional data entry and bill generation with respect to international mails. This application facilitates the user in generating in-time bills and thus enables early settlement.

Cargo Reconciliation Report & MIS

An in-house web based application is developed for Cargo and Finance Departments to enable them reconcile the Airway Bills (AWB) with the cargo agents. This is based on AWB archived data sent to LMS FTP server by the LMS System. It is also planned to develop MIS Reports using this data.

11. HUMAN RESOURCES

11.1 Staff Strength

The staff strength as on 31 March 2015 was 21139. Out of this, 7126 employees have been deputed / transferred to AIATSL and AIESL.

11.2 Long Service Mementoes

Every year all the employees of the Company who had completed 25 years of service are presented with a long service memento i.e. a wrist watch and a Certificate, on 27 August. Accordingly, this year on 27 August 2014, the Long Service Mementoes presentation function was held Region-wise and 1154 employees were felicitated.

12. SPORTS

The Air India Cricket Team won Inter Corporation Shield in May 2015, the Atharva Patson Cricket Tournament held in Pune in November 2015, Chandu Borde T20 Tournament held in Pune in February 2015 and All India Laxmandas Cricket Tournament held in New Delhi in April-May 2015.

Ms Jhulan Goswami, Padmashree/Arjuna Awardee and ICC Awardee (Air India’s fastest bowler) and Ms Karuna Jain were selected for the Indian Women’s Cricket Team as Opening Batsmen for the forthcoming Tour to England from 6-26 August 2014.

The Air India Hockey Team won Bronze Medal in the Sr National Championship held in Pune and in Indoor Hockey Festival 5-a-side-Tournament held in Doha in June 2015 they were joint winners with PIA.

The Air India Football Team won MDFA League, Elite Division Harwood League held in Mumbai, RCF Cup held in Mumbai in December 2014, Super Society Sports Club held in Lucknow in January 2015, Malcom Baug P G held in Mumbai and MDFA League U-19 held in Mumbai.

The Kabaddi Team won Tournaments organized by Industrial National League, JD Sports Club, All India Rajiv Gandhi Gold Cup, Mumbai District Championship, All India Tournament, State Level Kabaddi Tournament, Baba Haridas Tournament. Mr Ajay Thakur was the member of Indian Team which won Gold Medal in the Asian Games held at Icheon, South Korea from 19 September to 4 October 2014.

In Table Tennis Men’s A Team and Women’s A Team won the Inter Office Table Tennis Championship and Inter Club TT Tournament held in Mumbai in June 2014.

Air India Carrom Team won 16th Inter Institutional Nationals held in Kolkatta in January 2015. It also won All India Public Sector Tournament held in Noida.

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Air India Badmintorn Team won

3 Silver / 3 Bronze Medals and 2 Bronze Medals in Senior All India Major Ranking Badminton Tournament held at Hyderabad and Pune, respectively. It also won 1 Gold / 1 Silver / 1 Bronze Medal at All India Senior Ranking Tournament held at Bareilly.

2 Gold / 4 Slilver / 4 Bronze and 2 Gold / 1 Silver / 4 Bronze Medals at Junior All India Major Ranking Badminton Tournament held at Cochin and Bangalore respectively.

1 Gold / 4 Silver / 1 Bronze Medals at Gautam Thakkar Memorial Junior All India Tourname nt.

2 Gold at Central Zone Badminton Tournament.

2 Silver / 1 Bronze Medal at Tata Open India International Challenge. 1 Gold / 1 Silver / 2 Bronze at All India Senior Ranking Tournament held at Cochin

13. PUBLIC GRIEVANCES

During the year 2014-15, 591 Public Grievance cases were received. Out of these, 492 cases have been settled during 2014-15 and 99 are pending.

14. STATUTORY COMPLIANCE

Air India has five subsidiary companies. The financial statements of the subsidiaries are included in this Annual Report elsewhere. Their performance is briefly discussed here :

14.1 Air India Air Transport Services Limited (AIATSL): (Rs.in Million)

Particulars 2014-15 2013-14

Air India’s investment in equity 0.5 0.5

Total Income 6,470.12 1,018.15

Profit/(Loss) After Tax 906.82 21.97

AIATSL presently provides ground handling services at 63 airports. Apart from handling 86837 flights of Air India Limited and its Subsidiary Companies, ground handling is also provided for 27270 flights of 30 foreign airlines, 4 domestic airlines, HAJ and Charter / Non-Scheduled flights.

AIATSL operations alongwith financials are expected to be on a much higher turnover. The majority of the earnings would be from handling international flights and hence the foreign exchange inflow is expected to be an effective hedge against foreign procurement as well as possibly deriving foreign exchange gains in revenue earnings to the Company. AIATSL with Pan India presence is to be the market leader in the country and with its capability should be able to venture into few of the foreign countries wherever Air India is operating.

14.2 Air India Charters Limited (AICL):

(Rs.in Million)


Air India’s investment in equity 7,800.0 300.0

Total Income 22,949.6 20,696.10

Profit/(Loss) After Tax (610.31) (3,453.19)

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AICL operates a Low Cost Airline under the brand name "Air India Express". Launched on 29 April 2005 with a fleet of 3 leased B737-800 aircraft, it operated from 3 stations in Kerala to 5 stations in the Gulf. As on 31 March 2015, AICL had a fleet of 17 B737-800 owned aircraft. It operated to 11 Indian and 12 foreign on-line stations.

During 2014-15 AICL has carried 2.62 million passengers as against 2.68 million during 2013-14, a decline of 2.2% due to increase in average stage length as some of the capacity deployed on domestic services were moved to international routes giving rise to a reduction in the number of seats offered although the capacity in terms of ASK rose marginally by 0.5%. The Scheduled Services Revenue, before revenue sharing with the holding company Air India Limited, increased substantially from Rs.23,594.5 million in 2013-14 to Rs.26,164.6 million.

The Summer 2014 Schedule comprised of 149 international flights and 11 domestic flights and the average aircraft utilization was approximately 10.5 hours per day per aircraft. In the Winter Schedule aircraft rotations were further rationalized so as to increase aircraft utilization and cater to the traffic demands for direct links / increased frequencies. Air India Express ended the Winter 2014-15 schedule with 165 international flights per week. The Company made a loss of Rs.610.3 million during the year 2014-15 as against a loss of Rs. 3,453.19 million during the year 2013-14.

14.3 Air India Engineering Services Limited (AIESL): (Rs.in Million)


Air India's investment in equity 0.5 0.5

Total Income 1,420.05 -

Profit/(Loss) After Tax (2,425.67) (0.03)

During the year 2013-14, the Company had entered into a Memorandum of Understanding (MoU) with its Parent Company viz. Air India Limited regarding the services to be provided on maintenance and repair and overhaul facilities to Air India.

An MoU has also been entered into with Airline Allied Services Limited (AASL), a wholly owned subsidiary of Air India, wherein AASL has decided to transfer its MRO activities (including infrastructure) to AIESL and AASL agreed to commit its fleet in entirety for all MRO work to AIESL.

Similarly, an MoU has also been entered into during 2014-15 with Air India Charters Limited (AICL), a wholly owned subsidiary of Air India, wherein AICL has decided to transfer its MRO activities (including infrastructure) to AIESL and AICL agrees to commit its fleet in entirety for all MRO work to AIESL.

