RFP for Jet Airways

GROUP 2
Sanjeet Walia
C065
Rahul Tiwari D061
Ayushi Bapna H007
Gautam Maitreya H033
Rishi Sampat H049
Abhishek Satghare H050

Content

Introduction Jet
Airways

Business Trends

Jet Airways (India) Limited is an Indian based company which provides for transportation of passengers as
well as cargo services.
Air Transportation
Leasing of Air Craft
Business Segments

They operate a fleet of 116

aircrafts. This includes:

Boeing 777-300,

Airbus A330-200/300 aircraft

ATR 72-500/600
It Flies to 73 destinations in India &
beyond
including
Abu
Dhabi,
Bahrain,
Bangkok,
Brussels,
Colombo, Dammam, Dhaka, Doha,
Dubai, Ho Chi Minh City, Hong Kong,
Jeddah, Kathmandu, Kuwait, London
(Heathrow), Muscat, New York
(Newark), Paris, Riyadh, Sharjah,
Singapore and Toronto.
Subsidiaries
JETLITE It was extablished by
Sahara Airlines in 1991. Jet
airways took over Air Sahara
and renamed it as Jetlite.
JETKONNECT This is the low
cost
brand
of
the

Proposition Jet
Airways

In a recent study comparing leading

airlines in India, Indigo, Go Air, Spice
Jet, Jet Airways and Air India, the
below is how Jet Airways has fared

Slower
RSKM (6.4%
compared
to 9.5%)

Declining
ASKM
(Capacity)

Falling
passenger
volume
(22.8%)

Largest
market
share only
in one
metro
(Mumbai)

Second
Highest cost
per
available
seat (CSKM
US cents
9.05)

High
Maintenanc
e, Fuel, &
ownership
cost

Low EBITDA
Margins
(5.9%)

Not a
dominant
player

Second
Highest
average
fleet age

Main Metrics & Categories for

Risk

Risk Framework for

REPM

KPI/KCI Combinations
Two major categories of risks are
industry risk and company specific
risks.
Aircraft Utilization / Load Factor

Risk

Metri
c

Risk
Category

Mitigation

KPI/ KCR KRI

Lower
Utilization

Revenu
e

Operational

Efficient
Maintenance
staf

Flight hours/
On Time
Performance

Capacity

Revenu
e

Operational

Demand
estimation
using
analytics

RPK
Available
seat KM

Revenu
e

Operational

PM &
Appraisal
System

Attrition Rate

Cost per Available KM

Availability of
skilled
workforce

Operational Reliability Ratings

Exchange rate
volatility

Revenu
e

Financial

Hedge
Derivatives

Hedging
costs

Complaints per 10000 passengers

Cost of
multiple types
of fleet

Cost

Operational

Routes close
to O&M
contractor

Cost per
available
seat

Interest Rates

System
Failure

Cost

Operational

Compliance
Level

Reliability
rating

Maintenance Cost per ASK

Security
Breach

Revenu
e/
Brand

Operational

Next in class
security
system

Available Seat KM
Revenue Passenger KM
Attrition Rate

Average age of fleet

Mitigation Systems
Some of the mitigations systems that
we would implement, modernize or
standardize would be
Systems for better route planning

Risk Impact / Probability

Matrix

Demand estimation with Analytics

Accepted minimum compliance level

Recalibrate for opportunity
assessment matrix
Interest Rate Swap
Predictive analysis systems
Broadly we believe the above mentioned risks contribute to the
current issues faced by Jet Airways.

Ancillary Risks

Project Phases

We have identified some ancillary risk that we would need to observe to ascertain their impact. We would
hence undertake an assessment phase where we would analyze them and if gaps are found, we would
proceed (post approval) on correcting them.
Contingent Liabilities
The proposed project on risk management would, thus, be carried
out in two broad phases - as- is assessment for gap identification
Legal proceedings
and solution implementation.
Terms of contract
Covenants by lenders
Labor agreement Risks
Ground staf training
Carbon hedging
Alternatives for financing
ECA
Key Management person

Phase 1
1. The current risk management framework would be studied
against the risks identified
2. Mitigation measures would be assessed for their efectiveness
and whether they limit the risks within the risk tolerance
levels.
3. Any gaps identified when compared to industry best practices
would be fixed as a part of the implementation phase.
4. Design workshops would be conducted to upgrade the business
processes for risks that matter so that all risks are contained
within the range of tolerance.
5. The new system would integrate risk management into the
long range, annual operating plans and performance
monitoring thus aligning the risk appetite and risk
management philosophy of the company to its business
objectives.

