Neo-Nair (get it?): The merger story of Air India and Indian (airlines) PART 2 – The follies committed by and the eventual light at the end of the tunnel for India’s national carrier.

It is critical to note that the merger did have proper practices put in place to service the changes being brought about in the organization, despite the image the whole issue has at its crust:

The erstwhile CMD and Jt.MD of the Company worked together to steer the merged company on its journey to success. The merged entity comprised 5 Strategic Business Units viz. Corporate Services Group, Passenger Airline, Cargo, Low Cost Airline, MRO (Maintenance, Repair and Overhaul) & Ground Handling.
These SBUs were managed as focused businesses, capable of offering a full suite of services, under the guidance and direction of the Corporate Services Group, Appointed senior management team Corporate Directors, SBU Heads, Deputy Managing Director and Executive Directors to varied areas in the Corporate and SBU structure; a cross-functional Integration Cell along with sub-groups was formed to plan and coordinate all integration activities. Jt. MD was the head of the Integration Cell and worked closely with CMD in planning the integration of various facets of the organization. The Integration Cell coordinated the detailed planning and implementation of integration activities which were driven by the functional/SBU Heads. These functional/SBU Heads draw upon the integration plans drawn by various working groups. Several communication channels were established to receive feedback and inputs during the merger process. A three-tired Grievance Redressal Cell consisting of members at the highest level s to look into any specific grievances that may arise was approved.

We need to understand, although, that the personnel force that resulted from the merger led to tremendous amount of redundant talent across the organization. At the cost of being slightly exaggerating, the organization had nearly twice as many employees doing the same work with half the efficiency. That primarily defeated the purpose of the merger, unless measures to rightsize the airline and restructure it were put in place. Even post merger the pilots of the two companies operated separately till 2012. This has led to strikes being undertaken by pilots on four occasions since 2009.

One of the basic objectives of merger of erstwhile Air India and Indian Airlines has been to provide an opportunity to leverage skilled and experienced manpower available with both the companies to their optimal potential, and evolve an integrated international/domestic footprint, which would significantly enhance customer orientation and provide an opportunity to fully leverage strong assets and capabilities. However, such objectives are yet to fructify completely for want of adequate progress on the ground as more or less the two erstwhile airlines continue to live in the heart and mind of the employees. One of the most difficult tasks in merger process was integration of human resources. The Company had decided to take up this task in a phased manner and assured that will try to evolve category/level specific solutions in a fair and transparent manner. In respect of category of employees represented by different recognized union/associations, due participation of such union/associations assured to be allowed and had promised to take their views into account which were deprived and not taken into consideration any suggestions forwarded by the recognized unions during the course of integration of human resources. This attitude of the Ministry/Management left a deep wound in the heart of the employees. With regards to erstwhile Air-India employees, promotion was counted on the basis on number of year’s service put in, while in the erstwhile Indian Airlines this exercise was not followed. Juniors of erstwhile Air-India rules the seniors in service from erstwhile Indian Airlines due to which there is always unrest at the working places.

These impediments to survival had literally put Air India on ventilating support from the government. So as to leverage the joint forces of the two airlines and reap economies of scale, the merged entity placed an order for 100 aircrafts. These aircrafts as a result were never fully utilized and ran uneconomical and unprofitable routes. Despite continuous bailouts given in each year (2009-2012) to the airline post merger, Air India had failed to see any signs of operating profits. The striking pilots have left passengers in a state disarray and helplessness.

We can pinpoint a few major pitfalls to this merger malady that has struck Air India for so long:

· Leadership: International routes were Air India’s Cash Cows that reaped most revenue of all their operating routes. The lack of consistent and definitive action by the leadership and ministry to resolve the pilots strike greatly stalled these routes operating and made them lose ground to local and international players. In stark contrast to what needed to be done, Air India went through four Chairman-cum-Directors in a span of 2 years that greatly impacted organizational direction. Such dereliction of the power that is needed at the helm of an organization, especially during at a time of a gargantuan overhauling of work practices.

