In 2007, the Government of India announced that Air India would be merged with Indian Airlines. As part of the merger process, a new company called the National Aviation Company of India Limited (NACIL) was established, into which both Air India (along with Air India Express) and Indian Airlines (along with Alliance Air) will be merged.
On 27 February 2011, Air India and Indian Airlines merged along with their subsidiaries to form Air India Limited by the Ministry of Civil Aviation headed by the Civil Aviation Minister Praful Patel.
Perhaps the biggest mistake relating to Air India was made that is the decision to merge the erstwhile Indian Airlines into the flagship carrier. In 2007, in a report on the national carriers, Accenture had highlighted two factors as being responsible for their sub-optimal performance:
1.) An ageing fleet and;
2.) The fact that the two existed individually.
INTRODUCTION OF THE ORGANIZATION:-
Air India was founded by J. R. D. Tata in 1932 as Tata Airlines, a division of Tata Sons Ltd. (now Tata Group). On 15 October 1932, J. R. D. Tata flew a single-engine De Havilland Puss Moth carrying air mail (postal mail of Imperial Airways) from Karachi's Drigh Road Aerodrome to Bombay's Juhu Airstrip via Ahmadabad. The aircraft continued to Madras via Bellary piloted by former Royal Air Force pilot Nevill Vintcent.
Following the end of World War II, regular commercial service was restored in India and Tata Airlines became a public limited company on 29 July 1946 under the name Air India. On 1 August 1953, the Government of India exercised its option to purchase a majority stake in the carrier and Air India International Limited was born as one of the fruits of the Air Corporations Act that nationalized the air transportation industry. At the same time all domestic services were transferred to Indian Airlines. On 11 June 1962, Air India became the world's first all - jet airline.
HISTORY AND OVERVIEW:
Boeing 747- 400 in 1970-2007 Palace In The Sky livery in 1970, Air India move dits offices to downtown Mumbai/Bombay. The next year, the airline took delivery of its first Boeing 747200B named Emperor Ashoka and registered VT-EBD. This coincided with the introduction of the 'Palace in the Sky' livery and branding. In 1986 Air India took delivery of the Airbus A310-300; the airline is the largest operator of this type in passenger service. Air India introduced a new "sun" livery that was mostly white but had a golden sun on a red tail. Only applied to around a half of Air India's fleet, the new livery did not succeed, as the Indian flying public complained about the phasing out of the classic colors.In 1993, Air India took delivery of the flagship of its fleet when the first Boeing747-400 named Konark and registered VT-ESM made history by operating the first non-stop flight between New York City and Delhi. In 1994 the airline was registered as Air India Ltd. In 1996, the airline inaugurated service to its second US gateway at O'Hare International Airport in Chicago. In 1999, the airline opened its dedicated Terminal 2-C at the newly renamed Chatrapati Shivaji International Airport in Mumbai. On May 2004, Air India launched a wholly-owned low cost airline called Air India Express.
Air India Express connecting cities in India with the Middle East, South East Asia and the Subcontinent. On 8 March 2004, International Women's Day, the airline operated an "All Women Flight" from Mumbai to Singapore.
In 2007, the Government announced that Air India would be merged with Indian Airlines. As part of the merger process, a new company called the National Aviation Company of India Limited (or NACIL) was established, into which both Air India (along with Air India Express) and Indian Airlines (along with Alliance Air) have been merged. Once the merger is complete, the airline - which will continue to be called Air India - will continue to be headquartered in Mumbai.
On 1 March 2009 Air India announced that it would make Frankfurt Airport its Global Aviation Hub for Flights to and from India to North America.
THE MERGER:
The report by Accenture had gone on to say that merger of the two entities and replacement of the ageing fleet would result into profits estimating of Rs 1,000 crore in the first year itself which does not happen.
MAIN ISSUES & PROBLEMS:
Air India is operating under a huge amount of debt and accumulated losses so far. The decision of merging the two entities had severely affected the company & their Employees. Most of the time ,delayed or partly payments of salaries resulting to job dissatisfaction and ultimately leading to protest and strikes by the pilots, cabin crew, ground staff and maintenance crew.
