The merger story of Air India and Indian (airlines) PART 1 – The follies committed by and the eventual light at the end of the tunnel for India’s national carrier.

Among the several mergers and acquisitions that have colored the Indian business panorama over the last 14 years of the 21^st century, none is more tumultuous and attention grabbing than the Air India-Indian(airlines merger. Air India is the national carrier for India and is owned by Air India limited, an entity of the Government of  India. It is the 2rd largest airline in the country , proceeded only by IndiGo and Jet Airways. It is headquartered in New Delhi and has secondary hubs in several locations in the country. Indian, formerly Indian Airlines (Indian Airlines Limited from 1993 and Indian Airlines Corporation from 1953 to 1993) was a major Indian airline based in Delhi and focused primarily on domestic routes, along with several international services to neighbouring countries in Asia.
It was state-owned, and was administered by the Ministry of Civil Aviation. It was one of the two flag carriers of India, the other being Air India.

The declining market, operating and financial performance posed a serious threat to future survival of the two airlines on a stand-alone basis.  Erstwhile Air India  was focusing largely on international sectors as well as few domestic sectors and erstwhile Indian Airlines focusing largely on domestic sectors and few sectors of the neighbouring countries which was overlapping  the networks of both the airlines. The airline officially merged into Air India on 27 February 2011

Reasons for the same can be outlined as follows:

• ·         To scale new horizons and establish fresh benchmarks for service, efficiency and reliability, making Air India a force to be reckoned with in the global aviation industry
• ·         To become a world class airline and provide the finest service in the areas where air India operates, hence becoming  globally competitive
• ·         To harness the opportunity to leverage combined assets, infrastructure and capital better and build a stronger sustainable business, so as to create the largest airline in India and comparable to other airlines in Asia.
• ·         Provide an integrated international/domestic footprint which will significantly enhance customer proposition and allow easy entry into one of the three global airline alliances.
• ·         Enable optimal utilization of existing resources through improvement in load factors and yields on commonly serviced routes as well as deploy “freed up” aircraft capacity on alternate routes.
• ·         Provide an opportunity to leverage skilled and experienced manpower available with both the airlines to the optimum potential.
• ·         Provide maximum flexibility to achieve financial and capital restructuring through revaluation of assets.
• ·         To strive for and achieve client satisfaction, so that able to transform Air India into an organization people are happy to deal with.
• ·         Constructive involvement of all employees, so that employees take pride in their job, their organization and themselves, creating excellence in each and every sphere of activity, so that Corporate image is refurbished.   

In the year 2007, as announced by the Government of India, the Merger of Air India and Indian Airlines took place. Four years later, in February 2011, Air India and Indian Airlines merged along with their several subsidies to for Air India Limited. From a 2007 standpoint, the merger of the two carriers was seen as a profitable strategy that could reap the PSU mass gains through operational economies. 

This decision came at a time when there had been a continuous escalation of Air Turbine Fuel Charges and growing competition from private and low cost carriers. Each additional buy of an aircraft was not being able to justify its own cost, in terms of efficiency and capacity utilization, due to falling passenger traffic.  The same time, discussions for making Air India a part of the Star Alliance, which is an international alliance of national carriers that seeks to, derive benefit from leveraging bilateral rights. The operations of both airlines, in reality, had never been the same since the government allowed private players into the aviation industry.  

The merger was viewed by the management as a panacea to all the above woes that ailed either national carrier, that served the same motto but under different incorporations for so long. The Management personnel have worked closely with the Integration Cell in planning the seamless integration of various facets of the organization. They were coordinating the detailed planning and implementation of integration activities which was driven by the functional /SBU Heads.  Management was working on gradually transitioning the organization to the new structure as well as other priority areas such as route and network integration, seniority integration, compensation harmonization etc. The management personnel were to attend to existing duties in such a manner that there will be no disruption in regular business or allow a vacuum in decision making in their erstwhile or new functions. They drew various integration plans for various working groups. The key focus areas were on Yields and profitability, on time performance and schedule reliability, product consistency on fleet and improvements in fuel consumption practices. One of the difficult tasks the management faced in merger process is with regard to integration of human resources.

 Albeit all the said and done elements of the merger being settled, till this date there still exist disparities between workers of the two companies on several issues. To cut a long story short, the merger was not a success and the strategy couldn’t see its fruitition due to innumerable operational loopholes.

On the employee end of affairs, the merged personnel faced several changes due to their being at the focal point of the newly born entity:

 There was a blanket ban on Recruitment hence not recruitment against any retirement. Contractual/Casual employment introduced in major places where against permanent post. Children Educational allowance i.e. Scholarships were abolished. All ’Travel on Office duty’ to other stations should return on the same day – No hotel accommodation, Temporary posting of all employees discontinued and travel was only to be on economy class. Advances given for festivals  stopped. All the training programs restricted, conferences/seminars/meetings which were held outside the premises stopped. Reimbursement of State owned Holiday Home charges/ITDC facility discontinued. Usage of Official telephone for personal use discontinued. The encashment of leave stopped .Free use of company vehicles discontinued. Salaries paid after 2-3 months. PLI  were withheld. Re-imbursement of Medical bills are not paid to the employees for months together. Medical bills of the hospitals not paid hence employees do not get medical facilities from the panel hospitals. Even after 5 years of formal merger, erstwhile AI and IA are still continuing with separate canteen facilities for their employees with different rates and subsidized food.

 Both AI and IA are still maintaining different working hours for their employees. Air India is following 6 days a week schedule whereas IA follows 5 days a week schedule. Uniforms worn by different relevant categories of employees in the erstwhile airlines are not made common. Final Service Rules & Regulations are not yet made hence wherever applicable erstwhile airlines rules & regulations are made applicable to employees depending on the cases. Participation of unions/associations was not allowed during the integration process or their views are not taken into account.  Many employees are terminated/ removed from the services due to which the employees are wounded hence still continue to work for the airline without any interest in their day to day activities.  

Apart from those mentioned above,the reasoning that contributed to the unsuccessful merger were, firstly, the government  failed to keep its promise of equal pay to all grades of workers in the merged entity – they persisted to have different pay structure, training schedules, working hours , career progressions and leaves.

To be continued in the next post...