MANAGEMENT CONTROL SYSTEMS AT

Submitted To Prof. Anto Joseph Air India 1/27/2012

Abhinav Sharma Isha Sharma Mitul Jain Rajat Kumar Aditya Chawla

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Table of Contents
1. Introduction .................................................................................................. 3
1.1 Domestic Operations .......................................................................................................................... 3 1.2 Services ............................................................................................................................................... 3

2. Organization Structure .................................................................................. 4

2.1 Current Structure ................................................................................................................................ 4 2.2 Outgrowing the traditional model ...................................................................................................... 4

3. Management Style And Culture .................................................................... 7

3.1 Attitude towards employees .............................................................................................................. 7 3.2 Decision-making process .................................................................................................................... 7 3.3 Focus of Air India................................................................................................................................. 7 3.4 Credibility & Caring-Key to Air Indias Culture .................................................................................... 8 3.5 Role of Supervisors ............................................................................................................................. 8 3.6 Role of Relational Competence .......................................................................................................... 9 3.7 Official Language Implementation ...................................................................................................... 9

4. Control Process of Air India ......................................................................... 10

4.1 Steps taken for effective control process/system in the organization ............................................. 10 4.2 Norms set for the discharge of functions ......................................................................................... 13 4.3 Scrutiny of policies and activities ...................................................................................................... 13 4.4 The budget allocated to each agency ............................................................................................... 13 4.5 Reward .............................................................................................................................................. 13 4.6 Wage disparity .................................................................................................................................. 15 4.7 Over Time .......................................................................................................................................... 15

5. Communication and Coordination.............................................................. 16

5.1 Internal communication system ....................................................................................................... 16 5.2 External communication system ....................................................................................................... 17

6. Conclusion & Recommendations................................................................. 18

Air India | Introduction

1. Introduction
The urge to excel and the enthusiasm, which characterized Air India's first flight, way back on October 15, 1932, are lively even today. The recent merger of Air India and Indian, the countrys leader in the domestic sector, has helped the airline to emerge as a major force in the airline industry.

1.1 Domestic Operations

On the domestic front Air India operates to 64 stations out of which 17 are connected to international destinations. The 172-seater Airbus A321 aircraft connects all major metros. The Regional operations cover all the metros and many smaller cities in all the four regions i.e. northern, eastern, western, and southern regions.

1.2 Services
Apart from the basic services that an airline provides Air India also offers Frequent Flyer Programme - Air India has a Frequent Flyer Programme branded "Flying Returns. Members of the Flying Returns Programme (FRP), the most attractive FRP for the Indian traveler, can accrue mileage points while flying on Air India, Lufthansa and flights of Air Indias code share partners, and redeem them for award tickets on Air India or Lufthansa.

Star Alliance - Air India will be joining Star Alliance by mid of 2010. Star Alliance, is a leading global airline alliance of 21 top international carriers. Once Air India becomes a member, passengers will enjoy enormous benefits, including seamless transfers while travelling across the world, more frequent flyer mileage points, code-sharing leading to a wider choice of flights and access to lounge facilities worldwide. The Star Alliance network offers more than 17,000 daily flights to 916 destinations in 160 countries. Air India Express - Air Indias international budget airline, Air India Express, was launched in April 2005. Air India Express operates 200 weekly flights on its network between 17 Indian and 14 international stations.
Air India | Introduction 3

2. Organization Structure
2.1 Current Structure

2.2 Outgrowing the traditional model

For airlines, the functional organizational model worked well for decades. It promoted deep technical expertise and economies of scale by grouping specialists together and focused accountability for the direction and efficiency of all divisions on one person: the chief executive.
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Peripheral businesses and small customer segments typically got limited attention from management, however, while the mainstream passenger business received most of the attention. This functional model probably remains the best choice for some aviation groups, particularly those that outsource most support functions (such as catering and maintenance), lack the sophisticated information systems needed to manage more complex structures, or serve only a few homogeneous customer segments. Yet many other carriers, like railroad and oil companies before them, have outgrown the traditional model. The rise of low-cost carriers is altering the nature of competition in the industry by spurring some traditional airlines to expand into businesses that offer higher margins or require less capital than their core passenger operations. Functionally organized airlines often lack the flexibility to meet the varied needs of an ever more diverse customer basea problem that crimps their ability to grow in ancillary businesses and in the fast-expanding market for budget travel. Because managers in a functional organization, with the exception of the CEO, aren't responsible for profitability, costs can easily get out of line. Moreover, labor agreements that cut across several parts of a company can lead to higher wages and benefits as everyone from baggage handlers to the catering staff receives some of the same perks the cockpit crew gets. To counter those shortcomings, aviation groups should take a hard look at the idea of adopting a new form of organization structured around separate business units, each with broad decisionmaking authority and responsibility for its own profitability. Such a structure resembles the classic business unit model of many diversified companies and of many retailers and banks, where individual units operate independently on a day-to-day basis and set their own strategic direction.

