aviation audit

Aviation & Aerospace Sector

“Our Ground – Work Takes You Sky High’’

-Abhishek Yelne

Introduction

Aviation is derived from avis, the Latin word for bird. Many cultures

have developed devices which fly in the air from earliest projectiles

like stones and spears to hot air balloons and kites which fly in the air

along with man. There are stories of human flight such as the stories

of Icarus, and Jamshid in Persian myth, and later, somewhat more

credible claims of short-distance human flights appear, such as the

flying automaton of Archytas of Tarentum (428–347 BC), the winged

flights of Abbas Ibn Firnas (810

Century), and the hot-air Paassarola of Bartolomeu Lourenço de Gus

(1685–1724). The modern age of aviation began with the first un

tethered human lighter-

air balloon designed by the Montgolfier brothers. However the balloon

was only able to fly in the low winds which was

was replaced by elastic balloons. Jean

human-powered dirigible in 1784 and he himself crossed the English

Channel in one of them in 1785. While there are many competing claims

for the earliest powere

accepted date is 17th December 1903 by the Wright brothers.

The Wright brothers were first to fly in powered and controlled

aircraft which was combination of earlier flights gliders controlled but

not powered and free flight powered but not controlled.

Now we come to India it is expected to be amongst the top five

nations in the world in the next 10 years in the aviation sector. On the

flights of Abbas Ibn Firnas (810–887), Eilmer of Malmesbury (11th

air Paassarola of Bartolomeu Lourenço de Gus

1724). The modern age of aviation began with the first un

-than-air flight on 21st November 1783, in a hot


was only able to fly in the low winds which was recognized shortly and

was replaced by elastic balloons. Jean-Pierre Blanchard flew the first

powered dirigible in 1784 and he himself crossed the English


for the earliest powered, heavier-than-air flight, the most widely

December 1903 by the Wright brothers.



and free flight powered but not controlled.



Eilmer of Malmesbury (11th

air Paassarola of Bartolomeu Lourenço de Gusmao

1724). The modern age of aviation began with the first un-

November 1783, in a hot


recognized shortly and

Pierre Blanchard flew the first

powered dirigible in 1784 and he himself crossed the English


air flight, the most widely-

December 1903 by the Wright brothers.





sidelines of the International Civil Aviation Negotiation (ICAN)

Conference, Ms Pratibha Patel, Ex-President of India, highlighted that

currently, India is the 9th largest civil aviation market in the world.

The Ministry of Civil Aviation, Government of India (GOI), has decided

to allow the Indian Scheduled Carriers including Air India to utilize the

allocated bilateral till the time they reach the maximum permissible

limit under Air Service Agreements (ASAs). Air India's operational

plan will receive due consideration in allocation of the traffic rights

and entitlements.

The Ministry has also supported the approach outlined in the

Inter Ministerial Group (IMG) discussion -paper in this context.

Keeping in view the recent developments in the civil aviation sector and

in order to modernize and update the existing Air Services

Agreements (ASAs) with foreign countries as per the ICAO templates,

the Ministry of Civil Aviation has signed ASAs with Indonesia and

Brazil, besides initializing ASAs with Jamaica, Dominican Republic,

Mozambique, Uganda, Trinidad and Tobago .

After the invention of Airplane the airplane, the safety of

passengers in a flight is of foremost consideration. “One World-One

Sky-One Mission: SAFETY” is the foremost consideration of the

airport authority India. The ICAO (International Civil Aviation

Organization) document 9859 chapter 12 lays down the requirement of

issuing a Safety Policy by the service providers and establishment of

Safety Management System (SMS) based upon the policy. The

guidelines for Safety policy and SMS framework are also issued by the

ICAO document {entitled “ICAO Regional Workshop on SMS and State

Safety Program (SSP) Implementation”}.

Maintenance includes the installation or removal of a component from

an aircraft or aircraft subassembly,

Elementary work, such as

plates, spark plugs, checking cylinder compression, etc.

Servicing, such as refueling, washing windows:

Any work done on an aircraft or aircraft component as part of

the manufacturing process, prior to issue of a ce

airworthiness or other certification document.

Directorate General of Civil Aviation (DGCA) compliances:

India has been found to be fully compliant with the international

safety standards by an audit done by the Federal Aviation

Administration (FAA) of the United States of America. Before

permitting a foreign airline to operate in the USA, the FAA of US,

backed by the US legislation, conducts an audit of the concerned

country’s Civil Aviation Authority (CAA) / DGCA to ensure its capability


an aircraft or aircraft subassembly, but does not include:

Elementary work, such as removing and replacing tires, inspection


Servicing, such as refueling, washing windows:


the manufacturing process, prior to issue of a ce

airworthiness or other certification document.




ation (FAA) of the United States of America. Before





but does not include:-

removing and replacing tires, inspection



the manufacturing process, prior to issue of a certificate of




ation (FAA) of the United States of America. Before




for providing safety certification and continuing oversight on its

international carriers.