As such, AIESL shall be having committed business from Air India group along with infrastructure and other support. The company as of 1 January 2015 as also obtained DGCA certificate for the repair and overhaul of its facilities. Certificate of facilities for EASA and FAA would be procured shortly.

14.4 Airline Allied Services Limited (AASL):

(Rs.in Million)



Total Income 2,279.52 2,423.90

Profit/(Loss) After Tax (1,839.21) (2,494.0)

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32

The Company operates under the brand Alliance Air.

As on 31 March 2015 the Company had 4 ATR-42-320s, 2 ATR-72-600 and 4 CRJ-700s leased aircraft in its fleet. As at the end of the year, the network of the Company consisted of 25 stations within the country. Presently, it has been operating around 170 flights per week. As on 31 March 2015, the staff strength of the Company was 664 including 17 employees on deputation from the parent Company.

Alliance Air operated air services in the North East Region under an MoU with the North Eastern Council (NEC).

Alliance Air also operates flights between Agatti and the mainland under an undertaking of grant of VGF by the Lakshadweep Administration. Further, it has charter operations on Port Blair/Car Nicobar/Port Blair with CRJ aircraft once per week on behalf of the Andaman and Nicobar Administration effective 21 July 2014.

14.5 Hotel Corporation of India Limited (HCI):

(Rs.in Million)



Total Income 528.58 505.02

Profit/(Loss) After Tax (504.59) (404.73)

Chefair Flight Catering, Mumbai

The Unit earned a revenue of Rs.100.13 Million as against Rs.96.66 Million previous year. Expenditure decreased from Rs.213.10 Million during previous year to Rs.209.39 Million. The Unit made net loss of Rs.154.98 Million as against Rs.137.98 Million in the previous year.

Centaur Lake View Hotel, Srinagar :

The Unit earned a revenue of Rs.88.81 Million as against Rs.80.47 Million previous year. Expenditure increased from Rs.135.32 Million during previous year to Rs.145.33 Million. The Unit incurred a net loss of Rs.80.67 Million as against Rs.65.03 Million previous year.

Centaur Hotel, Delhi and Chefair, Delhi

During the year Centaur Hotel, Delhi incurred net loss of Rs.211.85 Million as against Rs.148.34 Million previous year and Chefair Flight Catering, Delhi Rs.73.07 Million as against Rs.76.38 Million during 2013-14.

T3 Lounge, Delhi

The Unit started operations in January 2013 and earned a revenue of Rs.69.06 Million as against Rs.51.09 Million during the year 2013-14. The Unit made an Operating Profit of Rs.25.76 Million as against Rs.17.58 Million during 2013-14 and after providing for depreciation, the net profit for the year was Rs.25.61 Million as against Rs.17.51 Million previous year.

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15. RISK MITIGATION STRATEGIES

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

16. INTERNAL CONTROL SYSTEMS

The Company continues to ensure proper and adequate internal control systems and procedures commensurate with its size and nature of business to ensure that all assets are safeguarded and protected against loss from unauthorized use and that transactions are authorized, recorded and reported correctly. The internal control system enables documented policies, guidelines, authorization and approval procedures. Necessary actions were also being taken to address some of the concerns raised by the Auditors in this regard.

The Company has an extensive system of internal controls which ensures optimal utilization and protection of resources, IT security, accurate reporting of financial transactions and compliance with applicable laws and regulations as also internal policies and procedures. The internal control system is supplemented by extensive internal audits, regular reviews by management and well documented policies and guidelines to ensure reliability of financial and other records to prepare financial statements and other data.

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

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Report of Corporate Governance

1. Company’s Philosophy on Code of Governance

Air India Limited’s corporate philosophy on Corporate Governance has been to ensure fairness to the Stakeholders through transparency, full disclosures, empowerment of employees and collective decision making.

2. Board of Directors

As per the Articles of Association of the Company, the number of Directors shall not be less than three and not more than fifteen.

BOARD OF DIRECTORS AS ON 31 MARCH 2015

Shri Rohit Nandan Chairman & Managing Director

Shri S. Venkat Director (Finance)

Shri N K Jain Director (Personnel)

Shri Pankaj Srivastava Director (Commercial)

Shri S S Mohanty Addl Secretary & Financial Advisor, Ministry of Civil Aviation

Shri B S Bhullar Jt Secretary, Ministry of Civil Aviation

Smt Renuka Ramnath Founder MD & CEO – Multiples Alternate Asset Management Pvt Ltd.

Shri Ravindra H Dholakia Professor, Indian Institute of Management, Ahmedabad

Shri Prem Vrat Pro-Chancellor & Professor of Eminence, ITM University, Gurgaon

Shri Gurcharan Das Retd Chairman – Proctor & Gamble

Air Marshal (Retd) K K Retired Air Marshal, Indian Air Force

Nohwar

Shri Syed Nasir Ali ceased to be Jt Managing Directors effective 20 December 2014.

Smt M Sathiyavathy, Addl Secretary & Financial Advisor, Ministry of Civil Aviation ceased to be Director with effect from 11 February and Shri S S Mohanty was appointed effective that date. Shri S S Mohanty, Addl Secretary & Financial Secretary ceased to be Director effective 6 May 2015 and Ms Gargi Kaul, Jt Secretary & Financial Advisor was appointed effective that date.

Shri Arun Kumar, Jt Secretary, Ministry of Civil Aviation ceased to be Director effective 1 January 2015 and Shri B S Bhullar, Jt Secretary, Ministry of Civil Aviation was appointed effective that date.

The Board places on record its appreciation of the valuable services rendered by Shri Syed Nasir Ali, Jt Managing Director, Smt M Sathiyavathy, Shri S S Mohanty and Shri Arun Kumar as Directors on the Board of the Company.

During the year, all meetings of the Board and the Annual General Meeting were chaired by the Chairman & Managing Director.

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Independent Directors :

As provided under Schedule IV of the Companies Act, 2013, during the Financial Year 2014 -15 the First and Second Meeting of Independent Directors were held on 23 May 2014 and 28 January 2015, respectively wherein the Independent Directors reviewed various parameters for assessing the quality, quantity and timeliness of flow of information between the Company, Management and the Board to effectively and reasonably perform their duties.

The Company is also nominating Independent Directors to the Familiarization Programme and other Corporate Programme from time to time. Being a Government Company, the appointment of all Directors including Independent Directors and their performance evaluation is being done by the Government of India.

Details regarding the Board Meetings, Annual General Meeting, Directors’ Attendance thereat, Directorships and Committee positions held by the Directors are as under :

Board Meetings :

Seven Board Meetings were held during the financial year on the following dates:

16 April 2014 (59th Meeting)

26 June 2014 (60th Meeting)

24 July 2014 (61st Meeting)

2 September 2014 (62nd Meeting)

5 November 2014 (63rd Meeting)

11 December 2014 (64th Meeting)

17 March 2015 (65th Meeting)

The Board has adopted a Code of Conduct for the Directors and also for the Senior Management of the Company and the same has been posted on the website of the Company. There is a system in the Organisation of affirming compliance with Corporate Governance by the Board Members and Senior Management Personnel of the Company. A declaration of compliance signed by Chairman & Managing Director of the Company is enclosed with this Annual Report.

