MIRA INFORM REPORT

Report Date :

31.01.2013

IDENTIFICATION DETAILS

Name :	AIR INDIA LIMITED
Registered Office :	Airlines House, 113, Gurudwara Rakabganj Road, New Delhi – 110001
Country :	India
Financials (as on) :	31.03.2011
Date of Incorporation :	30.03.2007
Com. Reg. No.:	55-161431
Capital Investment / Paid-up Capital :	Rs. 21450.000 Millions
CIN No.: [Company Identification No.]	U62200DL2007GOI161431
TAN No.: [Tax Deduction & Collection Account No.]	DELN09135A
PAN No.: [Permanent Account No.]	AACCN6194P
Legal Form :	A Closely Held Public Limited Liability Company
Line of Business :	Providing Air Transport Services
No. of Employees :	28085 [Approximately]

RATING & COMMENTS

MIRA’s Rating :

B (27)

RATING		STATUS	PROPOSED CREDIT LINE
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small

Status :	Moderate
Payment Behaviour :	Delayed
Litigation :	Exists
Comments :	Subject was incorporated for the purpose of merging the erstwhile Air India and Indian Airlines with itself. It is an established company having a moderate track record. The latest financial of the company are not made available. As per previous year’s record, the financial position of the company is under severe pressure. There appear a huge accumulated losses recorded by the company which exceeds the networth. The external borrowing of the company appears to be huge. However, the company gets support from the Government of India. Taking into consideration the suppliers point of view we rate the company as moderate. Business is active. Payment terms are delayed. The company can be considered for business dealings with great caution and on fully secured terms.

NOTES :

Any query related to this report can be made on e-mail : infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – June 30, 2012

Country Name	Previous Rating (31.03.2012)	Current Rating (30.06.2012)
India	A1	A1

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

INDIAN ECONOMIC OVERVIEW

India is developing into an open-market economy, yet traces of its past autarkic policies remain. Economic liberalization, including industrial deregulation, privatization of state-owned enterprises, and reduced controls on foreign trade and investment, began in the early 1990s and has served to accelerate the country's growth, which has averaged more than 7% per year since 1997. India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Slightly more than half of the work force is in agriculture, but services are the major source of economic growth, accounting for more than half of India's output, with only one-third of its labor force. India has capitalized on its large educated English-speaking population to become a major exporter of information technology services and software workers. In 2010, the Indian economy rebounded robustly from the global financial crisis - in large part because of strong domestic demand - and growth exceeded 8% year-on-year in real terms. However, India's economic growth in 2011 slowed because of persistently high inflation and interest rates and little progress on economic reforms. High international crude prices have exacerbated the government's fuel subsidy expenditures contributing to a higher fiscal deficit, and a worsening current account deficit. Little economic reform took place in 2011 largely due to corruption scandals that have slowed legislative work. India's medium-term growth outlook is positive due to a young population and corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy. India has many long-term challenges that it has not yet fully addressed, including widespread poverty, inadequate physical and social infrastructure, limited non-agricultural employment opportunities, scarce access to quality basic and higher education, and accommodating rural-to-urban migration.

Source : CIA

EXTERNAL AGENCY RATING

Rating Agency Name	CRISIL
Rating	Non Convertible Debenture Programme : AAA (SO)
Rating Explanation	Highest degree of safety and lowest credit risk.
Date	November 06, 2012

RBI DEFAULTERS’ LIST STATUS

Subject’s name is not enlisted as a defaulter in the publicly available RBI Defaulters’ list.

EPF (Employee Provident Fund) DEFAULTERS’ LIST STATUS

Subject’s name is not enlisted as a defaulter in the publicly available EPF (Employee Provident Fund) Defaulters’ list as of 31-03-2012.

INFORMATION DECLINED

MANAGEMENT NON CO-OPERATIVE (91-22-26265660)

LOCATIONS

Registered Office :	Airlines House, 113, Gurudwara Rakabganj Road, New Delhi – 110001, India
Tel. No.:	91-11-22796666 / 23422000 / 26265660
Fax No.:	91-11-22023686
E-Mail :	kalpana.rao@airindia.in s.venkat@airindia.in rbansal.moca@nic.in
Website :	www.airindia.in
Area :	10,000 Sq. ft.
Location :	Owned
Commercial Headquarter:	Old Airport Kalina, Santacruz (East), Mumbai – 400029, Maharashtra, India
Tel. No.:	91-22-26265555
Other Air India Office:	Located At : Ø Ahmedabad Ø Amritsar Ø Anand Ø Bhopal Ø Bengaluru   Ø Bengaluru Airport Ø Baroda (vadodara) Ø Chandigarh   Ø Cochin (Kochi) Ø Cochin Airport Ø Calicut (kozhikode) Ø Calicut Airport Ø Chennai Ø Chennai Airport Ø Coimbatore Ø Chittagong Ø Delhi Ø Dhaka Airport Ø Guwahati Ø Guwahati Airport Ø Goa Ø Goa Airport Ø Hyderabad Ø Hyderabad Airport Ø Igi Airport Ø Indore Ø Jalandhar Ø Jaipur Ø Kolkata Ø Kolkata Airport Ø Kanpur Ø Kannur Ø Lucknow Airport Ø Mumbai Ø Malappuram Ø Mangalore Ø Nagpur Ø Pune Ø Rajkot Ø Surat Ø Thiruvan- Anthapuram Ø Thiruvan- Anthapuram Airport Ø Trichy Ø Thiruvalla Ø Trichur Ø Varanasi
Overseas Offices :	Located at: Ø SAARC Countries Ø South East Asia Ø South East Australia Ø Gulf and Middle East Ø USA and Canada Ø UK and Ireland Ø Europe Ø Russia Ø Far East