Another issue was the decision of acquiring a new fleet for the airline but with almost no planning. When an airline buys expensive aircraft such as the Boeing 777 that Air India acquired, route and fleet planning often starts six months before the aircraft start arriving. Instead, it had an extraordinary situation where Air India could not take delivery of three aircraft that had to remain parked at Boeing's factory for more than three months as Air India did not have enough trained pilots and cabin crew. Even CAG (Comptroller & Auditor General of India) had also criticized the decision to buy 111 aircraft by Air India and Indian Airlines. In a report by CAG it has also mentioned that the decision was taken in a hurried manner.
Apart from the CAG report, the CAG is also considered a report by the Parliamentary Standing Committee on Transport, Tourism and Culture on the 'Merger of Indian Airlines and Air India: its impact on the Civil Aviation'. The committee, chaired by CPM MP Sitaram Yechury, had also criticised the civil aviation ministry for its "ill-timed" plan to merge Air India and Indian Airlines.
"The Committee is of the opinion that NACIL should review its aircraft acquisition programme in view of its financial condition, changing commercial dynamics and the demand and supply in the market. The company is already struggling to get equity infusion to consolidate its capital. The Committee feels that a deferment of the aircraft acquisition programme will reduce the debt burden of the NACIL substantially," the report had said in 2010.
Again, when Arvind Jadhav took over as Managing Director of Air India he quashed the recruitment of additional cabin crew after the process for it had been nearly completed. As a result, another eight months were spent hiring cabin crew. During this period hundreds of flights had to be either cancelled or were delayed, not because of a lack of pilots or planes but because of a lack of crew.
The pilots of the erstwhile Indian Airlines were promised parity with Air India pilots. For three years, nothing was done about it. Discontent built up Praful Patel managed to keep it in check while he was minister, thanks to constant negotiations.
The pilots were in a position to protest, unlike the cabin crew, ground staff and maintenance crew. Now, instead of looking for ways to resolve differences with the pilots who are on strike, the Air India management and particularly Jadhav has decided to "teach the pilots a lesson". Matters have worsened to such an extent that even the executive pilots of the airline, who are management cadre pilots, have gone on strike in support of their colleagues.
A few years ago when Jet Airways pilots went on strike Naresh Goyal, the airline's chairman, talked to pilots and pleaded with them to go back to work. But Jadhav has decided that he will not even talk to the pilots. Even the Delhi High Court has noted this fact. It appears that the management wants to make the pilots scapegoats for its successive failures. It was looking for an alibi and feels that the pilots have provided it one.
There is a severe shortage of trained commanders across Indian carriers and this has been forcing airlines to hire expatriates - often those with less than the best skills. If Air India sacks the striking pilots they can easily get jobs in other airlines within three months. But the pilots want to work for Air India. They, however, also want their dues. In Parliament, we were told that Air India loses Rs 20 crore a day. It is surprising then the management is fighting over what is essentially a matter of a few crores.
Political parties like Bharatiya Janata Party, or BJP (Party in Opposition), have always argued in favour of privatization of Air India. If not full privatization, at least a partial one can be carried out through disinvestment. This will bring in funds to run the airline instead of the government constantly raiding taxpayers' money to feed it. The management of Air India should also be professionalized. The airline should not be allowed to become a training ground for officers of the Indian Administrative Service who have no knowledge of the aviation sector. Besides, there should be less interference from the ministry. Air India is an important asset to Indian skies, and it has helped keep airfares in check. The moment the pilots went on strike airfares rose significantly.
WHAT WAS DONE :
To tackle the various HR issues which have cropped up after the merger of Air India and Indian airlines, a three-member committee was set up to examine the recommendations of the Justice Dharamadhikari Committee report .