Particulars of Directors including their attendance at the Board/Shareholders’ Meetings during the financial year 2014-15:

Name of the Director Wholetime Directors

Academic Qualifications

Attendance out of 7 Board Meetings held during the year

Details of Directorships held in other Companies

Memberships held in Committees

Shri Rohit Nandan Chairman & Managing Director

Post Graduation in History & MBA from UK

7 Part-time Chairman Air India Charters Ltd Air India Air Transport Services Ltd

Chairman Finance Committee HR Committee Strategic Committee Permanent Invitee Audit Committee

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Air India Engineering Services Ltd Airline Allied Services Ltd Hotel Corporation of India Ltd Director Air India SATS Airport Services Pvt Ltd Air Mauritius Ltd Air Mauritius Holdings Ltd

Member Corporate Social Responsibility and Sustainability Committee Nomination & Remuneration Committee Audit Committee – Hotel Corporation of India Ltd Audit Committee – Air India Charters Ltd

Shri Syed Nasir Ali Jt Managing Director (till 20 December 2014)

M.Sc - Zoology 5 NIL Member HR Committee Strategic Committee Manpower Restructuring Committee

Shri S Venkat Director (Finance)

B.Com,FCA,FCMA,FCS, CPA(US), CGMA (US)

6 Director Air India Charters Ltd Airline Allied Services Ltd Hotel Corporation of India Ltd Air India Air Transport Services Ltd Air India Engineering Services Ltd Air India SATS Airport Services Pvt Ltd

Member Finance Committee Special Invitee Audit Committee Co-opted Member Strategic Committee Chairman Audit Committee,Hotel Corporation of India Limited Member Audit Committee,Air India Charters Limited

Shri N K Jain Director(Personnel)

B.Tech, IIT Rourkee, LLB, IRPS

7 NIL Member HR Committee Corporate Social Responsibility and SustainabilityCommittee Manpower

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Restructuring Committee

Shri Pankaj Srivastava

7 Director Airline Allied Services Ltd

Co-opted Member Strategic Committee

Non Executive Directors (Ex Officio)

Smt M Sathiyavathy Addl Secretary & Financial Advisor, Ministry of Civil Aviation (till 11.02.2015)

Post Graduate 6 Director Air India Air Transport Services Ltd Air India Engineering Services Ltd Hotel Corporation of India Ltd

Member Audit Committee Strategic Committee Finance Committee

Shri S S Mohanty, Addl Secretary & Financial Advisor,Ministry of Civil Aviation (w.e.f.11.02.2015 to 06.05.2015)

MA, MBA 1 Director Air India Air Transport Services Ltd Air India Engineering Services Ltd Hotel Corporation of India Ltd

Member Audit Committee Strategic Committee Finance Committee

Shri Arun Kumar Jt Secretary, Ministry of Civil Aviation (w.e.f.23.04.2014 to 01.01.2015)

Post Graduate 5 Director Air India Air Transport Services Ltd Air India Engineering Services Ltd Hotel Corporation of India Ltd

Member HR Committee Strategic Committee Nomination & Remuneration Committee

Shri B S Bhullar, Jt Secretary,Ministry of Civil Aviation (w.e.f.01.01.2015)

Post Graduation in Agriculture Science

1 Director Air India Air Transport Services Ltd Air India Engineering Services Ltd Hotel Corporation of India Ltd

Member HR Committee Strategic Committee Nomination & Remuneration Committee

Non Executive Directors - Independent

Smt Renuka Ramnath

BE- VJTI, MBA, AMP-

4 Director Multiples Alternate

Chairperson Audit Committee

AIR INDIA

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Harvard Business School

Asset Management Pvt Ltd Multiples Equity Fund Trustee Pvt Ltd Shri Nath G Corporate Management Services Pvt Ltd Arvind Ltd Indian Energy Exchange Ltd Mogae Media Pvt Ltd PVR Limited B2R Technologies Pvt Ltd Vikram Hospital (Bengaluru) Pvt Ltd Bharatiya Mahila Bank Ltd

Member Strategic Committee Finance Committee

Shri Ravindra H Dholakia

Post Doctoral Fellow(Toronto),Phd(MSU,Baroda)

5 Director AE Ltd Union Bank of India

Chairman Nomination & Remuneration Committee Member HR Committee Strategic Committee Member Audit Committee-AE Ltd Audit Committee-STC Ltd

Shri Prem Vrat

B.Tech(Hons) in Mechanical Engineering,IIT-Kharagpur,M.Tech(Indl Engg & Operations Research),Phd,IIT-Delhi

6 NIL Member Audit Committee Strategic Committee Finance Committee Nomination & Remuneration Committee

AIR INDIA

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Shri Gurcharan Das

Graduate with Honors from Harvard University,AMD-Harvard Business School

6 Director Birla Sun Life Trustee Company Pvt Ltd Gurcharan Das Consultants Pvt Ltd Non Executive Chairman DMI Finance Pvt Ltd

Member Strategic Committee Member Remuneration Committee, Fortis Health Care Ltd Audit Committee, Gillette India Ltd

Air Marshal (Retd) K K Nohwar

Graduate from National Defense Academy

7 NIL Chairman Corporate Social Responsibility & Sustainable Committee Member HR Committee Strategic Committee

3. Board Committees

Audit Committee

As part of the Corporate Governance and in compliance with the provisions of the Companies Act, 2013 and DPE Guidelines, the Company constituted the Audit Committee of the Board in November 2007.

As on 31 March 2015, the following were the Members of the Audit Committee :

Smt Renuka Ramnath Chairperson

Smt M Sathiyavathy Member

Prof Prem Vrat Member

Director (Finance) Special Invitee

ED-Internal Audit Special Invitee

Shri Rohit Nandan Permanent Invitee The Board of Directors in its Meeting held on 5 November 2014 has revised the terms of the Audit Committee as under:

· To recommend for appointment, remuneration and terms of appointment of auditors of the company;

· To review and monitor the auditor’s independence and performance, and effectiveness of audit process;

AIR INDIA

40

· To review the Internal Audit program & ensure co-ordination between the Internal & External Auditors as well as determine whether the Internal Audit function is commensurate with the size and nature of the Airlines Business;

· To discuss with the Auditor before the audit commences the nature & scope of the audit and to ensure co-ordination where more than one audit firm is involved;

· To examine the financial statements and the auditors’ report thereon;

· To review the Statutory Auditor’s Report, Management’s response thereto and to take steps to ensure implementation of the recommendations of the Statutory Auditors ;

· Approval or any subsequent modification of transactions of the company with related parties;

· Scrutiny of inter-corporate loans and investments;

· Valuation of undertakings or assets of the company, wherever it is necessary;

· Evaluation of internal financial controls and risk management systems;

· Monitoring the end use of funds raised through public offers and related matters.

· To consider any other matter as desired by the Board. The Audit Committee met two times during the year to review various issues including inter alia annual accounts of the Company for the year before submission to the Board, on the following dates:

1. 24 July 2014 (18th Meeting) 2. 11 December 2014 (19th Meeting) Attendance at the Audit Committee Meetings

Name of the Member No. of Meetings Attended

Smt Renuka Ramnath, Chairperson 2

Smt M Sathiyavathy, Member (upto 11.02.2015) 2

Shri Prem Vrat, Member 2

Shri Rohit Nandan, Permanent Invitee 2

Shri S Venkat,Director(Finance) Special Invitee 2

Shri R K Goel,GM-Internal Audit ,Special Invitee -

Air India Limited has presently five Indian Subsidiary Companies i.e. Air India Charters Limited, Airline Allied Services Limited, Air India Air Transport Services Limited, Air India Engineering Services Limited and Hotel Corporation of India Limited.