The audit is conducted under an ‘International Aviation Safety

Assessment Program’ (IASA) and focuses on the country's ability to

adhere to standards and recommended practices of International Civil

Aviation Organization (ICAO) for aircraft operations and maintenance.

EXISTING SECURITY MEASURES

Some countries may have an agency that protects all of their

airports (such as Australia, where the Australian Federal Police is

responsible for security at major airports); in other countries like the

United States, the protection is controlled at the state or local level.

The primary personnel will vary and can include:

1. A police force hired and dedicated to the airport

2. A branch of the local police department stationed at the airport

3. Members of the local police department assigned to the airport

as their normal patrol area

4. Members of a country's military

5. Members of a country's airport protection service

6. Police dog services for explosive detection, drug detection and

other purposes.

7. Other resources may include:

a. Security guards

b. Paramilitary forces

c. Military forces

Aviation Audit

What is an audit?

An audit may be defined in many

different ways and there are a number

of issues to consider too when defining

'What is an audit?' Considerations such

as the type of audit being conducted and

the industry within which an audit is being undertaken need to be taken

into consideration as definitions vary accordingly. However, broadly

speaking, an audit is defined as “a formal and planned event carried out

in accordance with documented procedures by appropriately trained

personnel”.

At Aviation Auditors we can provide and structure our aviation

auditing services according to the needs of each of our client’s. Our

audit procedures can be applied to any part of the aviation industry

such as:

RPT

Charter

Commercial Operations

Flying Training Schools

War bird Operators

Parachute Operators

Gliding

Ballooning

Emergency Medical Services.

Broadly speaking in the aviation industry, audits are an integral part

of any Safety Management System (SMS). Audits, within this industry,

are most often used to help benchmark an organization and to help

management gain a clear view and evaluate where the organization

currently sits against its own systems, procedures and management

plans.

International standards Organization (ISO) defines an audit as a

“systematic, independent and documented process for obtaining audit

evidence and evaluating it objectively to determine the extent to which

audit criteria are fulfilled”

There are many different kinds of audits and in the main they fit into

three broad categories:

1. First,

2. Second or

3. Third party audits.

1. First party audits, often referred to as ‘internal audits ‘are

defined as an organizational audit of its own system and

procedures to satisfy ISO 9001:2008 8.2.2 and the relevant

regulatory requirements. The objective of a first party audit is

to provide management with a review methodology and

feedback mechanism that will assure maintenance and

development of the quality system.

2. Second party audits, often referred to as ‘external audits’, are

defined as an audit performed on an organizations suppliers and

subcontractors as required by ISO 9001:2008 7.4.1. The

objective of a second party audit is to measure the performance

of suppliers and or sub-contractors.

3. Third party audits often referred to as ‘extrinsic audits’ and are

defined as an assessment, by a body commercially and

contractually independent of the organization, its supplies and

customers. Commonly, this is an assessment by a certification or

regulatory body to a quality or safety system standard. The

objective of a third party audit is to determine the quality or

safety system has been documented and implemented to a

specific standard.

Aviation auditing is the very foundation of what we do. Aviation

auditing service is tailored to each individual client’s requirements,

which may include;

Internal audit

External audit

Contractual

Compliance

Assurance

Safety Management System

Quality Management System etc

You can specify the scope of the audit, whether it is on a part of your

organization, or, your entire organization, or even on a third party

organization that you have contracted or wish to contract.

Corporate Aviation Auditing

Corporate aviation auditing service is tailored to each organization as

required. Service can be as simple as a onetime audit, or, we can

provide a full audit service on a regular basis.

We understand that running a corporate aviation service can be very

demanding which is why we are excited to offer our services.

We can offer you a suite of products and services tailored to your

requirements, such as;

1. Auditing, first, second & third party accident and

2. Incident investigation

SMS Auditing

QMS Auditing

Surveillance auditing

At Aviation Auditors

we are independent,

professional, and confidential and operate in a timely

manner.

QMS Auditing

Quality Management Systems (QMS) auditing is a key component

of a functioning QMS. We can conduct an independent audit of

all, or, part of your QMS in a professional, timely and confidential

manner.

This also allows us to find any problems within your QMS so that

they can be rectified. An independent audit is crucial in assessing

your QMS.

When we conduct an audit we observe conformance to your

systems and processes and find conformance or non-conformance.