DIRECTORS

AS ON 04.02.2011

Name :	Mr. Arvind Jadhav
Designation :	Chairman and Managing Director
Address :	22B, Sterling Apartment, Peddar Road, Mumbai – 400026, Maharashtra, India
Date of Birth/Age :	05.06.1956
Date of Appointment :	04.05.2009
DIN No.:	00795741
Name :	Mr. Anup K. Srivastava
Designation :	Director
Address :	30 A Sterling Apartments, Peddar Road, Mumbai – 400026, Maharashtra
Date of Birth/Age :	28.05.1954
Date of Appointment :	18.09.2007
DIN No.:	00240937
Name :	Mrs. Anita Khurana
Designation :	Director
Address :	20 A Sterling Apartments, Peddar Road, Mumbai – 400026, Maharashtra
Date of Birth/Age :	18.07.1954
Date of Appointment :	18.09.2007
DIN No.:	00518141
Name :	Mr. Vipin Kumar Sharma
Designation :	Director
Address :	214, Mavilla Apartments, Mayur Vihar, Phase 1, New Delhi – 110091, India
Date of Birth/Age :	18.09.1955
Date of Appointment :	18.09.2007
DIN No.:	01077975
Name :	Mr. Kunamkumarath Muralidharan Unni
Designation :	Director
Address :	Flat No.11, air India Apartments, 61 B Pali Hill, Bandra West, Mumbai – 400050, Maharashtra, India
Date of Birth/Age :	10.11.1955
Date of Appointment :	18.09.2007
Din No.:	01202428
Name :	Mr. Subramanian Chandrasekhar
Designation :	Director
Address :	B 1 – 261, Twin Tower, Prabhadevi, Mumbai – 400025, Maharashtra, India
Date of Birth/Age :	02.08.1953
Date of Appointment :	18.09.2007
DIN No.:	01367349
Name :	Mr. Bharat Bhushan Edodiyil Kunhiraman
Designation :	Director
Address :	Bhavana Peroorkada P O, Trivandrum, Kerla - 695005, India
Date of Birth/Age :	14.01.1955
Date of Appointment :	20.03.2009
DIN No.:	01124966
Name :	Mr. Prashant Narain Sukul
Designation :	Director
Address :	A – 10, Sujansingh Park, New Delhi – 110003, India
Date of Birth/Age :	22.10.1959
Date of Appointment :	09.02.2009
Din No.:	02558916
Name :	Mr. Anand Mahindra
Designation :	Vice Chairman and Managing Director
DIN No.:	00004695
Name :	Dr. Amit Mitra
Designation :	Director
DIN No.:	00154041
Name :	Mr. Harshvardhan Neotia
Designation :	Director
DIN No.:	00047466
Name :	Mr. Falli H. Major
Designation :	Director
DIN No.:	03026199
Name :	Mr. M. A. Yusuffali
Designation :	Director
DIN No.:	00364677

KEY EXECUTIVES

Name :	Mr. Srinivasa Venkat
Designation :	Secretary
Address :	Flat No.8, Air India Apartments, 61 B Pali Hill, Bandra West, Mumbai – 400050, Maharashtra, India
Date of Birth/Age :	17.10.1957
Date of Appointment :	28.08.2007
PAN No.:	AAKPV6798A

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

Not Available

BUSINESS DETAILS

Line of Business :

Providing Air Transport Services

Products :

ITC Code	Product Descriptions
720	Air Transport Carrier (of passengers and cargo)

GENERAL INFORMATION

No. of Employees :

28085 [Approximately]

Bankers :

Ø Bank of Baroda

Ø Bank of India

Ø Canara Bank

Ø Central Bank of India

Ø Citibank

Ø HDFC Bank

Ø IDBI Bank

Ø Indian Overseas Bank

Ø Punjab National Bank, Large Corporate Bank, Tolstoy House, Tolstoy Marg, New Delhi – 110001, Delhi

Ø State Bank of India

Ø Syndicate Bank

Ø UCO Bank

Ø United Bank of India

Facilities :

