The IA-AI merger does not seem to be Working. And Strikes at Air India are Making Matters Worse. Worse – no party seems to be Getting much out of The Strikes. What’s there to Gain from all The Melodrama?
As if accumulated losses of over $3 billion was not enough for India’s ailing nationalised carrier, the Air India (AI) management found itself on a sticky wicket yet again, after over 800 pilots (who belonged to the erstwhile Indian Airlines) went on strike from midnight April 27, 2011. Neither is this the first time in 12 months that such a situation has come to cause discomfort to Air India passengers (it was last May when about 25,000 employees went on a flash strike), nor is this the first time that the management of the airline has faced questions over wage inequalities. Only this time, it just got bigger and worse. The strike lasted 10 days, and towards the end of the strike period, on May 6, 2011, flight cancellations had risen to about 90%. And how much of a loss did the airline incur? Between Rs.1.5 billion to Rs.2 billion. But everybody knows. This scenario which has “again” occurred due to mismanagement by those at the helm of affairs at AI, is not a new sight. One more strike, one more submission by the government, and perhaps thousands of customers lost forever. Only, this fact is not official.
The merger of the erstwhile Indian Airlines with AI was undertaken on May 1, 2007, with the view to make the airline more profitable and efficient. It was felt during that time that combining the two state-run firms into a single entity would provide an opportunity to leverage combined assets to build a stronger, more sustainable business to fight the ever-rising competition and price wars in the sector. Four years since the merger (and two years after the integration has been completed), contrary to expectations, the Air India flight has failed to take off. Historically, mergers in the aviation sector have failed because the management could not or did not put in place a people integration strategy before the single operational licence date (which happens 18 months after the merger is signed). The AI case is a reflection of the failed US Airways and AmericaWest merger, in whose case, today, even 6 years later, the carriers are today operated uniquely by two different pilot groups. One merger, two ideologies? Doesn’t work. Also, you cannot have labour issues if you want a successful merger.
Air India topped the list of biggest State-owned loss-making firms for FY2009-10, according to a February 2011 survey titled, Public Enterprises Survey, conducted by a Government of India agency. And such strikes will not help alter such findings. It will also damage its market share, which is already getting slimmer with budget and private carriers enjoying greater patronage from the fliers. Surely, for the month of April and May 2011, the strike will impact the carrier’s share. [The airline currently has a 17% domestic market share, compared to Jet’s 26% & Kingfisher’s 18%.] As per DGCA, AI, which operates 320 flights daily to domestic & international destinations, cancelled a total of 1,470 flights during the strike days. Cancelled flights mean doubly-lost opportunity, because not only are you letting go of customers, you are actually sending them to competitors!
In a rather unusual response to the situation, Arvind Jadhav, CMD of Air India, decided to put the blame on his predecessors and the political leadership. Yes, he does not deserve all the blame for the situation in which AI finds itself today. But he is also no new guest to the party. The day the strike was called off, he had completed 2 years & 2 days as the top guy for the job to turn around AI. Are we to understand that all this while, for the past two years, he could not hear a single voice of request from the end of the Indian Commercial Pilots Association (ICPA; a body that represents the pilots of the erstwhile IA)?
As if accumulated losses of over $3 billion was not enough for India’s ailing nationalised carrier, the Air India (AI) management found itself on a sticky wicket yet again, after over 800 pilots (who belonged to the erstwhile Indian Airlines) went on strike from midnight April 27, 2011. Neither is this the first time in 12 months that such a situation has come to cause discomfort to Air India passengers (it was last May when about 25,000 employees went on a flash strike), nor is this the first time that the management of the airline has faced questions over wage inequalities. Only this time, it just got bigger and worse. The strike lasted 10 days, and towards the end of the strike period, on May 6, 2011, flight cancellations had risen to about 90%. And how much of a loss did the airline incur? Between Rs.1.5 billion to Rs.2 billion. But everybody knows. This scenario which has “again” occurred due to mismanagement by those at the helm of affairs at AI, is not a new sight. One more strike, one more submission by the government, and perhaps thousands of customers lost forever. Only, this fact is not official.
The merger of the erstwhile Indian Airlines with AI was undertaken on May 1, 2007, with the view to make the airline more profitable and efficient. It was felt during that time that combining the two state-run firms into a single entity would provide an opportunity to leverage combined assets to build a stronger, more sustainable business to fight the ever-rising competition and price wars in the sector. Four years since the merger (and two years after the integration has been completed), contrary to expectations, the Air India flight has failed to take off. Historically, mergers in the aviation sector have failed because the management could not or did not put in place a people integration strategy before the single operational licence date (which happens 18 months after the merger is signed). The AI case is a reflection of the failed US Airways and AmericaWest merger, in whose case, today, even 6 years later, the carriers are today operated uniquely by two different pilot groups. One merger, two ideologies? Doesn’t work. Also, you cannot have labour issues if you want a successful merger.
Air India topped the list of biggest State-owned loss-making firms for FY2009-10, according to a February 2011 survey titled, Public Enterprises Survey, conducted by a Government of India agency. And such strikes will not help alter such findings. It will also damage its market share, which is already getting slimmer with budget and private carriers enjoying greater patronage from the fliers. Surely, for the month of April and May 2011, the strike will impact the carrier’s share. [The airline currently has a 17% domestic market share, compared to Jet’s 26% & Kingfisher’s 18%.] As per DGCA, AI, which operates 320 flights daily to domestic & international destinations, cancelled a total of 1,470 flights during the strike days. Cancelled flights mean doubly-lost opportunity, because not only are you letting go of customers, you are actually sending them to competitors!
In a rather unusual response to the situation, Arvind Jadhav, CMD of Air India, decided to put the blame on his predecessors and the political leadership. Yes, he does not deserve all the blame for the situation in which AI finds itself today. But he is also no new guest to the party. The day the strike was called off, he had completed 2 years & 2 days as the top guy for the job to turn around AI. Are we to understand that all this while, for the past two years, he could not hear a single voice of request from the end of the Indian Commercial Pilots Association (ICPA; a body that represents the pilots of the erstwhile IA)?
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist). For More IIPM Info, Visit below mentioned IIPM articles
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist). For More IIPM Info, Visit below mentioned IIPM articles
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Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
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IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
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IIPM : The B-School with a Human Face
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