When we find non-conformance we work with you to resolve the

issue so that our final report states that conformance has been

achieved. This is largely your responsibility to achieve, but we will

work with you. In some circumstances a non-conformance may be

published in your final report.

We find that this can occur when it is more responsible to take

time to rectify an issue rather than push through a solution that

may not be in the best interest of all involved.

SMS Auditing

Aviation Safety Management Systems (SMS) auditing is a

key component of a functioning SMS. We can conduct an

independent audit of all, or, part of your SMS in a

professional, timely and confidential manner.

Professional Opportunities

Industry overview, sectoral snips and Government initiatives

The aviation sector globally, though growing is recently experiencing

turbulent weather with Aviation Turbine Fuel ( ATF) price volatility,

Carbon emission issues, funding challenges and teething market

competition. The industry drivers of aviation sector encompass:

Price sensitive Service industry

Seats are perishable inventory

Yield management

Labor relations

The key success factors for any aviation company to survive, sustain

and scale up are as:

On time arrivals, departure, flight operations

Customer service, Food quality, frequent flier programs fewer

customer complaints,

Denial of service

Luggage and Cargo handling Fast check-in and booking

Facilities

Safety records, compliance with ICAO / DGCA Norms

In India, there has been lot of action in this domain. While Low Cost

Carrier (LCC) Indigo has off late, been granted international route

licenses by Director General of Civil Aviation (DGCA) there is

persistent crisis both in our National Carrier Air India (NACIL) and

Kingfisher Airlines (KFA).

The government has taken proactive measures to help sustain the

aviation sector in its flight to greater heights, these include

Allowing direct ATF imports by private players, reducing

cost burden (fuel cost accounts for nearly 49% of total

operating costs of airline companies)

Softening Sales tax for sale of ATF and engine oil

Eliminating Service tax on air-tickets Consideration of 49 %

FDI in Aviation sector (proposed in Finance Bill 2012) AI-IA

merger and consequent Air India restructuring and bailout

package.

Consulting opportunities for Chartered Accountants

The success of AI-IA merger and future sustainability, like in Case of

any other airlines, depends not only on a robust restructuring / funding

package but also on operational restructuring and turnaround

techniques. CA s can play a vital role in this domain, broadly as in:

1. Financial consulting – sourcing funds through External Commercial

Borrowings ( ECB), financial restructuring , cost rationalization

2. Structuring funds through PPP model for setting up of Greenfield

airports( e.g. Navi Mumbai), expansion and modernization of

existing airports ( Kolkata Netaji Subhash International

Terminal, T3 of Delhi IGI Airport etc)

3. Assisting in fleet acquisition through outright purchase ( Boeing

787 Dream liner by Air India) or lease of aircrafts

4. Operational structuring – integration and modernization of HR

policies ( as in Case of AI-IA merger), otherwise pilots & ground

personnel strike is inevitable leading to revenue loss , reputational

damage and competition risk Development , analysis and

benchmarking of key performance metrics – e.g.. Cost per

Available Seat Kilometer ( CASK), Revenue per passenger per

Nautical mile, Capacity / fleet utilization

5. Consulting service for corporate / High Net worth individuals

with private jets.

6. Commodity hedging: ATF pricing and ensuing forex risk

management.

7. Compliance with ICAO & DGCA standards – Chartered

Accountants are emerging as top professionals in Aviation audit

to ensure ongoing compliance with International Civil Aviation

Organization ( ICAO) norms, DGCA mandates and standards set

up by Airports Authority of India ( AAI)

8. ICAO Operational Safety Audit (IOSA) – providing ongoing

adherence, compliance etc

9. Process improvement consulting like Balanced Score Card, 6

Sigma etc

Consulting and internal audit of aviation and aerospace sector

preferably requires specific domain knowledge, international aviation

audit / QMS certifications, understanding of route navigation, radio

telephony, aviation regulations including ICAO norms, IATA Standards,

Aircraft Act, 1934 etc. The focus of internal and operational audit

addresses –

Operational Control/Dispatch Flight Operations

Engineering & Maintenance of aircrafts, ground handling

equipments

Cabin Operations Ground Operations

Management & Quality

Safety, Security and sustainability

Cost control, reduction and rationalization

Conclusion:

With increasing challenges in this sector, there

is a growing trend in consulting practice,

especially by well-equipped Chartered

Accountants. It is expected that in the foreseeable future, with our

value additive service, we CA s shall be able to express to the aviation

sector – ‘’our ground work takes you sky-high.’’

There are many opportunities under this Civil Aviation audits. Financial

consulting, Commodity hedging etc a professional can developed himself

new era of Civil Aviation and can provide and structure our aviation

auditing services according to the needs of each of our client’s.

-Abhishek Yelne

[email protected]

-Maharashtra.

-India

aviation audit

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