Corporate Governance Jet

Airways
Mr James Hogan

BOARD OF DIRECTORS

Corporate governance is the

system by which companies are
directed and controlled. The
Corporate Governance Structure
at Jet Airways is vested with The
Board of Directors which is
responsible for the management,
direction and performance of the
Company as well as to provide an
independent view of the Companys
Management while discharging its
objectives.
Incorporation
of
corporate
sustainability into the overall
strategy in order to avail the
greener competitive edge.
Investors isnt the only factor,
environment will become a more
important to passengers.
Jet Airways is consistent on its
reporting of corporate governance.
They present information which is
credible,
Straightforward
&
relevant.

Mr Naresh Goyal Chairman

Mrs Anita Goyal

Mr Ifthikar Kadri Mr Aman Mehta
Mr Javed Akhtar
Mr Dinesh Kumar Mittal

Key Governance Practices Jet

Airways
Policy on prevention of Sexual
Harassment at Workplace
The Company has in place a Prevention
of Sexual Harassment Policy in line
with the requirements of The Sexual
Harassment
of
Women
at
the
workplace (Prevention, Prohibition &
Redressal) Act, 2013.
Risk Management Policy &
adequacy of Internal Financial
Controls
Mechanism to identify, assess, monitor
and mitigate various risks to key
business
objectives.
Major
risks
identified
&
addressed
through
mitigating actions
Vigil Mechanism / Whistle
Blower Policy
The Company has a vigil mechanism
and Whistle Blower Policy in place to
deal with instance of fraud and
mismanagement
Board Training & Induction
The Company has conducted the
familiarisation
program
for
Independent
Directors
appointed
during the year. The Program aims to
provide insights into the Company

BOARD OF
DIRECTORS
9 MEMBERS
1 Whole time directors
8 Non Executive Directors out of which 4 are
independent

Audit
Committee
3 members,
67% Independent
Directors
5 Meetings
70% Attendance

Currently non complaint according to

Indian Rules but one independent
member resigned on 4th August, 2015
and the company having identified a
person for the post is waiting for
security clearance from MoHA
The Board of Directors has undertaken
an evaluation of its own performance,
the performance of its Committees and
of all the individual Directors based on
various parameters relating to roles,
responsibilities and obligations of the
Board, etc.

CSR Committee
3 Members
67% Independent
Directors

Remuneration
Committee

3 Non-Executive Directors
100% Independent
Directors
1 Meeting
100% Attendance

Stakeholder Relationship
Committee
3 Directors
67% Independent
Directors
2 Meetings
83% Attendance

Pointers to make Governance more

efective
Diversity: Gender diversity is an
economic issue, the earlier the
companies realize this better.
Theres only 1 women director on
board. Jet Airways should compile
a database of more board ready
women and groom them to reach
the pinnacle.
Overlapping
Membership
across
committees:
While
cross-functional approach is the
key approach for solving business
problem,
maintaining
same
members across committees will
not serve the purpose. Increasing
the
Committee
members
strength while reducing their
positions of responsibilities will
help
realize
efficiencies.
The figure below shows a sample
matrix that is a more efficient
representation of board members
across various committees along
with their responsibilities.

Ideal Content for Corporate

Governance
Corporate
Governance
4
Pronged Approach:
The Corporate governance acts as
an enabler to the application of
Risk Management,
Internal control of operations, &
Internal controls for financial
reporting &
Misconduct.
It
leverages
organizational
strategies
(Growth
strategy,
Branding strategy, Market Entry
Strategy,
product
strategy,
operations strategy) to create a
well-developed
Internal
audit
strategy.
These are supported by critical
enablers for IA strategy to run the
IA strategy like a business (Define
plan- execute- Evaluate).
Clearly Jet airways needs to
define their corporate governance
report as per the mentioned
approach
instead
of
merely

