Air India pilots may have called off their agitation, but their
action again raised questions on the merger of Air India and Indian. In an
exclusive interview the first Chairman and Managing Director of the merged Air
India, Mr V. Thulasidas, outlines the reasons and advantages of the merger and
why it has not worked.
In the Parliamentary Committee on Public Undertakings 2009-10
report, there are several instances of senior airline functionaries stating
that the merger process has not worked anywhere in the world. What promoted the
Government to go for it?
It was no one’s case that the merger of Air India and Indian
Airlines was going to be easy. But to say that the merger process has not
worked anywhere in the world is stretching facts. Look around, you will find
that airline mergers have taken place all over the world successfully and are
happening even now.
I remember the preliminary discussion on the possibility of
merger that was held among senior officers of the two airlines. Every one
present stated that the merger was necessary for the survival of the national
carriers. There was total acceptance in the Ministry of Civil Aviation and in a
meeting held in the PMO.
The case for merger was apparently so strong that the entire
spectrum of decision making in the Government was in its favour, including the
Committee of Secretaries, a Group of Ministers and the Cabinet. The context was
unprecedented and increasing competition in the airline business, both in India
and globally, by which the fairly secure position enjoyed by the two national
carriers had come under severe challenge. The growing economy had led to a
significant increase in demand for air travel, foreign airlines had stepped up
their capacity in India and private carriers had become strong in the domestic
market and were getting into the international market.
The national carriers were operating virtually two separate
networks, one predominantly domestic with a few international flights, and the
other exclusively international with no domestic network. All efforts made in
the past, including in my time, to bring the two airlines to align their
networks to provide a smooth transition from domestic to international flights
and vice versa had failed. Both sides were determined to fight for their turf and
not yield an inch. The only option, other than merger, would have been for Air
India to start a domestic network and for Indian Airlines to launch long-haul
flights.
What were some of the other advantages of the merger considered
at that time?
There were the advantages to be derived through pooling of
resources, common marketing and sales, reduction in expenditure through sharing
of assets, economies of scale in procurement of stores and, finally, the clout
the combined airline could enjoy, apart from the increased load the combined
airline could attract by combining domestic and international networks.
Then why is the merger being criticised?
It is being criticised for other reasons. People need to
understand that what has happened so far is just an articulation of the
decision to merge. The legal formalities of combining the two companies have
been completed, but the two airlines have not been combined. It is five years
now but the airlines still operate as two. Cosmetics alone have changed. The
people, the most important resource, are still separate and the networks have
still not been integrated. If a passenger has to travel on both domestic and
international legs of this airline, she still does not enjoy smooth transition,
not even smooth confirmation of tickets. Bickering among the employees of the
two sides has, if anything, only increased.
Does the recent agitation by sections of Air India pilots put a
question mark on the entire merger process?
Rather than put a question mark on the merger, it underlines the
problem created by non-implementation of the merger process. If manpower
integration had been completed as originally envisaged and as per the original
timeline, pilots of both wings would have been flying aircraft of both sides as
part of an integrated cadre of pilots.
How was the merger going to tackle the separate work cultures,
timings and seniority rules of the two airlines?
If two airlines can be merged only if they have the same work
culture, network schedule or HR policies, no merger would have taken place in
the world. It was the difference in the networks and their complementarity that
was the primary need and justification for the merger. If the two airlines were
operating only similar networks, the merger would have been more difficult to
manage.
Work culture is something to be modified through appropriate
re-training, incentives/disincentives and HR policies. There could be some who
will refuse to change; they should have no place in the new airline.
HR policies have to be unified. Neither side can insist that they
should continue to have their own policy in the new set up; there has to be a
new set of policies.
There are many who feel that demerger and having two separate
airlines under a holding company is the only way forward. Will you agree?
I do not think that the only option is to demerge, but merger in
the form of a holding company and two separate wings under it can be an option.
But before that, it is necessary to come to the conclusion that the Government
and the airline management do not have the will to complete the merger process
as originally planned. The problem is not merger but the fact that the merger
has not been achieved. If someone tries to say that the merger has not been
achieved because it is not achievable, I do not agree. Merger has not been
achieved as it has not even been attempted. I can vouch for it that we had
concrete plans to integrate various aspects of the two airlines, including the
manpower, with clear timelines. We were on target when I retired in 2008.
Someone should study why this process was not carried forward from April 2008
onwards.
Air India and Indian were profitable between 2003-04 and 2005-06.
But from 2006-07 the new merged company has only seen its losses mount. Was
this anticipated?
There are two factors to be taken into account while analysing
the losses incurred from 2006-07. First, airlines in India were gradually
getting into losses around this time, thanks to rapidly rising costs,
increasing competition, overcapacity in the market and falling revenues.
Secondly, merger led to a certain amount of strain on the operation of the new
airline that ought to have been overcome through effective integration of
operations. The fact that integration is yet a distant dream has kept the
airline from making money.
What were the benefits of the merger which should have kicked in
by now?
The main benefit ought to have been seamless transfer from
domestic to international flights which would have led to an increase in
traffic volumes, greater revenues and profits. Merger, implemented properly,
would have taken Air India into Star Alliance and that would have added to
traffic further. An integrated and re-trained manpower would have been the
greatest gain and not the squabbling and disgruntled set of people now.
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