Secured Loans	31.03.2011	31.03.2010
	(Rs. In Millions)
Foreign Currency Loans from Banks* Secured by hypothecation of : Three B777-300 Aircraft (VT-ALS, ALT & ALU) & One GE Spare Engine	16851.100	1347.000
Other loans from banks Secured by i. Hypothecation of inventories other than those in ‘A’ above book debts, other current assets and four Aircraft i.e. VT-EQS, EQT, ESA and ESC. ii. Hypothecation of 11 Aircraft (2 A-310 Freighter & 9 A-320 Aircrafts) iii. Hypothecation of 21 Aircrafts ( 8 A-321, 4 A-320 and 9 A-319 Aircrafts) Guaranteed by the Government of India to the extent of Rs.55226.400 Millions	89388.300	64560.100
Others* Secured by I. Hypothecation of SAP related Hardware & Software.	841.000	0.000
Total	107080.400	65907.100
NOTES: * Includes Rs. 49828.700 millions due for repayment within one year. (Previous Year Rs. 19811.500 millions) ^ Other Loan from Banks: Over Due Rs.1108.900 millions.

Banking Relations :	--
Auditors :
Name 1 :	P K Chopra and Company Chartered Accountants
Address :	N Block, Bombay Life Building, 2^nd Floor, Above Post Office, Connaught Place, New Delhi- 110001, India
PAN No.:	AAHFP6285D
Name 2 :	Thakur Vaidyanath Aiyar and Company Chartered Accountants
Address :	Delhi, India
Name 3 :	Chhajed and Doshi Chartered Accountants
Address :	Mumbai, Maharashtra, India
Name 4 :	P.K.K.G. Balasubramanium and Associates Chartered Accountants
Subsidiaries:	v Hotel Corporation of India Limited CIN: U55101MH1971GOI015217 v Air India Charters Limited CIN: U62100MH1971GOI015328 v Air India Air Transport Services Limited CIN: U63090DL2003PLC120790 v Air-India Engineering Services Limited CIN: U74210DL2004PLC125114 v Airline Allied Services Limited CIN: U51101DL1983GOI016518 v Vayudoot Limited

CAPITAL STRUCTURE

AFTER 29.12.2011

Authorised Capital : Rs. 110000.000 Millions

Issued, Subscribed & Paid-up Capital : 62610.000 Millions

AS ON 31.03.2011

Authorised Capital :

No. of Shares	Type	Value	Amount
5000050000	Equity Shares	Rs.10/- Each	Rs. 50000.500 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
2145000000	Equity Shares	Rs.10/- Each	Rs. 21450.000 Millions

NOTE:

Of the above 144,950,000 equity shares were issued pursuant of Amalgamation.

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2011	31.03.2010	31.03.2009
SHAREHOLDERS FUNDS
1] Share Capital		21450.000	9450.000	1450.000
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		804.700	624.800	633.500
4] (Accumulated Losses)		(123542.600)	(54890.900)	0.000
NETWORTH		(101287.900)	(44816.100)	2083.500
LOAN FUNDS
1] Secured Loans		107080.400	65907.100	23659.500
2] Unsecured Loans		198901.400	184761.100	168764.900
TOTAL BORROWING		305981.800	250668.200	192424.400
DEFERRED TAX LIABILITIES		0.000	0.000	0.000
FUTURE LEASE OBLIGATION		120308.200	133373.800	116887.500
TOTAL		325002.100	339225.900	311395.400
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		307126.400	296419.900	224913.500
Capital work-in-progress		18964.200	24656.200	50113.700
INVESTMENT		1320.500	1219.300	1231.800
DEFERRED TAX ASSETS		28425.200	28425.200	28425.200
Foreign Currency, Monetary Items Translation Difference Account		113.300	99.500	1528.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	6759.600	8677.800	9642.100
	Sundry Debtors	28376.200	25791.100	24731.000
	Cash & Bank Balances	4164.400	5284.700	11396.400
	Other Current Assets	825.200	768.100	561.600
	Loans & Advances	13806.100	14466.500	11175.900
Total Current Assets		53931.500	54988.200	57507.000
Less : CURRENT LIABILITIES & PROVISIONS
	Sundry Creditors	45944.300	38189.400	24750.700
	Other Current Liabilities	23296.800	17463.100	17532.200
	Provisions	15637.900	10929.900	10040.900
Total Current Liabilities		84879.000	66582.400	52323.800
Net Current Assets		(30947.500)	(11594.200)	5183.200
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		325002.100	339225.900	311395.400

