Budgetary Control &

Financial Performance

BY: LAKSHMI BANSAL

0171MBA086
MBA 3C
 AVIATION
INDUSTRY Key facts and figures
from the world of air transport
 About AAI
AAI came into existence on 1 April 1995.
It has been created by merging the erstwhile
International Airports Authority of India and National
Airports Authority with a view to accelerate the
integrated development, expansion and modernization of
• air traffic services,
• passenger terminals,
• operational areas and
• cargo facilities at the airports in the country.
 RESEARCH METHODOLOGY
Problem Statement
Analysis of Budgetary control and financial Performance of AAI.

Objectives
• To study about the Airports Authority of India;
• To study the Capital expenditure budget & Financial position of AAI.

Population
The population consists of all 126 airports operating under Airports Authority of
India as on March 31, 2017.

Sampling
No sampling was drawn as a census of all the airlines operating under Airports
Authority of India was considered in the study.
Data Collection Method
Data is collected through two ways:
o Primary Data Collection:
• Interviewing the executives of the company.
• A detailed study on the actual working processes and the tasks and
responsibilities of employees in the finance department
o Secondary Data Collection:
• National Civil Aviation Policy [NCAP] 2016.
• The annual report of the company of last year i.e. 2016-17
• Organization policies, audit reports, cash forecast, cash status reports.
• ibef.org.

Data Analysis
Data is analysed using percentages, variances, charts and ratio analysis technique.

Limitations of the study

• Limited to the data supplied by the organization employees and officials.
• Future plans of the company are not disclosed to the trainees.
 CONCEPTUAL FRAMEWORK
Making & Compilation of Capital Expenditure Budget in AAI
• The capital expenditure budget is compiled every year for approval of Competent
Authority.
• The budget estimates approved for the current financial year are revised, if required,
based on progress of works (called Revised Estimates).
• The Budget Estimates for the next financial year are also compiled.
• The budget is compiled by Directorate of Finance at Corporate Head Quarters (CHQ)
based on inputs received from respective Directorates at CHQ. Airports/Regions are
required to submit the proposal to respective Directorate at CHQ for consolidation.

• There are three types of Schemes under which budget are compiled:
o A1 Schemes: These are the schemes that are completed or are likely to be completed
by the end of the year.
o A2 Schemes: These are the ongoing schemes. In other words, it is the work in
progress. It includes those investment plans or projects which will take 2-3 years to
complete.
o A3 schemes: These are new schemes. It includes the projects which are taken by the
firm for the first time. For Example: Acquiring new land for the construction of new
airport.
Steps for preparing Budget in AAI
As we know that AAI owns and regulates the functions of total 126
airports. So each airport is required to prepare its own capital and
revenue budget thereafter duly submitting to their regional heads.

Regional departments after acquiring the budget estimate from each

airports belonging to their region compiles the data and prepares the
regional budget statements.

Finally the entire 5 regional departments passes their budget

statement to the corporate headquarters, lending to further
compilation and preparation of the Budget statement of AAI as a
whole.
FINDINGS
&
ANALYSIS
 AIRPORTS AUTHORITY OF INDIA
ABSTRACT OF CAPITAL EXPENDITURE BUDGET
REVISED ESTIMATE 2017-18 & BUDGET ESTIMATE 2018-19

(Rs. In Crores)
S. No. PARTICULARS BE 2017-18 RE 2017-18 BE 2018-19

1. AERODROME WORK

A) EASTERN REGION 145.84 181.96 318.38

B) NORTH EASTERN REGION 210.48 209.77 302.09

C) NORTHERN REGION 371.62 344.34 515.83

D) WESTERN REGION 212.36 216.26 308.17

E) SOUTHERN REGION 460.23 462.67 522.19

F) KOLKATA AIRPORT 146.76 111.92 124.40

G) CHENNAI AIRPORT 145.92 94.77 163.48

H) ENGG. WORKS-ANS 81.80 79.54 131.89

I) ENGG. WORKS-SECURITY 102.14 91.78 93.06

SUB TOTAL 1877.15 1793.00 2479.49

2. AIR NAVIGATIONAL SERVICES 282.52 275.00 650.00

3. AIRPORT SYSTEMS 9.90 53.74 7.30

4. INFORMATION & TECHNOLOGY 75.50 144.57 170.00

5. GSS-EQUIPMENT & TECH 100.00 100.00 280.00

6. SECURITY EQUIPMENTS 93.21 96.51 294.21

7. EQUITY OF JV COMPANIES 50.00 50.00 200.00

8. DEVELOPMENT OF REGIONAL AIRPORTS RCS (S110001001091) 50.00 0.00 0.00

9. MISCELLANEOUS (P110001000655) 4.72 5.00 5.00

GRAND TOTAL (1 TO 9) 2543.00 2517.82 4086.00

 AIRPORTS AUTHORITY OF INDIA
ABSTRACT OF OPERATIONAL EXPENDITURE BUDGET
REVISED ESTIMATE 2017-18 & BUDGET ESTIMATE 2018-19

(Rs. In Crores)
S. No. Particulars B.E. R.E. B.E.
2017-18 2017-18 2018 – 19

1. Employee Benefit Expenses 3791.01 3452.40 3818.88

2. Repairs & Maintenance 837.19 953.52 1094.52

3. Consumption of Stores & Spares 75.00 93.93 74.92

4. Electricity & Water Charges 545.09 418.34 446.52

5. Other Operating Expenses 310.09 308.09 385.41

6. Administrative & Other Expenses 978.32 1213.55 1286.80

7. Financing Charges 57.74 58.92 26.02

8. Depreciation 1650.01 1503.78 1603.98

9. Security Expenses 1016.90 1052.27 1181.77

10. Prior Period Adjustment (Net) 0.00 0.00 0.00

Total Expenditure 9261.35 9054.80 9918.81

 RATIO ANALYSIS
1. Liquidity Ratios
• Current Ratio = current assets/current liabilities

Current Ratio
1.85
1.82

1.8

1.75

Current Ratio
1.7 1.68

1.65

1.6
2015-2016 2016-2017

AAI’s current ratio has increased.