Remuneration Committee

Taking into account the Guidelines on Corporate Governance for CPSEs, the Board constituted a Remuneration Committee on 28 September 2012 to formulate and review policies related to remuneration/perquisites//incentives within the parameters of Guidelines issued by the Government of India. As on 31 March 2015, following were Members of the Remuneration Committee:

Prof Ravindra Dholakia (Independent Director) ChairmanProf Prem Vrat (Independent Director) MemberJoint Secretary, MOCA MemberCMD Member

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41

Corporate Social Responsibility (CSR) & Sustainable Development Committee (SD) The Board constituted a Sustainable Development Committee (SDC) on 11 December 2012 to approve and review Sustainable Development projects from time to time. As on 31 March 2015, the Committee consisted of : Air Marshal (Retd) K K Nohwar Chairman & Managing Director Director (Personnel) Smt Hade Singh, Head of Corporate Quality, Safety and Environment Management System – Nodal Officer.

4. Remuneration to Directors

Air India being a Government Company, the remuneration payable to its whole-time directors is approved by the Government and advices received through the Administrative Ministry viz. Ministry of Civil Aviation. The non-official part-time Directors are paid Sitting Fees for Board Meetings and Sub Committee Meetings of the Board attended by them. Air India does not have a policy of paying commission on profits to any of the Directors of the Company. The remuneration payable to officers below Board level is also approved by the Government of India.

Details of Remuneration paid to the Whole-time Directors during the Financial Year 2014 -15 are as follows : Names of Directors All elements of remuneration packages of the Directors

i.e. salary, benefits, bonus, pension, etc. (in Rs.) Total

(in Rs.)

Salary & Allowances

Contribution to Provident Fund & other funds

Other benefits & perquisites

Performance Related Pay

Shri Rohit Nandan 20,80,813 20,80,813

Shri S Venkat 21,23,707 1,34,997 21,23,707

Shri N K Jain 22,86,372 1,78,143 22,86,372

Shri Pankaj Srivastava

20,73,114 1,25,325 20,73,114

Service Contracts : As per terms & conditions of appointment communicated by the administrative Ministry (i.e. from the date of taking over charge of the post or till the date of superannuation or until further orders, whichever is earlier). The Company has not introduced any Stock Option Scheme. None of the Non-Executive Part-time (Independent) Directors holds any share in the Company.

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During the Financial Year, the Non-Executive (Independent) Directors received sitting fees for attending the meetings of the Board / Committees as under : Shri Ravindra Dholakia Rs.1,40,000/-

Shri Prem Vrat Rs.1,40,000/-

Shri Gurcharan Das Rs.1,40,000/-

Air Marshal (Retd) K K Nohwar Rs.1,60,000/-

Smt Renuka Ramnath Rs.1,00,000/-

5. Annual General Meetings during the last three years

The details of these meetings are given below :

Date and time of the Meeting Venue

6th Annual General Meeting 27 December 2012 at 1030hrs Airlines House, 113 Gurudwara

Rakabganj Road,

New Delhi 110 001


Rakabganj Road,

New Delhi 110 001


Rakabganj Road,

New Delhi 110 001

M/s Link Intime India Pvt Ltd having its address at Pannalal Silk Mills Compound, C-13, Lal Bahadur Shastri Marg, Subhash Nagar, Bhandup-West, Mumbai 400 078 are the Registrars for the debentures and also the transfer agents of the Company. All matters connected with debenture transfer, transmission, interest payment is handled by the transfer agents.

6. Code of Conduct

“Code of Conduct for Board Members and Senior Management Personnel of Air India Limited” has

been devised and made effective 31 March 2013. The purpose of this Code is to enhance further

ethical and transparent process in managing the affairs of the Company. This Code has been made

applicable to

a. All Whole-time Directors

b. All Non-Whole time Directors including Independent Directors under the provisions of Law and

c. Senior Management Personnel

All the Board Members and Senior Management Personnel have provided the Annual Compliance

Certificate duly signed by them as on 31 March 2015.

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7. Integrity Pact

The Company has introduced Integrity Pact (IP) to enhance ethics / transparency in the process of

awarding contracts with effect from 8 February 2008. The Integrity Pact has now become a part of

tender documents to be signed by the Company and by the vendor (s) / bidder (s) with a value of

Rs.100 million and above.

8. Compliance with the RTI Act, 2005

Air India Limited, as a PSU Organisation with large public interface, has successfully ensured

compliance with the provisions of Right to Information Act for providing information to the citizens.

As required by the RTI Act, information has been displayed on the Company’s website for the public at large. Air India has decentralized its structure to deal with the applications / appeals received under RTI Act with effect from 9 January 2015. 77 Central Public Information Officers (CPIOs), 73 Central Assistant Public Information Officers (CAPIOs) at outstations and 24 First Appellate Authorities (FAAs) for speedy disposal of applications / appeals.

During 2014-15, 1049 cases of Requests and 143 Appeals were received. Out of 143 Appeals, 141 were disposed off by the Appellate Authority.

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CODE OF CONDUCT

DECLARATION

I hereby declare that all the Board Members & Senior Management Personnel have affirmed compliance with

the Code of Conduct as adopted by the Board of Directors for the year ended 31 March 2015.

(Rohit Nandan)

Chairman & Managing Director

Air India Limited

Place : Delhi

Date : 25 August 2015

Sd/-

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ANNUAL STATEMENT SHOWING REPRESENTATION OF THE PERSONS WITH DISABILITIES IN

SERVICE AS ON 1 JANUARY 2015 AND DIRECT RECRUITMENT / PROMOTION DURING THE

CALENDAR YEAR 2014

NAME : AIR INDIA LIMITED

Group Number of Employees

As on 1.1.2015

Direct

Recruitment-2014

Promotion - 2014

Total In

Identified

Posts

VH HH OH

1 2 3 4 5 6 7 8

“A” 7988 342 1 - 19 NIL 4

“B” 6990 8 11 6 36 NIL 10

“C” 1440 19 - - 1 NIL NIL

“D” 5197 199 10 9 40 NIL 10

Total 21615 568 22 15 96 NIL 24

Notes

i. VH stands for Visually Handicapped (persons suffering from blindness or low vision) ii. HH stands for Hearing Handicapped (persons suffering from hearing impairment) iii. OH stands for Orthopedically Handicapped (persons suffering from loco motor disability or cerebral

palsy)

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46

Annexure to Directors' Report for the year 2014-15

FORM NO. MGT 9 EXTRACT OF ANNUAL RETURN

As on financial year ended on 31.03.2015

Pursuant to Section 92 (3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management & Administration) Rules, 2014.

I. REGISTRATION & OTHER DETAILS:

II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY (All the business activities contributing 10 % or more of the total turnover of the company shall be stated) -

1. CIN U62200DL2007GOI161431

2. Registration Date 30 March 2007

3. Name of the Company AIR INDIA LIMITED

4. Category/Sub-category of the Company

Government Company

5. Address of the Registered office & contact details

Airlines House, 113 Gurudwara Rakabganj Road New Delhi 110 001

6 Whether listed company No

7. Name, Address & contact details of the Registrar & Transfer Agent, if any.

N.A.

Sr No

Name and Description of main products / services NIC Code

of the Product/

service

% to total turnover of

the company

1.

