By Narendra Kumbhat, author of Inside Corporate India
However, Air India even after several years of merger and much financial support from the Government of India is yet to achieve synergy between both the airlines.
Presented here is a case study of the failed merger of Indian Airline with Air India.
To start with, three committees were appointed by the Government of India from time to time to consider the merger of the two airlines, last being the Tata Committee, but all the three committees were against the merger due to various reasons.
Tata committee then recommended a common Chairman with two Managing Directors, each one for Air India and Indian Airlines. They also recommended common maintenance operations and other technical matters to save the cost.
Indian Airlines used to be the market leader on domestic routes till 2007 when it merged into Air India; the incident makes for a case study on how not to merge two entities. Many insist that the 2007 merger was doomed long before the thought of merger due to political reasons.
The then aviation minister Praful Patel might have done so for some dubious reason and his decision of buying 110 new aircrafts was termed by CAG (Controller and Auditor General of India) as a “ recipe for disaster”. No one knows the acquiring of 110 new aircrafts made what strategic sense since Air India did not have the financial health to sustain the expenditure of Rs. 40,000 crore in acquiring these aircrafts. In a book written by Mr. Jitendra Bhargava, ex-employee of the Indian Airlines, the author has blamed the aviation minister, who forced this merger by appointing two external consultants with a mandate to recommend merger of both the airlines. The main reason for merger was to benefit a personal friend of the minister who owned King Fisher airlines and another friend Naresh Goyal who managed Jet airways, without looking into interest of the national airlines.
With the intent to benefit the private sector airlines, aviation minister Praful Patel even instructed the Indian Airlines to modify their schedule and changed the flight timings from peak hours to non-peak hours and where ever the traffic was high, the size of aircraft was changed to smaller aircraft. The flight planning went hey wire and all profitable routes were cleared up for private airlines.
One of the ex-employees in a private conversation disclosed that foreign airlines also took favors from the minister and saw to it that the Gulf route, which was the most profit-generating route for Air India and Indian Airlines too was handed over to them. The law of bilateral treaty among various countries was overruled in this case.
It was news to me when a friend informed me that now Air India does not fly from Bangalore city to Dubai, a hub of technocrats and industry and the particular route was awarded to Emirates for reasons best known to the civil aviation minister. Similarly Delhi-Singapore sector was also given to private airlines.
Delhi – London slot was given to Jet Airlines since it was indicated that Air India does not have adequate aircrafts. Later Jet sold the very same slot to Etihad of UAE for US$ 80 million without any approval from Air India or the civil aviation ministry.
There are many factors, which have doped the National airlines, and these facts are based on the opinions of various experts including former employees and many top Industrialists of the country.
Since Air India and Indian Airlines were Government companies, aviation ministry has been indirectly interfering in the management of these companies and Aviation Minister was de-facto Chief Boss of both the companies. In 2007 the then Aviation Minister recommended to merge the two companies without discussing the issue with the senior managers or consulting any professional organization to make a case study preceding such a crucial merger. This arbitrary decision of the minister created confusions and in the beginning itself Pilots of the both the airlines went on Strike, which forestalled the airline’s cash making international operations.
A few others point out that Air India has had four chairmen in the last six years and they without biting the bullet on tough decisions did nothing to save the airline. It could be since they knew that if they take such decisions, they will be overruled by the Minister and may even be shunted out.
” How can you think of achieving success with such instability at the top,” asks Kapil Kaul, CEO-South Asia, Centre for Asia Pacific Aviation. Many more experts within the industry concur with the thought and so do other industrialists of the country.
The merger brought together two disparate entities and created a behemoth with 30,517 employees – 214 per plane may be the highest in the world. Moreover, the service qualities of the employees have been extremely poor. Recently it was observed that due to the employee’s delay in reporting on time; many international flights had to take off for their destinations after few hours delay.
The employees of the National airlines do not care to observe discipline since most of their appointments are results of political lobbying. Recently 17 airhostesses were suspended but again the management had to revoke their suspension under the pressure of their political bosses.
I have been globally travelling and have closely observed every modern airline’s operations while noticing the obsessive attention to pare costs by way of buying same type of aircrafts to reduce the maintenance cost. One- way airlines have successfully worked at eliminating such expenses without hurting the service experience.
After the merger, Air India continues with both Boeing and Airbus-made planes: the international operations are run mostly by wide-body Boeing 777 or Dreamliner jets, while domestic routes mostly use A320S. The result: high operations, maintenance, and manpower costs. Most of the aircrafts that were with the Indian Airlines have also been very old and demand high maintenance costs. In addition to this one has to have separate technical staff for each type of aircraft.
Air India was also hurt by the delay in integrating the two airline reservation systems due to commercial reasons as well as getting approval from the International association. A single system makes it easy to sell tickets, join alliances and ink code-share agreements. It took until February 2011 for a common reservation system to come up.
There are airlines that run successfully with two or more aircraft types. But India is a price-sensitive market, and a model built around a single aircraft is not as feasible here.