(The Justice Dharmadhikari Committee was formed to examine the principles of integration across various cadres and determination of level and seniority, examine the principles of pay/wage rationalization and restructuring between all the employees of erstwhile airline and also suggest harmonized working of various categories of employees of erstwhile airlines).
A ministry spokesperson said "This committee will look into various recommendations in this report of Justice Dharmadhikari Committee and give its comments in terms of implementability of those recommendations, keeping in mind the employee's interests, the functional viability of the Company, the financial implications and also various other practical aspects of implementation."
The report has called for linking the state-owned carriers' salaries to the Department of Public Enterprises guidelines and advocated a graded system. It has voted for benchmarking pilots' salaries to the industry standards and pruning their wage bill by 10-15 per cent.
Along with Prashant Sukul, joint secretary in the ministry handling Air India, the new committee includes A K Sinha, joint secretary, Department of Public Enterprises and RP Singh, director (HR), IFFCO as an outside expert. The panel will give its report by the first week of March. The decision to expedite the implementation of the report was backed by the ministerial panel reviewing the progress of Air India's turnaround plan.
In order to boost the revenue, Arvind Jadhav has curtailed all business class travel by all grades of its employees with immediate effect.
"The company is passing through a critical financial situation and to improve the passenger revenue in the business class/first class, it has been decided that with immediate effect, all categories of employees (serving or retired) and their families/dependents, including the undersigned, will travel only in economy class," said an official note issued by the Air India chief. To implement this decision, Jadhav is said to have himself travelled by the economy class on his way back from Hyderabad the very same day.
"There is a certain belief in the market that a substantial part of the business class market has been unaffected by the ongoing recession and naturally we're trying to corner them," said an Air India official. Indian carriers - which are expected to post losses of Rs 9,000 crore that fiscal - are trying desperately to corner the premium class travel that would help them immensely increase the revenue.
There were instances on the Mumbai-Delhi route when paying business class passengers were shifted to other flights because Air India officials were occupying business class seats. "It created a perception that business class seats were not available at Air India and thus we have lost passengers on that count," said an official.
However, some employees maintained that the cut was expected to create a negative impact on employee morale and many retired employees who served the airline during its heydays did not deserve this. Jadhav told The Indian Express(One of the leading Newspaper) that it was a question of survival and using business class seats for meeting the company's internal usage was not an option. "There is no harm in using the economy class seats. Retrenching on routes that many private carriers are doing is a bigger demotivator," he said.
Air Corporation Employees Union:
Air Corporations Employees Union (ACEU) is the largest and most representative trade union of the non-technical and some technical workmen of the Air India Limited .It was registered under the Trade Unions Act, 1926 on 16th November 1989 and was granted recognition in 1959. Air India management had withdrawn recognition to the Air Corporation Employees Union on 26th May 2010.
Responding to such withdrawal of recognition CPM has alleged that the Air India management had arbitrarily withdrawn recognition to the Air Corporation Employees Union and Chairman Arvind Jadhav had refused to hold a dialogue with employees. The party demanded immediate revocation of termination and suspension orders against union activists and restoring recognition of the Air Corporation Employees Union. "The management should immediately start negotiations with unions to improve the services of Air India and address the legitimate grievances of employees," CPM polit bureau said in a statement."The great inconvenience caused to thousands of passengers was due to policies adopted by the management. The Air India management is solely responsible for the inconvenience of passengers. The role of civil aviation minister Praful Patel is also responsible for the present state of affairs in Air India," it said.
On 28 January, 2011 a petition in Delhi High Court was also filed against ACEU for indulging in regular violations of Code of Discipline and of the Settlement and acted in a manner resulting in the disruption of the normal working of the company and breach of the industrial peace and harmony. The said letter stated that ACEU had given directives and strike notices from time to time in the last three years .The letter dated 26th May 2010 further stated "The ACEU also issued a directive dated 14th May 2010 to go on strike w.e.f. 31st May 2010 and went on unjustified strike on 25th May 2010 even while the matter was seized till conciliation, thereby causing harassment to the innocent passengers, causing revenue loss and disrupting flights nationwide and to international destinations.