Defining Board Matters - Board's Conduct of Affairs, Principle duties of the board members
Delegation by the board: Key features of the board processess, Attendance on board &
board committee meetings
Boards approval on various strategies
Induction & training of members, Breiefings updates & review on trainings provided to the
board of directors
Board Size, composition & guidance, Directors Independence view

Role of Non executive directors

Board Matters : Chairman & CEO, Board Membership, Board performance, Access to
information
Renumeration Matters, Disclosure of renumeration

Accountability & Audit: Internal audit, audit committee

Shareholders Right: communication, interaction with shareholders

Bench Marking against Global Practices Economic

Reporting
Parameters
Financial Measures
adopted
Net Revenues
Net Profit
Operating Income
Profit Before Tax
Operating Margin
Earnings Per Share
Net Margin
EVA
EBITDA

Jet
AIRFRANCE
Airways KLM
Economic Reporting

DELTA

LUFTHAN
SA

Yes

Yes

Yes

Yes

Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes

Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes

Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes

Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes

Bench Marking against Global Practices Environmental &

Social Reporting
Jet
AIRFRANCE
Airways KLM
Environmental Reporting
Emissions
No
Yes
Noise
No
Yes
Fuel Efficiency
No
Yes
Carbon Neutral Growth
No
Yes
Energy Efficiency
No
Yes
Waste Reduction
Yes
Yes
Environmental
No
Yes
Compliance
Social Reporting
Internal Social Policies
No
Yes
Employee Goals
No
Yes
Supply Chain Goals
No
Yes
Customer Goals
No
Yes
Training Goals
No
Yes
Quality of Life
No
Yes
Workplace Opportunities
No
Yes
Parameters

DELTA

LUFTHAN
SA

Yes
No
Yes
Yes
Yes
Yes

Yes
Yes
Yes
No
Yes
Yes

Yes

Yes

No
Yes
Yes
Yes
Yes
No
No

Yes
No
No
No
Yes
No
No

Key Observations & Recommendations

1. Jet Airways is compliant with the SEBI and government regulations in terms financial reporting with all
relevant facts and figures published in its annual report
2. The table shows certain lags in terms of environmental and social reporting
3. A comparison with global airlines shows that Jet Airways scores 1/7 in environmental reporting with global
players having a much higher score (Lufthansa and Delta: 6/7 and Air France KLM: 7/7)
4. Similarly, in case of global benchmarking for social reporting, it is observed that Jet Airways lags far
behind the international players with no reporting in social and internal controls segment while Air France
scoring 7/7 followed by Delta (4/7) and Lufthansa (2/7)
5. Reporting on sustainability standards followed by the company has not been found adequate
6. It is recommended that the company puts in place more efficient and transparent reporting standards that
match with global standards
7. As part of the project, under the Aviation Reporting Standardization service, our team would enable
and aid your company in establishing companywide practices that capture various efficiency
improvement numbers on a y-o-y basis
8. Under the same service, with further consulting and inputs from your management, environmental
reporting parameters can also be included that would measure the emission figures and carbon credits
earned by the company
9. Also, our team under Corporate Goals and Training domain would facilitate your management in
setting up systems across divisions to improve the goal setting and achievement from customers,
employees, suppliers, operations and workplace improvement perspectives

Costing
Assumptions

Phases
Assessment
Phase

Pre
Implementati
on Phase

Implementati
on Phase

Post
Implementati
on Phase

1. The project duration has

been assumed as 12
weeks or 3 months.
2. Number of working days
in a week has been
assumed as 5 working
days.
3. One man day has been
assumed as 8 man hours.
4. All the costing has been
done on man hour basis
5. The project has been
divided in diferent
phases and diferent
number of sources have
been allocated to each
phase
6. The internal costing has
been marked up by 100%
as the margin required
was at least 65%
7. Maximum permissible

Phase Wise Details

End Result
1.
2.
3.
4.

We have given attractive discount on various level of resources.

These are the maximum permissible discounts giving more discounts will reduce our margin below 65%
If no discount is given then the margin is 100% as we marked up the internal costing 100% earlier.
The total cost for assessment phase is 4,492,500.0 INR, for pre implementation phase 2,020,000.0 INR,
for implementation phase 4,115,000.0 INR and for post implementation phase 2,020,000.0 INR
5. The margin from assessment phase is 64.45% while the total margin from implementation phase is
66.21%.