PROFIT & LOSS ACCOUNT

	PARTICULARS		31.03.2011	31.03.2010	31.03.2009
	SALES
		Operating Revenue	139743.900	127620.300	132245.200
		Other Income	2807.200	2936.500	2548.600
		TOTAL (A)	142551.100	130556.800	134793.800
Less	EXPENSES
		Payments to and Provisions for employees including Crew Allowances	37268.700	33567.200	33388.500
		Insurance	1204.600	914.700	861.800
		Aircraft Fuel and Oil	61120.500	50150.200	70606.400
		Navigation, Landing, Housing and Parking	10774.800	10604.400	9290.900
		Aircraft Material Consumed	3251.700	4262.700	5560.500
		Outside Repairs- Aircraft	5932.200	8031.500	6910.800
		Hire of Aircraft	5820.700	8309.000	13847.800
		Handling Charges	6190.200	6045.500	5290.600
		Passenger Amenities	4598.100	4838.100	4865.600
		Booking Agency Commission	6219.100	4083.700	4360.500
		Commission Charges	5087.300	4916.300	4124.300
		Travelling Expenses	2626.300	3136.400	3604.700
		Other Expenses	12963.900	9583.200	13993.200
		Prior Period Adjustment	278.400	218.400	1056.800
		Extra Ordinary Items	(2008.700)	(826.600)	0.000
		TOTAL (B)	161327.800	147834.700	177762.400
Less	PROFIT BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (A-B) (C)		(18776.700)	(17277.900)	(42968.600)
Less	FINANCIAL EXPENSES (D)		32959.000	24343.500	16658.800
	PROFIT BEFORE TAX, DEPRECIATION AND AMORTISATION (C-D) (E)		(51735.700)	(41621.400)	(59627.400)
Less/ Add	DEPRECIATION/ AMORTISATION (F)		16901.000	13887.600	12258.900
	PROFIT BEFORE TAX (E-F) (G)		(68636.700)	(55509.000)	(71886.300)
Less	TAX (H)		15.000	15.400	(16403.700)
	PROFIT AFTER TAX (G-H) (I)		(68651.700)	(55524.400)	(55482.600)
Add	PREVIOUS YEARS’ BALANCE BROUGHT FORWARD		(54890.900)	--	(22261.600)
Less	APPROPRIATIONS
		Transfer to General Reserve	0.000	633.500	0.000
	BALANCE CARRIED TO THE B/S		(123542.600)	(54890.900)	(77744.200)
	EARNINGS IN FOREIGN CURRENCY
		Interest Received		21.600	154.000
		Dividend		34.500	64.200
	TOTAL EARNINGS		N.A.	56.100	218.200
	IMPORTS
		Stores & Spares		7283.600	8949.300
		Capital Goods		89586.200	36146.300
	TOTAL IMPORTS		N.A.	96869.800	45095.600
	Earnings Per Share (Rs.)		(58.10)	(371.70)	(382.60)

KEY RATIOS

PARTICULARS		31.03.2011	31.03.2010	31.03.2009
PAT / Total Income	(%)	(48.16)	(42.53)	(41.16)
Net Profit Margin (PBT/Sales)	(%)	(49.12)	(43.50)	(54.36)
Return on Total Assets (PBT/Total Assets}	(%)	(19.01)	(15.80)	(25.45)
Return on Investment (ROI) (PBT/Networth)		67.76	1.24	(34.50)
Debt Equity Ratio (Total Debt/Networth)		(3.02)	(5.59)	92.36
Current Ratio (Current Asset/Current Liability)		0.64	0.83	1.10

LOCAL AGENCY FURTHER INFORMATION

Sr. No.	Check List by Info Agents	Available in Report (Yes / No)
1]	Year of Establishment	Yes
2]	Locality of the firm	Yes
3]	Constitutions of the firm	Yes
4]	Premises details	No
5]	Type of Business	Yes
6]	Line of Business	Yes
7]	Promoter's background	Yes
8]	No. of employees	Yes
9]	Name of person contacted	No
10]	Designation of contact person	No
11]	Turnover of firm for last three years	Yes
12]	Profitability for last three years	Yes
13]	Reasons for variation <> 20%	--
14]	Estimation for coming financial year	No
15]	Capital in the business	Yes
16]	Details of sister concerns	Yes
17]	Major suppliers	No
18]	Major customers	No
19]	Payments terms	No
20]	Export / Import details (if applicable)	No
21]	Market information	--
22]	Litigations that the firm / promoter involved in	Yes
23]	Banking Details	Yes
24]	Banking facility details	Yes
25]	Conduct of the banking account	--
26]	Buyer visit details	--
27]	Financials, if provided	Yes
28]	Incorporation details, if applicable	Yes
29]	Last accounts filed at ROC	No
30]	Major Shareholders, if available	No
31]	Date of Birth of Proprietor/Partner/Director, if available	Yes
32]	PAN of Proprietor/Partner/Director, if available	No
33]	Voter ID No of Proprietor/Partner/Director, if available	No
34]	External Agency Rating, if available	Yes