Air India | Organization Structure

For airlines, however, this structure must differ in one significant way: units operating as standalone businesses would quickly destroy the network value that comes, for example, from coordinating interconnecting flight schedules, efficiently allocating aircraft across a number of routes, and using the fare structure to maximize revenue throughout a large network. Airlines thus need a hybrid structure that reaps the benefits of independent business units while maintaining strong links among them.

Air India | Organization Structure

3. Management Style And Culture

3.1 Attitude towards employees
Air India is committed to provide its Employees a stable work environment with a scope of encouragement towards creativity and innovation to provide opportunity for learning and personal growth which helps the employees in improving their effectiveness. Above all, Employees are provided the same concern, respect, and caring attitude within the organization that they are expected to share externally with every Air India customer. The management has created a culture where employees are treated as the valuable asset for the company.

3.2 Decision-making process

The procedure followed in decision making involves discussions among cross-section of departments and/or formal decisions by the Competent Authority on office notes in accordance with the Instrument of delegation of Financial and Administrative powers. In respect of decision making on day to day basis at airports/stations, all the Duty Officers/Station Managers take spot decisions in accordance with the Instrument of delegation of Financial and Administrative powers and the established practices. Decision making is by worker/management committees. Employees are encouraged to be responsible and are given authority to make decisions.

3.3 Focus of Air India

1. Focus on relationships among the employees is the fundamental driver of leadership, culture, strategy, and coordination at Air India which allows them to coordinate more effectively across all functions. 2. Air Indias organizational competency is its ability to build and sustain relationships characterized by the following-

Air India | Management Style And Culture

Shared goals: Motivates individuals to move beyond what is best for their own narrow area of responsibility within their own function. Motivates them to act in the best interests of the overall process of the organization and lessens competition between different functions within the organization

Shared knowledge: Shared knowledge is about how the tasks of one person or group are related to all other tasks. This enables the workforce to be more competent, efficient and coordinated than their competitors

Mutual respect: Encourages all employees to value the contributions of their colleagues Encourages all employees to consider the impact of their actions on others Reinforces the tendency to act in the best interests of the overall work process

3.4 Credibility & Caring-Key to Air Indias Culture

At Air India, credibility and caring are the two critical ingredients of effective leadership. Credibility and caring are the ability to inspire trust and the ability to inspire in employees the belief that their leaders care deeply about their well-being. The top management team has gained the complete trust of managers in the field, and of frontline employees, by being forthright and consistent in their messages to employees.

3.5 Role of Supervisors

Air India supervisors are not obstacles to coordination among frontline employees, but play a valuable role in strengthening coordination through day-to-day coaching, counseling, and participation in frontline work, even baggage handling.
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Supervisors go far beyond measuring performance and disciplining and focus on problem solving, advising, and providing support, encouragement, and recognition to individual subordinates.

Supervisors view their subordinates as internal customers who deserve help in doing their jobs better.

3.6 Role of Relational Competence

Teamwork at Air India is based on relational competence- the ability to relate effectively with others. Relational competence is a critical ingredient of organizational success, though it tends to be undervalued in the world of work. Other organizations usually underestimate the importance of relational competence, especially when it comes to people who perform highly skilled jobs. Often excellent performers are hired, but they cannot integrate their work effectively with the work of others which results in undermining of the organizations goals, which does not happen at Air India.