To establish, maintain and operate international and domestic air transport services, scheduled and non scheduled, in all the countries of the world for the carriage of passengers, meals and freight and for any other purposes.

511 100

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III. PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANY:

Sr. No.

Name and Address of the Company

CIN/GIN

Holding / Subsidiary / Associate

% of

Shares

Applicable Section

1

Air India Charters Limited 21st floor, Air India Building Nariman Point, Mumba-400 081

U62100MH1971GOI015328 Subsidiary 100% 2 (87)

2

Air India Air Transport Services Limited 113, Airlines House, Gurudwara Rakabganj Road, New Delhi, 110 001.

U63090DL2003PLC120790 Subsidiary 100% 2 (87)

3

Air India Engineering Services Limited 113, Airlines House, Gurudwara Rakabganj Road, New Delhi, 110 001.

U74210DL2004GOI125114 Subsidiary 100% 2 (87)

4

Airline Allies Services Limited Old Lufthansa Hangar Building (adjacent to ED-NR’s Office IGI Airport, T1, New Delhi – 110 037

U51101DL1983GOI016518 Subsidiary 100% 2 (87)

5

Hotel Corporation of India Limited 1

st floor, Transport Annexe

Bldg. Air India Complex, Old Airport Santa Cruz (E), Bombay-400 029

U55101MH1971GOI015217 Subsidiary 80% 2 (87)

6

Air India SATS Airport Services Pvt Ltd 113, Airlines House, Gurudwara Rakabganj Road, New Delhi, 110 001

U74900DL2010PTC201763 Joint Venture 50% 2(6)

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IV. SHARE HOLDING PATTERN (Equity Share Capital Breakup as percentage of Total Equity) : Category-wise Share Holding

Category of Shareholders

No. of Shares held at the beginning of the year [As on 01-04-2014]

No. of Shares held at the end of the year [As on 31-03-2015]

% Change during

the year

Demat

Physical

During the year

% of Total

Shares Demat Physical Total

% of Total

Shares

A. Promoters

(1) Indian

a) Individual/ HUF

b) Central Govt 14345000000 2833000000 100 17178000000 17178000000 100

c) State Govt(s)

d) Bodies Corp.

e) Banks / FI

f) Any other

Total share holding of Promoter (A)

14345000000 2833000000 100 - 17178000000 17178000000 100

B. Public Shareholding

Not Applicable

1. Institutions

a) Mutual Funds/UTI

b) Banks / FI

c) Central Govt.

d) State Govt.(s)

e) Venture Capital Funds

f) Insurance Companies

g) FIIs

h) Foreign Venture Capital Funds

i) Others (specify) Foreign Banks

Sub-total (B)(1):- - - - - - - - - -

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Category of Shareholders

No. of Shares held at the beginning of the year [As on 01-04-2014]

No. of Shares held at the end of the year [As on 31-03-2015] %

Change during

the year

Demat

Physical

Total

% of Total

Shares

Demat

Physical

Total

% of Total

Shares

2. Non-Institutions

Not Applicable

a)

Bodies Corp. (Market

Maker + LLP)

i)

I Indian

ii) Overseas

b)

Individuals

i)

Individual

shareholders holding

nominal share capital

upto Rs. 1 lakh

ii)

Individual

shareholders holding

nominal share capital

in excess of Rs. 1

lakh

c)

Others (specify)

i)

Non Resident Indians

ii)

Non Resident Indians

-

Non Repatriable

iii)

Office Bearers

iv)

Directors

v)

HUF

vi)

Overseas Corporate

Bodies

vi)

Foreign Nationals

vii)

Clearing Members

viii)

Trusts

ix)

Foreign Bodies -

D R

Sub-total (B)(2):-

-

-

-

-

-

-

-

-

-

Total Public Shareholding (B) = (B)(1)+ (B)(2)

-

-

-

-

-

-

-

-

-

C. Shares held by

Custodian for GDRs & ADRs

-

-

-

-

-

-

-

-

-

Grand Total (A+B+C)

14345000000

14345000000

100

17178000000

17178000000

1000

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B) Shareholding of Promoter-

C) Change in Promoters' Shareholding (please specify, if there is no change)

Sr No.

Particulars

Shareholding at the beginning of the year

Cumulative Shareholding at end of the year

No. of shares

% of total shares of

the company

No. of shares


the company

At the beginning of the year

Government of India 14345000000 100 14345000000

At the end of the year

Government of India 17178000000 100 17178000000

D) Shareholding Pattern of top ten Shareholders: (Other than Directors, Promoters and Holders of GDRs and ADRs):

Sr No.

Shareholder's Name


Shareholding at the end of the year

% change

in Share

holding during

the year

No. of Shares

% of total Shares of the

company

%of Shares

Pledged / Encum-bered to

total shares

No. of Shares

% of total Shares of the

company

%of Shares

Pledged / Encum-bered

to total shares

1

Government of India

14345000000

100

NIL

17178000000

100

NIL

Sr No

For Each of the Top 10 Shareholders


Cumulative Shareholding at end of the year

No. of shares % of total

shares of the company

No. of shares % of total

shares of the company

1 NOT APPLICABLE

2

3

4

5

6

7

8

9

10

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51

E) Shareholding of Directors and Key Managerial Personnel:

S. No.

Shareholding of each Directors and each Key Managerial Personnel


Cumulative Shareholding at the end of year

No. of shares


the company

No. of shares


the company

1 Shri Rohit Nandan 10 0 10 0

2 Shri B S Bhullar 10 0 10 0

3 Shri S S Mohanty 10 0 10 0

Total 30 30

V. INDEBTEDNESS -Indebtedness of the Company including interest outstanding/accrued but not due for payment.

Secured Loans excluding deposits

Unsecured Loans

Deposits Total

Indebtedness

Indebtedness at the beginning of the financial year

i) Principal Amount 21536.31 29109.20 0 50645.51

ii) Interest due but not paid 16.46 0 0 16.46

iii) Interest accrued but not due 121.12 517.48 0 638.60

Total (i+ii+iii) 21673.89 29626.68 0 51300.57

Change in Indebtedness during the financial year

* Addition 5600.68 272.47 0 5873.15

* Reduction -3524.56 -2610.94 0 -6135.50

Net Change 2076.12 -2338.47 0 -262.35

Indebtedness at the end of the financial year

i) Principal Amount 24634.13 26732.95 0 51367.08

ii) Interest due but not paid 313.94 116.30 0 430.24

iii) Interest accrued but not due 147.49 514.89 0 662.38

Total (i+ii+iii) 25095.55 27364.14 0 52459.69

(In Rs Crore)

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VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

A. Remuneration to Managing Director, Whole-time Directors and/or Manager:

(In figures)

Sr No

Particulars of Remuneration

Name of MD/WTD/ Manager

Total Amount

Shri Rohit

Nandan

Shri S Venkat

Shri N K Jain

Shri Pankaj

Srivastava

1 Gross salary

(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961

2061013

2083758 2253972 2033514 8432257

(b) Value of perquisites u/s 17(2) Income-tax Act, 1961

19800 39949 32400 39600 131749

(c) Profits in lieu of salary under section 17(3) Income- tax Act, 1961

2 Stock Option

3 Sweat Equity

4 Commission as % of profit others, specify.

5 Others : (PF, DCS, House Perks tax etc)

Total (A) 2080813 2123707 2286372 2073114 1946445 8564006

Ceiling as per the Act

B. Remuneration to other directors

Sr No. Particulars of Remuneration Name of Directors

Total Amount

1 Independent Directors

Shri Ravindra Dholakia

Shri Prem

Vrat

Shri Gurcharan

Das

Air Marshal (Retd)