· The merger brought the Airplane to Employee ratio to 214 per plane (Singapore Airlines has 161 while British Airways has 178). Such largesse on the personnel end could only be remedied by transferring employees to proposed new units, that necessarily are dealing with ground handling, maintenance, repair and overhaul operations. But the workforce that are being talked about in the move, demand deputation than a transfer.

· The manner in which the workforce integration took place was an ingredient for an spoilt broth. Seldom was any attempt made o standardise hiring policies for the rank and file. The two companies had 5 and 6 days working weeks respectively. Indian Airlines pilots were promoted unconditionally once in six years while Air India pilots complained they got their turn after 10 years - if there was a vacancy. Ground handling teams of the two giants continue to operate separately, as did the pilots. "Before the merger, due diligence on HR issues was very poor," says CAPA'S Kaul.

· Some of the gaps are being addressed but the process has been painfully slow. Five years after the two airlines merged, staff operating below the level of Deputy GM (DGM) have still not been integrated into the merged entity, creating organization structural obesity.

Even before the report by the Dharmadhikari Committee, set up to look into Air India's HR issues, was released, Air India CMD Rohit Nandan told BT: "It will not be an easy report to deal with." The panel has suggested uniform working hours and pay scales, among other things. But that, at best, is a beginning.

In order to make this an even sided perspective of affairs, it is critical to take into account what all went right with the merger which came to fruitition, albeit a little later in time. As all know, change natural or deliberate, takes its own time to manifest itself. Here is the status of Air India as of today:

Utilisation and availability of aircraft increased resulting in improved market shares. Financial performance improved along with flight timing performance being improved. Air India became a member of Star Alliance, and the code-sharing of the aircrafts has now been done successfully. Holiday packages to new destinations on the air India network have been introduced to keep up with the pace of private carriers. AI created new O & D fares combinations that connect over 180 cities in Europe and US and 58 cities in India. Passenger can now connect from a domestic flight to an international flight in a single check in process.”Unified Face to Customer” started which includes new livery, new in-flight amenities and new signage at many locations. There was an increase in non-stop flights, rerouting of flights from overlaps into new destinations and standardization of fares on overlap routes. Flight timings changed. Standardized hub and spoke feeder flights have been implemented providing daily domestic connections from Chennai, Bangalore & Hyderabad.

The common utilization of equipments, improved work-process, common fostering of trained manpower, better training systems and enhanced contracts with other airlines/ground handlers made the organization more streamlined. Low Cost Airline viz Air India Express serves domestic and international markets via point to point connectivity. Sharing of instructor resources, common courses and common training is done successfully for crew. Tele- check-in introduced. AI modified the systems to implement seamless transfer of passengers between domestic and international flights. Internet booking introduced. E-ticketing introduced. This will endure that partner airline all over the world will able to sell connecting tickets with Air-India an important requirement to ensure passenger retention.

Some of the major milestones achieved are:

Putting in place a three-tier governance structure to manage the Company.
Laying down detailed scope of 6 SBUs, role of Corporate Functional Directors, SBU Heads and Executive Directors
Notifying Organisational Structures including slotting of personnel at the level of Functional Directors/Executive Directors/General Mangers and Dy.General Managers in respect of majority of the functions/SBUs.
Finalisation of seniority integration principles of various posts at the level of Executive Directors, General Managers and Dy. General Manager sin all cadres.
Finalisation of reporting relationships at domestic outstation and Star Alliance plans
Common branding at key customer touch points along with Passenger Service System vendor being finalized.
Administrative and Financial powers for the merged entity.
Request for proposal of Clean Sheet exercise released and offers being processed.
Integrated schedules and communication programme being created and taken up
The synergy benefits on annualized basis have been higher than what has been projected.
New IBM mainframe system Z-9 has been installed and phase one migration of the Passenger Service System of the new system has been successfully completed.

We can see through this elaborate account of the merger, that the road ahead of AI is not one that is without any obstacle or impediment. All one can hope for is that the management and employees face whatever comes their way in a hand in hand manner than the more popular cloak and dagger manner.