3.7 Official Language Implementation

With respect to the internal culture of the company it continued to promote Hindi as official language. Various competitions like easy writing, debate, and quiz were organized during Hindi Pakhwara. In order to monitor progressive use of Hindi in the office, 57 Official Language Implementation Committees were constituted and meetings of these committees were held regularly. In order to facilitate officers/ employees in doing their official work in Hindi, seven Hindi Workshop training programmes were organized. NACILs In-house Magazine Vimanika was awarded second prize in the In-House Magazine Competition organized by Ministry Of Home Affairs, Department of Official Language. NACIL was conferred 2nd prize by a well known literary, Socio-cultural organization Aashirwad for outstanding Hindi implementation in the category of Public Sector Undertakings (Large) of Government of India Mumbai.
Air India | Management Style And Culture 9

4. Control Process of Air India

The company has extensive internal control system which ensures optimal utilization and protection of resources, IT security, accurate reporting of financial transaction and compliance with applicable laws and regulations and internal policies and procedures. The internal control system is supplemented by extensive internal audit, 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.

4.1 Steps taken for effective control process/system in the organization

Air India has set up a special vigilance department headed by a vigilance officer whose main function is to initiate steps to curb corruption and malpractices in the organisation. The prime functions to achieve this are as below: Investigation of complaints against all categories of employees / travel agencies / handling agencies. Monitor progress of action recommended by Vigilance against such employees. Study and examine Systems & Procedures followed in various departments, identify corruption prone areas and suggest remedial measures to minimise scope for corruption or malpractices. Organise, conduct surprise checks in sensitive & corruption prone areas. Maintain Surveillance on employees of doubtful integrity Ensure speedy processing of vigilance cases at all stages. Ensure that there is no delay in the appointment of the Inquiring Officer, and that no tactics are adopted by the accused officer. These are few of the functions of the vigilance department to have proper check on instances pertaining to demand and acceptance of a BRIBE in any form or kind for providing any service.

SITA, to provide new Passenger Services System SITA, the aviation IT specialist, has been selected to provide Passenger Services System (PSS) to Air India on a turnkey basis.SITAs Horizon platform provides PSS services to 140
Air India | Control Process of Air India 10

airlines and will be used to deliver a single airline code in order to allow the seamless integration of Air India with Indian Airlines (as these two were merged under NACIL). SITA will also implement an efficient online booking engine, departure control system, check-in and automated boarding control, baggage reconciliation system (BRS) and a frequent flyer programme. The booking engine will provide Air India full control over its own ticket distribution and drastically reduce costs.

Integrated Operations Control Centre (IOCC) An Integrated Operations Control Centre (IOCC) and dedicated hub control centre project was initiated in October 2008. The IOCC would provide visibility of the entire fleet of NACIL aircraft, including Air India Express and Alliance Air. The system would not only display flight positions but would provide automatic decision aid, to help from recovery of any irregularities, either flight diversion or delay. For this purpose, NACIL set up a project team and hired M/s. m2p consulting, from Germany to work with the project team to facilitate the implementation. This solution would provide the following functions: Complete operations control Increased maintenance control Enhanced flight dispatch Ground handling support Crew control support Passenger journey management support Improved communication.

Efforts were put in by these two teams to speed up the entire process and implemented it before the Common Wealth Games 2010 started. The Integrated Operations Control Centre (IOCC) is located in the new terminal at the Delhi airport. This unit would be the center of entire fleet manned by experienced personnel to ensure that any eventuality is handled promptly and efficiently with the help of advanced tools to ensure quick handling of any disruptions and saving delays.
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The advantages of this solution are increased efficiency; better disruption handling; enhanced punctuality and passenger connections; better integration between all departments managing scheduling and improved efficiency in crew management.

A new project, the Central Planning and Control Systems (CPCS), was initiated expanding the role of NACIL project team and the role of m2p. The combined team now proceeded with fast track solution implementation. This involved an assessment and evaluation of leaders in the field of solution providers to ensure the best-fit solution for NACIL.

After the evaluation the contract was awarded to M/s. Sabre Airline Solutions (Sabre). Sabre offers a comprehensive, airline solution, Sabre is an industry leader in all major travel channels and specializes in airline business operations, operations research/mathematics, technology, and Business management. Sabre provided two solutions: i. Sabre Air Vision Suite:

This helps in the complex decision making processes when formulating an airline schedule. This tool uses complex algorithms and operational research techniques to analyze data from the airlines to make forecast about the profitability of a scheduled fleet, and can also assist in the assignment of slots.

ii.

Sabre Air Centre:

It has two sub divisions Flight and Crew. Flight: It gives an easy way to monitor and schedule daily maintenance and flight operations and notifies pending operational issues before they become problems. It has a web extension for hub solutions and it can assist any hub controller to plan for all the issues that affect his hub.