K K Nohwar

Smt Renuka

Ramnath

Fee for attending board committee meetings

140000 140000 140000 160000 100000 680000

Commission - - - - - - Others, please specify (Fees for attending Board Sub Committee Meetings)

- - - - - -

Total(1) - - - - - - 2 Other Non-Executive Directors - - - - - -

Fee for attending board committee meetings

- - - - - -

Commission - - - - - -

Others, please specify - - - - - - Total (2) - - -

- -

Total (B)=(1+2) - - - - - - Total Managerial Remuneration - - - - - - Overall Ceiling as per the Act - - - - - -

- - - - - -

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C. REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THAN MD/MANAGER/WTD

* Not applicable to Government Companies. Only CFO and CS are KMPs. ** The Company Secretary is holding the position in addition to her responsibilities as AGM-Corporate Affairs, Air India Ltd. Similarly, CFO is on deputation from Air India and no remuneration is paid to them by AICL.

( figures in Rs)

Sr. No.

Particulars of Remuneration

Key Managerial Personnel

Smt Kalpana

Rao

Total

1 Gross salary ** ** -

(a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961

1946445 - - 1946445

(b) Value of perquisites u/s 17(2) Income-tax Act, 1961

- - - -

(c) Profits in lieu of salary under section 17(3) Income-tax Act, 1961

- - - -

2 Stock Option - - - - 3 Sweat Equity - - - -

4 Commission - - - - - as % of profit - - - - Others, specify. - - - - 5 Others: (PF, DCS, House Perks tax etc) - - - -

Total 1946445

-

-

1946445

VII. PENALTIES / PUNISHMENT/ COMPOUNDING OF OFFENCES:

Type

Section of the

Companies Act

Brief Description

Details of Penalty /

Punishment/ Compounding fees imposed

Authority [RD / NCLT/

COURT]

Appeal made, if any (give Details)

A. COMPANY Penalty - - - - - Punishment - - - - - Compounding - - - - - B. DIRECTORS Penalty - - - - - Punishment - - - - - Compounding - - - - - C. OTHER OFFICERS IN DEFAULT Penalty - - - - - Punishment - - - - - Compounding - - - - -

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54

SECRETARIAL AUDIT REPORT

FOR THE FINANCIAL YEAR ENDED 31ST MARCH, 2015

(Pursuant to Section 204 (1) of the Companies Act, 2013 and rule No.9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014)

To,The Members,Air India LimitedAirline House, 113, Gurudwara Rakabganj Road,New Delhi-110001

I have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by Air India Limited (CIN: U62200DL2007GOI161431) (hereinafter called the Company). Secretarial Audit was conducted in a manner that provided me a reasonable basis for evaluating the corporate conducts / statutory compliances and expressing my opinion thereon.

Based on my verification of the Air India Limited's books, papers, minute books, forms and returns filed and other records maintained by the company and also the information provided by the company, its officers, agents and authorised representatives during the conduct of secretarial audit and as per the explanations given to me and the representations made by the Management, I hereby report that in my opinion, the Company has, during the audit period covering the financial year ended on 31st March, 2015 generally complied with the statutory provisions listed hereunder and also that the Company has proper Board processes and compliance mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

A. I have examined the books, papers, minute books, forms and returns filed and other records made available to me and maintained by the company for the financial year ended on 31st March, 2015 according to the applicable provisions of:

(i) The Companies Act, 1956 and the Companies Act, 2013 ('the Act') and the rules made there under;

During the period under review the Company has complied with the provisions of the Companies Act, 1956 and the Companies Act, 2013 ('the Act') and the rules made there, as applicable, subject to the following observations:

a) Section 177 of Companies Act, 2013 in relation to re-constitution and functioning of audit committee provides that:

Every Audit Committee of a company existing immediately before the commencement of this Act shall be reconstituted within one year of such commencement.(i,e., on or before 31st March 2015)

Reconstitution of Audit Committee was not done by the company as prescribed under section 177 of the Companies Act, 2013 and further some of the items as mentioned in (iv) , (v) , (vi) and (vii) relating to functions of Audit Committee have to be considered in its meetings.

b) Pursuant to section 177(9) of Companies Act, 2013 read with Rule 7 of Companies (Meetings of Board and its powers) Rules,2014 company is require to establish a vigil mechanism for their directors and employees to report their genuine concerns or grievances. And, the companies which are required to constitute an audit committee shall operate the vigil mechanism through the audit committee .

The Company has represented that it has an independent Vigilance Department headed by an IPS officer on deputation from GOI.

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55

Vigilance manual of Air India has outlined policies, organisation structure and procedures for this purpose.

The Board of Directors reviews Vigilance Work time to time.

c) It is clarified that the Company continuously monitored the risks perceptions and taken preventive action for mitigation of risks on various fronts.

Provisions of the Section 134(3)(n) of Companies Act, 2013 provides that there shall be attached to financial statements laid before a company in general meeting, a report by its Board of Directors, which shall include—

a statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the company.

The Board has disclosed a note in Directors Report , but still, the Company has to develop and implement a risk management policy.

DPE Guidelines emphasize that the Board should ensure the integration and alignment of the risk management system with the corporate and operational objectives and also that risk management is undertaken as a part of normal business practice. Risk policy is yet to be evolved by the company by the company.

Queries raised by Statutory auditors of the company in Audit Observations in relation to compliance of Companies Act, 2013 has been replied by the Management in Directors Report , hence they have not been reproduced here.

(ii) Foreign Exchange Management Act, 1999 and the rules and regulations made there under to the extent of External Commercial Borrowings .

Company does not have any Overseas Direct Investment and Foreign Direct Investment;

(iii) The Securities Contracts (Regulation) Act, 1956 ('SCRA') and the rules made thereunder;

(iv) The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder;

(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act,1992 are applicable to the company :

(a) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008;

(b) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 ;

During the period under review and as per the explanations and clarifications given to me and the representations made by the Management, the Company has generally complied with the provisions of the Act, Rules, Regulations, etc. mentioned above subject to the observation made therein.

B. In aviation sector, following laws are specifically applicable to the Company:

l Aircraft Act, 1934

l Carriage by Air Act, 1972

l Tokyo Convention Act, 1975

l Anti-Hijacking Act, 1982

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56

l Suppression of Unlawful Acts against Safety of Civil Aviation Act, 1982

l Civil Aviation Requirements issued by DGCA

Director General of Civil Aviation (DGCA) is the Regulation Authority for the Aviation Sector in India.

DGCA has developed the Regulatory Audit Program (RAP) to promote conformance with the aviation regulations and standards that collectively prescribe an acceptable level of aviation safety. It also ensures that Civil Aviation audit policies and procedures are applied uniformly.

In addition , IATA conducts IOSA Certification every year and disclose its finding which are required to be corrected . In addition, Air India has ED Flight safety who continuously monitor the flight safety operations of the company .

I further report, that the company is generally regular in compliance of aforesaid aviation laws and the compliance by the Company of such aviation laws have not been reviewed in this Audit which have been subject to review by DGCA and other designated professionals.