It can be concluded that in the financial year 2016-17, company’s funds are efficiently
used and the increased current ratio shows that the company’s capacity to meet its
current liability has increased indicating a low risk on the short term financial position
of the firm.
 RATIO ANALYSIS
1. Liquidity Ratios
• Quick Ratio = Quick Assets/Current Liabilities

Quick Ratio
1.85
1.80116
1.8

1.75

1.7
1.65883 Quick Ratio
1.65

1.6

1.55
2015-2016 2016-2017

Since, AAI’s quick ratio is higher in financial year 2016-17, company is keeping too
much cash on hand or may have a problem in collecting its accounts receivable.

Higher quick ratio is needed when the company has difficulty in borrowings on short-
term notes.
 RATIO ANALYSIS
2. Profitability Ratios
• Return on Assets = Net Income/Average Assets
Return on Assets
12.5
11.975
12

11.5

11
Return on Assets
10.557
10.5

10

9.5
2015-2016 2016-2017

The Return on Assets has increased.

This indicates that the management is more efficient in utilizing its assets base in the
current financial year than the previous financial year.

This also indicates that the profits of the company have increased in the financial year
2016-17 than in that in financial year 2015-16.
 RATIO ANALYSIS
2. Profitability Ratios
• Return on Equity = Net Income/Average Equity
Return on Equity
22.5
22.2039

22

21.5

Return on Equity
21
20.7517

20.5

20
2015-2016 2016-2017

The company has shown a incline in the return on equity.

This indicates that the shareholders have earned more for their investment in the
company in the FY 2016-17.

This also indicates that management is utilizing its equity base and providing better
returns to its investors in the FY 2016-17 in comparison the FY 2015-16.
 RATIO ANALYSIS
3. Leverage Ratios
• Debt-Equity Ratio = Total Liabilities/shareholders’ Funds
Debt-Equity Ratio
0.95 0.93239

0.9

0.85

Debt-Equity Ratio
0.8 0.77885

0.75

0.7
2015-2016 2016-2017

A high debt-equity ratio generally means that a company has been aggressive in
financing its growth with debt. This can result in volatile earnings as a result of the
additional interest expense.

Since, AAI’s debt-equity ratio is low which means it has low proportion of debt as
compared to equity.
 RATIO ANALYSIS
4. Activity Ratios
• Total Assets Turnover Ratio = Net sales/Total Assets
Total Assets Turnover Ratio
0.48
0.4683
0.47

0.46

0.45

0.44
Total Assets Turnover Ratio
0.4285
0.43

0.42

0.41

0.4
2015-2016 2016-2017

Over the year the total assets turnover ratio of AAI has been below 1.The total turnover
ratio for the financial year 2016-17 is higher than the ratio of the financial year 2015-16 .

This indicates increase in efficiency of the firm to utilize its assets in the FY 2016-17 as
compared to that in FY 2015-16.
 Conclusion
• With robust growth projections for passenger and freight traffic, the long-term outlook of
the sector remains positive, and airports should be planned accordingly.
• Timely implementation of projects remain a major issue, as most of these projects are
delayed due to issues such as land acquisition, delays in getting clearances and
bureaucratic logjams. This leads to severe cost overruns that render the project unviable
and AAI have to keep more funds.
• The four metro airports have certainly raised the bar of Indian airports to international
standards. There is still a scope to enhance the share of non-aeronautical revenues at
these airports, which currently is ranging between 35 to 40% so that revenues can be used
to finance expenditures.
• In India, a very small fraction of population takes the aerial route for travelling. This is
primarily due to the higher prices attached to the service. In this background,
development of low-cost airports is expected to turn out as a big positive, essentially
suiting the pockets of the burgeoning middle class of the country.
• On the positive side, there exists huge scope for tapping non-aeronautical sources of
revenue. This also depends on the passenger footfall at a particular facility.
• The arrival of more and more airlines would prove to be a crucial juncture for the airline
industry. As the carrier is known for its strategy of offering low-priced tickets, the demand
for air travel is likely to boost significantly.
• Several issues like a high tax regime, regulatory limitations, and limited ground
connectivity have all acted as a dampener to development of MRO and cargo segments.
 Suggestions
• Government should fast-track the process of regulatory approvals, so as to curtail the
massive cost and time overruns. Such steps will help the sector attract the much-needed
financing.
• The government is required to revisit some of the deliberating policies like route dispersal
guidelines that make airlines fly on unprofitable routes.
• The need of the hour is to come up with sustainable airport models for smaller airports
with low traffic throughput. Policies for developing a PPP model for serving the smaller
towns and cities, as a means of spurring local economic development, can drive the
investment demand for this sector considerably.
• The easing of FDI norms is expected to be a game changer for the sector, giving the cash-
strapped airlines a much-needed boost. However, the airport charges need to be kept in
check to reap full benefits of the increased connectors.
• One of the area as of yet untapped potential for investment is the commercial
development of land around airports. Most airports in India are witnessing modest
development of modernization efforts and green field airports.. Therefore, both AAI and
private players should leverage revenues through investments in these segments.
Thank You!!