Crew: It provides complete crewing solutions. It helps airline to efficiently plan and manage their crew operations from crew training to appraisal system. It provides solution which ranges from ground staff to cabin crew. The entire process will be carried on with improved IT infrastructure.
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4.2 Norms set for the discharge of functions

Every year a Memorandum of Understanding used to be signed by the managements of one-time Indian Airlines/Air India with the Ministry of Civil Aviation after discussions and finalization of the same by members of the expert task force constituted by the Department of Public Enterprises. This Memorandum of Understanding signed with the Government every year acts as norms for discharge of its functions.

4.3 Scrutiny of policies and activities

National Aviation Company of India Limited (NACIL) being a Central Public undertaking, its polices and activities are constantly under close scrutiny of the Press, Public and Parliament. Further, there are Parliamentary Committees which examine the Company and hold discussions on its functioning and performance from time to time apart from giving suggestions and recommendations relating to its activities.

4.4 The budget allocated to each agency

NACIL is a commercial organization and has one centralized budget for its internal financial discipline. Since no agency other than NACIL is involved in its operations, there are no budget allocations to any other agency. These are few of the control process/systems in place with respect to Air India for effective control and management of its operations.

4.5 Reward
Air line companies have been walking a tight rope over the past couple of years where many airlines have been incurring huge losses and also having huge debt in their balance sheet. In India many low cost airlines have come up which are eating up the market share of large airliners like Air India, Jet Airways etc. Many Airliners started focusing on cutting costs in order to improve their financials, as it was becoming challenging to increase its total income especially during the recessionary phase and during the period of high oil prices.
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There are few main areas of expenditure which contribute maximum to the total expenditure of an airline company; they are the Aviation turbine fuel and Compensation to employees apart from interest expense. The Cost of fuel is something which cannot be controlled by the company, so in order to cut cost many Airlines layoff employees or cut their pay, similar is the case with Air India where there have been many occasions of pay cuts or improper payments with respect to salaries to employees. A few examples are-

In June 2009 Mr Arvind Jadhav, Chairman and Managing Director, Air India had communicated to Corporate Directors, SBU Heads, Executive Directors and General Managers, regarding the financial distress the company was facing and that every paisa which can be saved needs to be saved and also requested all executives in the level of General Managers and above to voluntarily forego salary and Productivity Linked Incentive payable for the month of July 2009.

In September 2009 Air India decided to review its plans to cut 50% performance-linked incentives of its staff across the board, and instead consider a graded cut in the range of 2050% based on employee salaries. A wage restructuring committee, set up by the airlines CMD Arvind Jadhav, presented a wage cost reduction plan to the company board. The committee had proposed to cut Performance Linked Incentives in the range of 20-50%, by this the company could save about Rs 750 crore of its Rs 3,000 crore annual wage bill.

In March 2010 Air India decided to delay the payment of March salaries and productivity linked incentives by a week, a move opposed by sections of the staff. This was mainly on account of the year closing and the need to meet certain financial commitments including payments to Airports Authority of India, oil companies and some international and domestic vendors.

As of August 2010 National Aviation Company of India Ltd (NACIL) had almost 31,000 employees, which is much more than what should be ideal for an enterprise of that size (Source: headlines India web site). It has also seen several problems with regards to reducing its workforce. As mentioned NACIL (Air India is part of NACIL) has always faced problems in reducing salaries as there has been political problems when ever such step has been taken.

Air India | Control Process of Air India

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4.6 Wage disparity

Many employees in the company claim that expatriate pilots were being paid "higher" than their counterparts in India and that they claimed that the cash crunch was ment only for Indian pilots who were getting half the salary of an expat.

4.7 Over Time

Aviation is one such industry which would not encourage its employees to work over time specially those employees who are on field, example; Pilots, as this job requires high level of concentration so proper allocation of working hours are done so that there are no burn outs, and the company does not incur much additional cost on account of over time.

If we look at the ratio of sales to compensation to employees ratio in the years 2008, 2009, it has decreased from 4.27 to 3.96, where the total compensation to employees has increased in spite of decrease in sales.

National Aviation Co. Of India Ltd.