Company has further provided the following note in connection with its Corporate Environment Policy and Environment Management System(EMS) .

Corporate Environment Policy

Air India Limited, covering all its Airline Operating Permits, subsidiaries and Strategic Business Units, as a part of its corporate social responsibilities, is committed to address all environment issues with particular regard to preserving and protecting the environment. Air India, through its "Environment Management System", will abide by all applicable laws and regulations and continually improve environment management practices and exceed the requirements by periodically reviewing its policy and improving its environmental related performance.

Air India Environment Report

1. Air India is the first company to obtain e-IOSA Certification . Air India has also undergone rigorous audit by Star Alliance as part of its joining requirements.

2. Air India is the first airline in India to establish an Environment Management System(EMS). Air India is recognized as an Energy efficient, competitive and environmentally sustainable International Airline.

3. Air India was audited by M/s Bureau Veritas an Auditor accredited with the Environment Agency of the UK for its operational processes and emissions data in the year 2011.

4. Air India was audited for its Environment Management System by IATA in July 2015. Air India has received the IATA Environmental Assessment Certificate (IEnvA) for adopting IATA international standards and best practices to save the environment. Air India is the first airline in the country to have been awarded with certification.

5. The Air India Environment Management Systems runs the company wide Green Initiatives program and sets targets and actions for all departments. Air India has adopted an integrated approach to Carbon emissions reduction which covers every phase of flight, from flight planning to the flight phase and on the ground. Air India has a corporate environment policy covering all its AOP's, subsidiaries and strategic business units for implementing its Green Initiatives program.

6. Various Green initiatives are being carried out by various departments like Flight Operations, Flight Planning, Commercial department, Engineering, Ground Handling department etc. which have resulted in reducing emissions and conservation of natural resources.

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57

7. Air India has implemented a Corporate Document Management System which provides storage, creation, version management, search, retrieval and dissemination of documents over a browser to all authorized personnel based. This has reduced the usage for paper and is a centralised corporate DMS to comply with IATA, DGCA standards as well as to meet the organisational requirements. This not only generates cost savings for the Company but also improves efficiency, as well as saves the environment.

C. I have also examined compliance with the applicable clauses of the following:

(i) Secretarial Standards issued by The Institute of Company Secretaries of India (Not notified hence not applicable to the Company during the audit period).

(ii) The Debenture Listing Agreements entered into by the Company with the National Stock Exchange of India Ltd. and the Bombay Stock Exchange Ltd.; and

(iii) Guidelines on Corporate Governance for Central Public Sector Enterprises as stipulated in the O.M. No. 18(8)/2005-GM dated 14th May, 2010 of the Ministry of Heavy Industries and Public Enterprises, Government of India.

I further report the following observation on perusal of Guidelines on Corporate Governance for Central Public Sector Enterprises of the company :

a) Audit Committee

1. Chapter 4 of DPE guidelines (para 4.4) require that the Audit Committee should meet at least four times in a year. During review, it was noticed that in respect of the company , there were only two meetings in the year 2014-15.

2. One of the recommendations of Blue Ribbon committee* (A Committee formed in 1998 in the United States which published a report on improving the effectiveness of Corporate Audit Committees ) was that the Audit Committee should meet the Statutory Auditors of the Company once in a year without the presence of the Finance Officers/Management of the Company. No such practice is followed by the company .

b) Nomination and Remuneration Committee

Chapter 5 of DPE guidelines provide Each CPSE shall constitute a Remuneration Committee comprising of at least three Directors, all of whom should be part-time Directors (i.e Nominee Directors or Independent Directors). The Committee should be headed by an Independent Director. CPSE will not be eligible for Performance Related Pay unless the Independent Directors are on its Board. Remuneration Committee will decide the annual bonus/variable pay pool and policy for its distribution across the executives and non unionized supervisors, within the prescribed limits.

It is reported that Board of Directors has constituted the Nomination and Remuneration th

Committee on 26 June 2014 with its terms of reference. During the period under review, no meeting of such remuneration committee was held .

c) Transactions

Para 7.1.1 of DPE Guidelines provides that A statement in summary form of transactions with related parties in the normal and ordinary course of business shall be placed periodically before theAudit Committee.

7.1.2 Details of material individual transactions with related parties, which are not in the normal and ordinary course of business, shall be placed before the Audit Committee.

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58

7.1.3 Details of material individual transactions with related parties or others, which are not on an arm's length basis should be placed before the Audit Committee, together with Management's justification for the same.

No such statements of transactions with related parties were placed periodically by the company before the audit committee.

d) Guidelines on Corporate Social Responsibility And Sustainability For Central Public Sector Enterprises

th I further report that the company constituted CSR Committee on 4 Feb. 2014 and

the company is not required to take up CSR activities as specified in the Act and the CSR Rules Read with Guidelines on Corporate Social Responsibility And Sustainability for Central Public Sector Enterprises w.e.f. 01.04.2014 as the company has not made any profit in the preceding year. During the period under review, no meeting of CSR committee was held.

D) I have examined the framework, processes and procedures of compliance with respect to following laws applicable to the company on test basis.

Apprentices Act, 1961; Employees State Insurance Act, 1948; Payment of Wages Act,1948; Minimum Wages Act, 1948; Industrial Disputes Act, 1947; Payment of Bonus Act, 1965; Payment of Gratuity Act, 1972; Contract Labour (Regulation and Abolition) Act, 1970; Maternity Benefit Act, 1961; The Child Labour (Prohibition & Regulation) Act, 1986; Equal Remuneration Act, 1976; The Employment Exchange (Compulsory Notification of Vacancies) Act,1956,

Company has created separate Trusts to administer Provident Fund Contributions .

Sexual Harassment of Women at Workplace ( Prevention, Prohibition and Regulation ) Act, 2013: The Company has in place an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

In connection with aforesaid laws, adequate systems and processes are in place to monitor and ensure compliance with such laws .

During the audit , it is observed that the Compliance Management System needs to be further strengthen by taking the following actions:

a) To establish Corporate Compliance Committee and designate a Chief Compliance officer and maintain centralised mechanism to ensure compliance with all applicable laws (both Indian and International);

b) To establish and maintain effective co-ordination of functional units and the compliance department under the overall supervision of the Board;

c) To establish mechanisms to prevent, detect, report and to respond to non-compliances;

d) To present Quarterly compliance Report to the Board;

e) Identification and classification of various compliance risks;

f) Organisation of compliance Check list, Audit, feed back, remedies.

E) I further report, that the compliance by the Company of applicable financial laws, like direct and indirect tax laws, has not been reviewed in this Audit since the same have been subject to review by statutory financial audit and other designated professionals.

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59

During the period under review and as per the explanations and clarifications given to me and the representations made by the Management, the Company has generally complied with the provisions of the Act, Rules, Regulations, Guidelines, etc. mentioned above subject to the observation made therein.

I further report that:

The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.

Adequate notice is given to all directors to schedule the Board Meetings at least seven days in advance and where the Board meetings are called at shorter notice ,presence of at least one independent director is ensured, agenda and detailed notes on agenda were sent and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.

Decisions at the Board Meetings, as represented by the management, were taken unanimously.

I further report that as per the explanations given to me and the representations made by the Management and relied upon by me there are adequate systems and processes in the Company commensurate with the size and operations of the Company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines. It is informed that the Company has responded to notices for demands, claims, penalties etc. levied by various statutory / regulatory authorities and initiated actions for corrective measures, wherever necessary.