UNSECURED LOANS

Unsecured Loans	31.03.2011	31.03.2010
	(Rs. In Millions)
Short Term Loans From Banks**	184412.200	168638.100
Other Loans From Banks** Guaranteed by the Government of India to the extent of Rs. 199.700 millions (Previous Year Rs. 208.200 millions)	7289.500	8914.900
Debentures 7,000 @9.13% Unsecured, Redeemable, Non-convertible Debentures of face value of Rs. 1.000 Million each (Redeemable on 26th March 2020) (Guaranteed by the Government of India)	7000.000	7000.000
Others**	199.700	208.100
Total	198901.400	184761.100

** Includes Rs.186599.600 millions due for repayment within one year. (Previous Year Rs.173714.800 millions)

** Short Term Loans from Banks: Over Due Rs.13115.600 millions.

LITIGATION DETAILS:

IN THE HIGH COURT OF DELHI AT NEW DELHI

CS (OS) 640/2012

K.T.C (INDIA) PRIVATELIMITED..... Plaintiff

Through Mr. Amit Jain, Ms. Ekta Nayar Saini and Mr. Arun K. Jha, Advocates

VERSUS

AIR INDIA ..... Defendant

Through Mr. Sanjay Gupta, Advocate

CORAM:

HON'BLE MS. JUSTICE HIMA KOHLI

ORDER

05.12.2012

RP No. 507/2012 (by the defendant)

1. The present review petition has been filed by the defendant under Section 114 and Order 47 Rule 1 readwith Section 151 CPC and Rule 3 Of Chapter VI of Delhi High Court(Original Side) Rules, 1967 praying inter alia for review of the order dated 25.7.2012, whereunder, the right of the defendant to file the written statement was closed on account of the fact that the same was not filed within the period prescribed in the CPC.

2. Learned counsel for the defendant states that the defendant was served with the summons in the suit on 3.5.2012 at its registered office at New Delhi. The aforesaid summons along with the paper book were forwarded to the office of the Chief Administrative Manager at the IGI Airport Terminal on 9.5.2012. Thereafter, the same were forwarded to the office of the General Manager (Personnel) for further necessary action. In the meantime, there had been a strike called by the Air India Pilots on 3/4.5.2012 and thereafter, a series of litigations cropped up. He submits that during the strike period, services of a number of employees were terminated and the issue of termination was also considered by the Bombay High Court and the Industrial Tribunal. In view of the aforesaid strike resorted to by the pilots, most of the departments, particularly departments of personnel and industrial relations of the defendant were preoccupied with resolving the strike and prosecuting the petitions pending before different legal fora. Finally, the strike was called off on 3.7.2012 and it was only thereafter, that the fact that the written statement had not been filed in the present case, was discovered. Immediately thereupon, the department had contacted their counsel with the comments on 2.7.2012. On receipt of the comments, the written statement was

prepared, got vetted by the department and filed on 31.7.2012. However, in the meantime, vide order dated 25.7.2012, the right of the defendant to file the written statement was closed and hence the present review petition was necessitated.

3. Learned counsel for the defendant submits that in view of the explanation offered hereinabove and having regard to the fact that the written statement has been filed beyond the stipulated period of thirty days, but within fifty eight days after excluding the period of thirty days, if reckoned from 3.5.2012, i.e., the written statement having been filed within the extended period of ninety days, the order dated 25.7.2012 may be reviewed and the written statement filed by the defendant be permitted to be taken on record.

4. Reply in opposition to the present application has not been filed by the non-applicant plaintiff.

5. Learned counsel for the plaintiff states that he does not wish to file a reply to the review petition only to cut short further delay in the suit proceedings and if the court is inclined to allow the present application, then costs ought to be imposed on the defendant for the delay caused in proceeding with the suit.

6. In view of the averments made in the application and having regard to the submissions made by learned counsel for the defendant as noted above, the present petition is allowed, subject to payment of costs of Rs.10,000/- to the other side. The said costs shall be paid to the plaintiff, through counsel within two weeks.

7. The application is disposed of.

1. As the written statement of the defendant has been permitted to be taken on record in terms of the orders passed in RP No.507/2012, the plaintiff is directed to file the replication within four weeks, with a copy to the other side.

2. The parties shall file their original documents within four weeks and exchange the index of documents in advance and endorse the admission/denial of documents in a separate column on the index. After the admission/denial is conducted before the Joint Registrar, the exhibited documents shall also be endorsed on the list of documents of the parties.

3. List before the Joint Registrar on 5.2.2013, for completion of pleadings as also for admission and denial of documents.

4. List in Court on 7.5.2013, for framing of issues.

5. The parties shall exchange their respective issues proposed to be framed one week before the next date of hearing and produce the same in Court.

6. The dates fixed before the Joint Registrar on 10.1.2013 and the Court on 15.1.2013 stand cancelled.

IA No.4793/2012(by the plaintiff u/O XXXIX R 1 and 2 CPC)

1. Reply to this application has not been filed by the defendant.

2. Last opportunity of four weeks is granted to the defendant to file a reply, with a copy to the other side. Rejoinder, if any, be filed within four weeks thereafter.