Rs. Crore

Mar 2008 12 months 13769.33 3224.5

Mar 2009 12 months 13248.67 3338.85

Sales Compensation to employees

Source: Prowess

Air India | Control Process of Air India

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5. Communication and Coordination

The Communication System Management at Air India can be understood as follows:

5.1 Internal communication system

Air India uses advanced technology for communication. The internal communication systems are maintained by: 1 SITA(Society De Telecommunication Aeronautics provided services) 2 Telephone System 3 Radio Communication System Those are briefly described below: SITA Headquartered in France, SITA provides various kinds of network services, which is only provider for Airlines all around the world. Its data transmission speed is 9.6/19.2/64/128kbps. SITA provides reservation system (Type-A) of all passengers that is reservation detail, flight planning for aircraft Captain (including weather forecast), SITA departure control system (automated system for issuing boarding pass for departure passengers). SITA messaging center (SITATEX, Type-B) can message 10 or above countries within a 0.3 micro second. For example if anyone wanted to send message to London, then the address would be LON UU BG. FOR Dhaka address is DAC XT BG, etc. This enhances the communication system and helps in speedy communication process to take place. Telephone system There are two types of telephone systems used: PABX (Public Automated Branch Exchange) Some electronics devices control the total PABX switching system. These are: Rectifier (48 V Output)
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Card Power Backup through Battery

The total PABX communication switching system is provided by Siemens (EMS 601). Intercom: Organization uses intercom system for its internal communication only, where it can communicate with any employee within short distance. Radio communication system. Walkie-talkie - It communicates small area. It is one way communication system and half duplex. It covers approximately 3p5 KM. Ground to Air Communication - In ground to air communication system any person from the Airlines communicates with the aircraft crew at any time. In this system there is Dipole Antenna, Unidirectional Antenna etc. The Unidirectional Antenna gain is 4dB again there is a local line of side bandwidth whish uses high frequency. Its output is 5 watt. The best gain antenna is VHF Antenna which is 1 or 3 dB. Its output is 50 watt and radiation pattern is 100 watt. This technology is majorly used to communicate with the pilot and co-pilot while on board. These are the means by which the company communicates internally. All the employees are kept updated with regards to their work schedule specially the cabin crew and the pilots well in advance.

5.2 External communication system

External communication systems are the means by which the airline communicates with its passengers and the general public. A 24 hour dedicated call centre to help customers regarding any issues they might have and in getting clarifications regarding their travel with the airlines. Rescheduling messages through SMS- Air India has made an online arrangement with M/s Cellebrum Service Provider whereby SMS messages are generated automatically to all Indian mobile numbers in PNRs ex India for flights which are rescheduled within 4 days prior departure.

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6. Conclusion & Recommendations

Over the past decade, as competition in the airline business has intensified, traditional carriers have pursued strategies to spur growth, trim costs, and improve profits. In pursuit of higher profits, large traditional airlines have also diversified into related businesses. In doing so, they broaden their customer base to provide services (such as aircraft maintenance and catering) to other airlines and to other kinds of operators (for instance, air cargo space to freight forwarders and maintenance services to the defense sector). To reduce costs, these airlines have repeatedly sought concessions from their workers. Such changes greatly increased the complexity of managing aviation groups, which have traditionally been organized along functional lines, with all operations from sales services to flight operations reporting directly to the CEO .As this complexity increased, decision-making bottlenecks at the top of some companies began to hinder their ability to respond rapidly to shifting competition.

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The focus of top executives on the core passenger airline often diverted attention from emerging opportunities in higher-margin businesses. Performance suffered as parts of companies lost sight of the bottom line, and a lack of information impaired both cooperation and oversight. To avoid these difficulties, large, diversified aviation groups should contemplate a major overhaul to replace the functional organization with a number of business units that have more autonomy and accountability for their performance. Such fundamental change in the shape of a company is a big step that can take three years or more to complete, but the advantages of the business unit model can make the shift worth undertaking. This model helps companies respond more quickly to changing market conditions, focuses middle managers on profitability, enables business unit managers to negotiate more competitive labor terms, and promotes the development of talented young leaders. Aviation groups switching to the business unit model must avoid several pitfalls that can erase the positive effects of the new organization. The challenge is to balance greater autonomy for business units with close collaboration among them when coordinated efforts are essential for maximizing the group's profit; poor coordination, for example, can hobble strategic functions such as planning for a company's flight network and aircraft fleet. But if coordination efforts go overboard, units will fail to embrace accountability for profits, duplicate roles will emerge, bureaucracy will proliferate, and costs will rise. Finally, the CEO and the corporate center may well maintain too much decision-making authority, thus undermining the agility and accountability of the business units.

Air India | Conclusion & Recommendations

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