Best Transaction Management Solution: Air India Limited

Air India is the flag carrier airline of India serving 102 domestic and international destinations.

As Air India transitions to a privately held business with ambitions to grow domestically and internationally, treasury transformation was identified as a key area of improvement.

Air India had been operating a highly decentralised treasury infrastructure. To ensure transparency, controls, efficiency and security in its processes, it sought to work with one to two cash management banks to overhaul its overseas operations, including:

• Bank account rationalisation – rationalisation of the 300+ bank accounts across 34 locations.
• Improving connectivity and centralisation – with no ERP connectivity in place, Air India’s in-country teams had previously relied on cumbersome payments processes with local banks, which were either done manually or via e-banking portals. Balances were compiled through spreadsheets with HQ treasury relying heavily on local teams for accuracy of data.
• Cost control – banks were charging different and excessive transaction fees given Air India had limited negotiating power with its banks.
• Improving liquidity management – decentralised operations meant every location was managing its own cash resulting in delays in information to HQ. This often created a requirement for external borrowing; a new approach was required.
• Navigating regulatory changes – privatisation brought about the need to comply with various additional regulations, previously not applicable as a government entity. The company also needed a bank that could support their growing overseas and FX operations, in accordance with the Foreign Exchange Management Act (FEMA).

As part of the transformation, the company also sought support from its banks to complete the acquisition of a combination of long-haul and narrowbody planes that would strengthen its network.

After a thorough RFP process, Air India mandated HSBC as its global cash management bank.

Air India completed the first phase of its treasury transformation in December 2023, with the company successfully streamlining its cash and liquidity management efforts in 15 markets.

The company rationalised over 150 accounts to just 16 to support multiple payment types across locations for vendor payments, payroll and statutory payments.

Utilising its existing HSBCnet and host-to-host profile with HSBC in India to other locations, has enabled centralised control of accounts from the company’s Indian HQ. The use of bank-agnostic XML V3 file formats and MT940 end-of-day statements further facilitate automated reconciliation of centralised payments for improved control.

Regulatory filings for setting up a USD cash pool in Singapore to centralise payments for fuel, airplane lease, etc and support short-term borrowing and deposits in case of liquidity mismatch have been secured. The company has also leveraged the bank’s liquidity management dashboard for a single view of its cash positions.

“We have also adopted corporate cards across multiple markets for ease of making payments in any emergency/‘flight on ground’ situations, eg for hotels and taxi,” explains Harish Pai, Head Treasury.

The next phase is expected to be completed within a year.

In just a year, Air India has modernised its archaic treasury operations while becoming the first airline in India to set up a financing leading company in GIFT City, aligning with its global rebranding efforts to position the company as a world class airline.

The project proved highly complex, especially as Air India was transitioning from a government-owned to a privately held business while also consolidating various airlines into two entities.

• Cost savings
• Headcount savings
• Number of banking partners/bank accounts reduced
• Process efficiencies
• Increased automation
• Risk mitigated
  
• Improved visibility
• Errors reduced
• Manual intervention reduced
• Increased system connectivity
• Future-proof solution
• Exceptional implementation (budget/time)