3. List on the date fixed.

HIMA KOHLI, J

DECEMBER 05, 2012

CIVIL AVIATION SCENARIO

WORLD

2010

IATA reported full year 2010 demand statistics for international scheduled air traffic that showed a 8.2% increase in the passenger business and a 20.6% increase in freight. Demand growth outstripped capacity increases of 4.4% for passenger and 8.9% for cargo. Average passenger load factor for the year was 78.4% which is a 2.7% improvement on 2009. The freight load factor saw a 5.2% improvement to 53.8%.

Forecast highlights - 2011:

Traffic : Passenger demand is expected to grow 4.4% and cargo demand is expected to increase 5.5%.

Yields : Yields are forecast to grow by 3% for passenger traffic and 4% for cargo.

Load Factors : Overall capacity (combined passenger and cargo) is expected to expand 5.8%. Due to schedule commitments and fixed costs, capacity adjustments are expected to continue lagging behind the fall in demand, driving load factors down.

Fuel : The average oil price for 2011 is expected to be $110 per barrel.

IATA reported that during 2010 margins remain pathetic. With a 2.7% net margin in 2010 shrinking to 1.5% in 2011. Airlines will barely be able to cover the cost of capital with the industry remaining fragile and balancing on a knife edge.

INDIA

The aviation industry has emerged out of the global financial crisis at a steady pace and on the back of this, Indian aviation industry has also shown high growth rates over the last few quarters. With significant capacity rationalization in the domestic aviation sector in the last two years and strong passenger growth, capacity increase is well aligned to demand.

International passenger carriage to/from India registered a growth of 10.3% and Domestic air traffic grew by 19% during 2010-11 compared to the same period last year. This compares to capacity increase of 11% for the same period.

The international and domestic freight handled by Indian airports during 2010-11 increased by 17.7% and 23.7%, respectively when compared with 2009-10.

The Indian aviation market continued its growth during the year under review at a steady pace. The growth of Indian economy was a major trigger and the aviation market has been growing at a healthy two times multiple of the GDP growth. According to the DGCA, the Indian domestic traffic for the year continued to show an impressive growth rate of 21%.

Passengers carried by domestic airlines during January-November 2011 were 55.03 million as against 46.80 million during the corresponding period of previous year thereby registering a growth of 17.6%.

India is expected to cross the 450 million mark of domestic passengers by 2020. During the last two decades, from a fleet of only about 100, the scheduled operators now have reached 435 aircraft connecting the nation and the world.

MANAGEMENT DISCUSSION AND ANALYSIS

MEASURES TO IMPROVE PERFORMANCE

Network Vision:

Hubs:

Delhi has been established as Air India’s primary hub effective from Winter’10 Schedule. Currently, Air India offers a total of 610 weekly flights and 1,05,600 weekly seats from Delhi to 21 international destinations and 44 domestic destinations. The Hub at T-3 provides for a flawless integration of international and domestic operations so as to provide passengers with a seamless, integrated experience. The Hub operations at Delhi have given rise to about 3000 transfer passengers per day which include sixth freedom traffic generated notably between Bangkok/Kathmandu and Europe/UK.

Central Planning and Control System (CPCS):

In early 2010, Air India signed a broad ranging agreement for establishing its Central Planning and Control IT System (CPCS). M/s Sabre Airline Solutions who are industry leaders in this field were selected as system provider for a range of integrated state of the art systems which cover Network Planning and Scheduling, Flight Operations Control (including integrated Operations Management and Hub Management) and a comprehensive Crew Management System.

In the Planning and Scheduling suite, out of the total 5 modules, 4 modules have been implemented and are being used. The modules and their current status is as under :

Ø Schedule Manager is being used extensively by their Scheduling Team. The Schedules of Air India and Air India Express, the wholly owned subsidiary company, are being published through Schedule Manager and regular changes are being updated and provided to the Passenger Service System (PSS) for updating the reservation system.

Ø Slot Manager is being used to monitor and manage slots. It is being used by the Scheduling Team at the slot co-ordination meetings which are held twice every year.

Ø Fleet Manager is an optimization tool, which helps in optimal fleet assignments for a given schedule. It has already been used on the narrow body fleet. With the implementation of single code, the process is being re-defined to source the input data for the entire fleet.

Ø Codeshare Manager is mainly used for codeshare synchronization. The AI-LH codeshare testing has been completed.

Ø The final module Profit Manager is to be implemented. Process has been initiated to procure the source data for the market sizes (at origin-destination levels), which is required for the calibration of Profit Manager. The Profit Manager module has the capability of providing demand forecasts at city-pair/flightleg levels and estimating the revenues and costs for a planned schedule.

Plans to turnaround performance :

Several measures were undertaken to improve the performance of the Company :

Ø Rationalization of certain loss making routes.

Ø Return of leased aircraft.

Ø Induction of brand new fleet on several domestic and international routes thereby increasing passenger appeal.

Ø Introduction of non-stop services to USA and Canada.