I further report that during the audit period the company has :

(i) Company has increased its authorised capital from Rs. Twenty thousand Crore (divided into Two Thousand Crore Equity shares of Rs. 10/- each ) to Twenty-five thousand Crore (divided into Two Thousand Five hundred Crore Equity shares of Rs. 10/- each ) vide Special Resolution passed in the AGM dt.23.12.2014. Company has allotted 100 Crore Equity shares @ Rs. 10/- each to President of India vide Board Meeting dated 16.04.2014. And further , company allotted 183.30 Crores Equity shares @ Rs. 10/- each to President of India vide Board Meeting dated 26.06.2014.

(Jiwan Parkash Saini)Company Secretary

in practice

March 29, 2016FCS No: 3671

CP No: 2100

Note 1 : Specific non compliances / observations / audit qualification, reservation or adverse remarks has been reported in respect of the above at appropriate place .

Note 2 : This Report is to be read with my letter of even date which is annexed as Annexure A and forms an integral part of this report.

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Annexure - A

To,The Members,Air India LimitedAirline House, 113,Gurudwara Rakabganj Road,New Delhi-110001

I report of even date is to be read along with this letter.

1. Maintenance of Secretarial record is the responsibility of the management of the Company. My responsibility is to express an opinion on these secretarial records based on my audit.

2. I have followed the audit practices and process as were appropriate to obtain reasonable assurance about the correctness of the contents of the Secretarial records. The verification was done on test basis to ensure that correct facts are reflected in Secretarial records. I believe that the process and practices, we followed provide a reasonable basis for my opinion.

3. I have not verified the correctness and appropriateness of financial records and Books of Accounts of the Company.

4. Where ever required, I have obtained the Management representation about the Compliance of laws, rules and regulations and happening of events etc.

5. The Compliance of the provisions of Corporate and other applicable laws, rules, regulations, standards is the responsibility of management. My examination was limited to the verification of procedure on test basis.

6. The Secretarial Audit report is neither an assurance as to the future viability of the Company nor of the efficacy or effectiveness with which the management has conducted the affairs of the Company.

(Jiwan Parkash Saini)Company Secretary

in practice

March 29, 2016FCS No: 3671

CP No: 2100

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Management's Replies on the observations contained in the Secretarial Audit Report

1. Audit Committee

Section 177 of Companies Act, 2013 in relation to re-constitution and functioning of audit committee provides that:

Every Audit Committee of a company existing immediately before the commencement of this Act shall be reconstituted within one year of such commencement.(i,e., on or before 31st March 2015)

Reconstitution of Audit Committee was not done by the company as prescribed under section 177 of the Companies Act, 2013 and further some of the items as mentioned in (iv) , (v) , (vi) and (vii) relating to functions of Audit Committee have to be considered in its meetings.

Chapter 4 of DPE guidelines (para 4.4) require that the Audit Committee should meet at least four times in a year. During review, it was noticed that in respect of the company , there were only two meetings in the year 2014-15.

One of the recommendations of Blue Ribbon committee* (A Committee formed in 1998 in the United States which published a report on improving the effectiveness o f Corporate Audit Committees ) was that the Audit Committee should meet the Statutory Auditors of the Company once in a year without the presence of the Finance Officers/Management of the Company. No such practice is followed by the company .

Management's Comments

Since the Audit Committee was reconstituted just before the commencement of the Act, only the terms rd

of reference of the Audit Committee as prescribed under Section 177 were revised in the 63 Board Meeting held on 5 November 2014.

The point regarding number of meetings is noted and the Company will endeavour to hold more meetings in future.

As regards the recommendation that the Audit Committee should meet the Statutory Auditors of the Company once in a year without the presence of the Management, the same will be conveyed to the Audit Committee.

2. Risk Management Policy

Provisions of the Section 134(3)(n) of Companies Act, 2013 provides that there shall be attached to financial statements laid before a company in general meeting, a report by its Board of Directors, which shall include—

a statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the company.

The Board has disclosed a note in Directors Report , but still, the Company has to develop and implement a risk management policy.

DPE Guidelines also emphasize that the Board should ensure the integration and alignment of the risk management system with the corporate and operational objectives and also that risk management is undertaken as a part of normal business practice. Risk policy is yet to be evolved by the company .

Management's Comments

There is a Risk Management Policy in so far as fuel is concerned. As for currency, since there is a natural hedge no currency risks are insured. As for Commercial risks aviation and non aviation insurance policies are taken to insure the aircraft and passengers while flying and the Company's assets at various locations. In addition, the Company takes insurance in respect of staff who travel on duty abroad and covers the operating and cabin crew for any injuries including death under the Company's Aviation Insurance Policy. The Company covers its operational risks by only operating over and to “safe” countries.

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA UNDER SECTION 143(6)(b) OF THE COMPANIES ACT, 2013 ON THE FINANCIAL STATEMENTS OF AIR INDIA LIMITED FOR THE YEAR ENDED 31 MARCH 2015.

The preparation of financial statements of Air India Limited for the year ended 31 March 2015 in accordance with the financial reporting framework prescribed under the Companies Act, 2013 is the responsibility of the management of the company. The statutory auditor/auditors appointed by the Comptroller and Auditor General of India under section 139(5) or 139(7) of the Act are responsible for expressing opinion on the financial statements under section 143 of the Act based on independent audit in accordance with the standards on auditing prescribed under section 143(10) of the Act. This is stated to have been done by them vide their Audit Report dated 23 November 2015.

I, on the behalf of the Comptroller and Auditor General of India, have conducted a supplementary audit under section 143(6)(a) of the Act of the financial statements of Air India Limited for the year ended 31 March 2015. The supplementary audit has been carried out independently without access to the working papers of the statutory auditors and is limited primarily to inquiries of the statutory auditors and company personnel and a selective examination of some of the accounting records. Based on my supplementary audit, I would like to highlight the following significant matters under section 143(6)(b) of the Act which have come to my attention and which in my view are necessary for enabling a better understanding of the financial statements and the related audit report.

ASSETS

Long Term Loans and Advances (Note 10) : Rs.41,363.7 million.

This includes Serve from India Scheme (SFIS) Scrips/claims of Rs.11,551.5 million. These included scrips amounting to Rs.6,815.6 million, the validity of which had expired on 27 September 2014 for which renewal, though sought by the Company has not been granted. Further, the company had earlier filed a claim for issuance of scrips amounting of Rs.4735.9 million for the financial year 2007-08 which had not been granted due to change in Foreign Trade Policy at that time Despite this, the Company had revived the claim and recognized revenue of Rs.4735.9 million in 2013-14. SFIS Scheme for airlines was discontinued with effect from January 2011. Government concurrence/clearance is necessary for the renewal of expired Scrip and issuance of scrips which is not available with the Company Hence, necessary provision should have been made for the expired and unapproved SFIS scrip claim amounting to Rs. 11,551.5 Million. However, this has not been done. Therefore, the loss of the company stands understand and Loans and Advance overstated by Rs.11,551.5 million.

For and on the behalf of theComptroller & Auditor General of India

Sd/-ParmaSen

Principal Director of Commercial Audit& ex-officio Member, Audit Board-II, Mumbai

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Place : MumbaiDate : 25 January 2016

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