The two-day Air India strike was called off at that time after the Delhi high court said it was illegal and the airline dismissed 17 officials, including union leaders, and suspended 15 engineers. Over 20,000 employees, including engineers, had gone on strike protesting against an order against union members from talking to the media. The management claimed that there is only one general circular and no 'gag order'. CPM leader and chairman of the parliamentary committee on transport and tourism Sitaram Yechury had spoken to the Air India chairman on the first day of the strike and asked him to talk to unions and resolve the matter.
BJP had alleged that Air India was in a "mess" and asked Prime Minister Manmohan Singh to spell out who was responsible for it. Air India is till witnessing Strikes and other HR related issues due to this merger as the employees are demanding their due payments and promotions.
In May 2012, due to the strike by the pilots still the situation is creating crises for all the parties concerned, Ajit Singh the Civil Aviation Minister has also agreed the fact the the merger has not progressed the way it was desired and the situation in Air India is the same.
EXHIBIT: 1 ORGANISATION STRUCTURE OF AIR INDIA.
CHAIRMAN & MANAGING DIRECTOR
GENERAL MANAGER- MEDICAL SERVICES
GENERAL MANAGER - IT
GENERAL MANAGER- PROP. & FACILITIES
DIRECTOR- CORPORATE AFFAIRS
DIRECTOR- AIR SAFETY
DIRECTOR- PLANNING & INT'L RELATIONS
DIRECTOR- MATERIALS
DIRECTOR- OPERATIONS
DIRECTOR- SECURITY
DIRECTOR- IN-FLIGHT SERVICES
DIRECTOR- ENGINE OVERHAUL
DIRECTOR- SECURITY
DIRECTOR- PUBLIC RELATIONS
DIRECTOR PERSONNEL
DIRECTOR FINANCE
DIRECTOR ENGINEERING
CHIEF
VIGILANCE
HRD
INDUSTRIAL RELATIONS
CANTEEN
WELFARE
RECRUITMENT
SC/ST CELL
TIME
OFFICE
MANPOWER
PLANNING
ESTABLISHMENT
EXHIBIT: 2 HUMAN RESOURCE STRUCTURE IN AIR INDIA
TEACHING NOTE:
The case presents an issue where it was thought and estimated that the merger between the two entities would be fruitful and profitable to both but however it has not progressed as desired as the way it was handled and treated, both by the ministry and the top most level of the company. The decision of buying the aircrafts with almost no planning created a base for the entire mess and then the merger acted as a fuel the entire case.
The various HR issues in this case would help in understanding and knowing the different facets of decision making and challenges relating to managing the employees i.e. the Human resources.
MAIN ASPECTS OF DISCUSSION:
What is the role of government and concerned Ministry in case of decisions relating to these Public Sector companies?
Who can be held responsible for such decision making failures as government changes after their tenure is finished?
In case of Bankruptcy, (as Air India is operating under a huge amount of debt & accumulated losses) what would be done to the employees and other staff if they have to leave the company i.e. what can be the backup plan for their future or the alternatives for them.
One of the points rose by BJP that the airline should not be allowed to become a training ground for officers (Chairman & Managing Director) of the Indian Administrative Service who have no knowledge of the aviation sector. Up to what extent this statement holds relevance.
Arvind Jadhav could have talked to the employees who were agitating and protesting at that time. What could have stopped him for not having a conversation with them?
What can be the role of ACEU in this case and any Union in a company in settling a dispute between management and employees?
Arguments in favor of privatization of Air India, if not full, at least partial which will bring in funds to run the airline instead of the government constantly raiding taxpayers money to feed it. Comment on the statement.
These points can be raised and discussed in the class so as to understand the issues relating to human resources, crisis management and various other factors like dissatisfaction, motivation & morale of the employees, listening to the demands and making proper justification etc. The case best suits the discussion in a HR class and even for a general MBA program as the anchor of the case is HR.