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

Ø Reduction of contractual employment and outsourced agencies.

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

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

Ø Setting up of an Integrated Operational Control Centre (IOCC) in Delhi for close monitoring of the turnaround time of various aircraft in the fleet to optimize aircraft utilization.

Ø Curtailment of overtime and certain staff perks and relocation of officers from abroad to India.

Ø Closure of some foreign stations including offline offices.

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

Ø Leveraging the assets of the company to increase MRO revenue as well as revenue from real estate properties.

Ø Introduction of Common Code through a common Passenger Service System (PSS) effective 27 February 2011 which would ensure seamless connectivity on domestic and international flights.

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

Ø Establishment of Hub Control and Networking / Crew Scheduling System.

Ø Deferment of B777-300 aircraft deliveries.

Ø Cabinet Note on Operationalization of Subsidiary Companies like AIATSL and AIESL and hiving-off the GH and Engineering / MRO activities to these Subsidiary Companies including at certain location to AI SATS JV, submitted to the Ministry.

Ø Shifting of the Hub from FRA to DEL T3, the state-of-art technology airport effective Winter 2010.

Ø 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

Infusion of Additional Equity - Linked to the Turnaround Plan of the Company :

In an attempt to adequately capitalize the Company and in anticipation of Government induction of equity into the capital of the Company, Air India had increased its authorised capital during the year 2011-12 to Rs.110000 million comprising of Rs.11000 million equity shares of Rs.10/- each.

The Turnaround Plan (TAP)/Financial Restructuring Plan (FRP) of Air India was submitted to the Group of Ministers (GoM) in the meeting held on 22 June 2011. The GoM after consideration of the same, directed that a Group of Officers (GoO) from the Ministry of Finance will examine the TAP/FRP and come up with recommendations within a specified period of time. The TAP/FRP was prepared by the Company in consultation with SBI CAPS which was independently vetted by M/s Deloitte.

Subsequently, a Committee headed by Special Secretary Expenditure was formed by the Ministry of Finance to review the TAP/FRP submitted by Air India.

The GoO presented its report to the GoM on 28 October 2011. The report recommended a scenario which envisages a moderated growth scenario wherein the fleet strength of Air India would be 157 and those of the subsidiaries 76 in the Financial Year 2019, the net addition to come mainly through leasing.

Committee has also prescribed various milestones for induction of equity wherein the Passenger Load Factor to be attained by Air India would be 73% by Financial Year 2015 and 75% by 2020, the airline would be EBIDTA positive by 2013, cash profits positive by 2018 and PBT and net worth positive by 2020. The report also envisages an upfront support of equity infusion by Government of India in order to provide immediate relief of Rs.67500 million in Financial Year 2012 (including Rs.12000 million provided in the Union Budget), infusion of equity to fund cash deficits upto Financial Year 2021 of Rs.45520 million, equity infusion to fund the principal and interest repayments in respect of guaranteed aircraft loan – Rs.189290 million subject to achievement of milestones.

The total equity support requested for would amount to Rs.302310 million upto Financial Year 2021. Besides this,

Government would also provide a buy back guarantee for Cumulative Redeemable Preference Shares (Financial Year 2027-2032) of Rs.74080 million. The FRP also involves regulatory forbearance from RBI in respect of restructuring and provisioning for which SBI have taken up the issue with RBI. GoM has stated that the recommendation made by the GoO under the Moderated Growth Scenario may be accepted. RBI’s firm views and regulatory forbearance of the TAP and FRP has been obtained following which the recommendation made by GoM is being processed for consideration by the Cabinet. The lenders have requested certain further conversions in the provisioning requirements which have been taken up with RBI. The FRP is planned to be completed before middle of March 2012.

The Company has received Rs.12000 million towards equity investment for the year 2011-12.

FINANCING INITIATIVES

Aircraft Financing

During the year 2010-11, Air India availed a Bridge loan amounting to US$473 million for financing 3 B777-300ER aircraft and 1 GE spare engine. Subsequently, this Bridge loan was re-financed through US Exim financing in August 2011 at a highly competitive interest rate structure resulting in savings of Rs.800 million p.a. by way of interest. Similarly, the loan for acquisition of Airbus aircraft amounting to Rs.55000 million given by a Consortium of Banks led by IDBI was refinanced in September 2011 with the ICICI Bond issue maturing in 15-20 years at a lower rate of interest which resulted in a saving of approximately Rs.1800 million p.a.

For the B787-8 financing, the airline is exploring a number of options including Sale and Lease Back. The US Exim Bank has already issued a Commitment Letter to support delivery financing for the first 12 B787-8 aircraft to be inducted into the fleet.

As of date, bids for the first 7 B787-8 aircraft for Sale and Lease Back have already been floated and the response is awaited.

CONTINGENT LIABILITIES NOT PROVIDED FOR:

A. Claims against the company not acknowledged as debts and being contested to the extent ascertainable and quantifiable.

(Rs. in Millions)

Nature of Claim	Description	2010-11	2009-10
Passenger and Cargo Claims	Claims on account of denied boarding, loss of passenger baggage, mishandled baggage delayed flight, cancellation of flights, damaged consignments and late receipt of cargo.	340.300	473.500
Income Tax	Demand Notices received by the company which are under Appeal (*)	1066.400	1243.300
Customs Duty and Service Tax	Customs Duty and service tax demand by the tax authorities	5174.200	559.400
Municipal Taxes/ House Tax	Property Taxes/ House Tax demanded by Municipal Authorities	170.100	140.200
Airport Authority of India/ HAL	Claims of Licence Fees, X-Ray, TNLC, Landing Charges, Parking Charges etc.	1146.400	1053.900
Others	Claims on account of Staff/ Civil/ Arbitration/ Labour cases and pending court cases (**)	4675.200	4071.700
	Total	12572.600	7542.000

(*)* Includes Rs.834.1 million where the Department is in appeal.

(**) Against which the Company has also filed its claims for Rs. 4111.500 millions.

B. Guarantees given by the Banks and counter guaranteed by the Company outstanding Rs. 1898.500 millions (Previous Year : Rs. 408.100 millions).

C. Letters of Credit issued by the Bank aggregated Rs. 5806.600 millions (Previous Year : Rs. 6671.300 millions).

D. Corporate Guarantees, Letters of Comfort given by the Company on behalf of its Wholly owned Subsidiary Companies :

(Rs. in Millions)

Particulars	2010-11	2009-10
Airline Allied Services Limited	197.600	176.900
Air India Charters Limited	3487.200	3462.600

FIXED ASSETS

v Aircraft Fleet and Equipments

v Aero Engines and Power Plants

v Land and Building

v Workshop Equipments Instrument

v Machinery and plants

v Ground Support and Ramp Equipments

v Furniture and Fixture

v Electrical Fitting and Installment

v Computer Systems

v Office Appliances and Equipments

v Computer Software

WEB DETAILS:

MANAGEMENT:

FOUNDER:

Air India is India's national flag carrier. Although air transport was born in India on February 18, 1911 when Henri Piquet, flying a Humber bi-plane, carried mail from Allahabad to Naini Junction, some six miles away, the scheduled services in India, in the real sense, began on October 15, 1932. It was on this day that J.R.D. Tata, the father of Civil Aviation in India and founder of Air India, took off from Drigh Road Airport, Karachi, in a tiny, light single-engine de Havilland Puss Moth on his flight to Mumbai (then known as Bombay) via Ahmedabad.

He landed with his precious load of mail on a grass strip at Juhu. At Mumbai, Neville Vintcent, a former RAF pilot who had come to India from Britain three years earlier on a barn-storming tour, during which he had surveyed a number of possible air routes, took over from J.R.D.Tata and flew the Puss Moth to Chennai (then Madras) via Bellary.

The Subject was established in 2007 and is owned by the Government of India and headquartered in Mumbai. The Company was created to facilitate the merger of the two main state-owned airlines in India: Air India, with its subsidiary Air India Express and Indian Airlines, together with its subsidiary Alliance Air.

Whilst the merger and integration process has started, and a few routes have been rationalised, a lot remains to be done before the various units start functioning as a cohesive airline.

National Aviation Company of India Limited

Air India

• Air India Express
• Air India Cargo

Indian Airlines

• Air India Regional (formerly Alliance Air)

Upon completion of the merger, there will be one primary airline, Air India, with two subsidiary carriers providing regional and low-cost, point-to-point services and a third subsidiary for cargo operations:

Air India

• Air India Cargo
• Air India Express
• Air India Regional

CMT REPORT (Corruption, Money Laundering & Terrorism]

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

1] INFORMATION ON DESIGNATED PARTY

No exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

2] Court Declaration :

No exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

3] Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

4] Record on Financial Crime :

Charges or conviction registered against subject: None

5] Records on Violation of Anti-Corruption Laws :

Charges or investigation registered against subject: None

6] Records on Int’l Anti-Money Laundering Laws/Standards :

Charges or investigation registered against subject: None

7] Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

8] Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

9] Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

10] Press Report :

No press reports / filings exists on the subject.

CORPORATE GOVERNANCE

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

CONTRAVENTION

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs. 53.57
UK Pound	1	Rs. 84.37
Euro	1	Rs. 72.23

INFORMATION DETAILS

Information Gathered by :	PJA
Report Prepared by :	BVA

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	2
PAID-UP CAPITAL	1~10	3
OPERATING SCALE	1~10	5
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	5
--PROFITABILIRY	1~10	-
--LIQUIDITY	1~10	2
--LEVERAGE	1~10	4
--RESERVES	1~10	2
--CREDIT LINES	1~10	4
--MARGINS	-5~5	-
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	YES
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	NO
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	NO
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		27

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
-	NB	New Business	-

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions

This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.