Posted on 13 September 2011
Samiran Saha
New Delhi
Four years after the government merged the erstwhile Air India and Indian Airlines, the true integration and harmonisation of employees is yet to be formalised. The two airlines have about 30,000 employees of which 11,000 are from Air India. The Comptroller and Auditor General (cag) in its report tabled in parliament, last week termed the merger ‘ill-timed’ and without a reason.
“Even four years after the merger of the two airlines, hr integration below the level of deputy general manager, representing 98 per cent of the staff,(including pilots, engineers, and other staff) has still not taken place. Pay and allowances, seniority, promotions and transfers have still not been harmonised. Consequently industrial relation disputes have arisen,” said the report.
“Even at the time of the ‘in principle’ approval (March 2006) on working towards the merger, apprehensions with regard to hr problems due to the merger were expressed. These issues remain a critical impediment to the merger, and have still not been fully resolved,” the report pointed out.
The idea of the merger was to create synergies between the two carriers and to make best use of the combined strength of both the airlines instead the half-baked merger process has left the airline employees totally disgruntled and demoralised.
“How would you like if you are suddenly asked to report to a person who is three years your junior is brought at par with you just because of a thoroughly ill-conceived merger,” asked an Air India employee who is now reporting to someone who is three years his junior in the airline. The official has been waiting for a promotion for past four years.
Apart from a totally demoralised lot of employees, the merger has not led to substantial gains for the airline. Instead, promotions, level mapping for seniority, and better integration of staff from erstwhile Air India and Indian Airlines for one uniform entity have gone awry.
Through the merged entity the government had envisaged an integrated international and domestic footprint for Air India allowing flyers more choice and better valuation for the merged entity, a combined fleet strength of 112 aircraft making it one of the largest airline operating out of Asia. But these milestones have not been met as the merger is yet to be in place.
The cag report pointed out the ‘benefits’ that were to accrue out of the merger, none of which have come true even four years after the merger.
Accenture, which was appointed to consult for the merger had said that the "net synergy benefits of Rs 820 crore (against the integration cost of Rs 200 crore) was envisaged, potential recurring synergies were expected to enhance profitability by Rs 600 crore at the end of the 3rd year of merger."
According to the CAG report the, the consultant had also stated that the "the merger would make the combine airline the largest in the country, improve combine market share, result in combined balance sheets (which would be important for an initial public offer IPO), and revaluation of assets of both the airlines (which would be possible only after a merger) and improve net worth.
In sharp contrast to what the consultant had said the airline today has combined debts and losses to the tune of Rs 60,000 crore and its net worth is in the negative, making it one of the unhealthiest airline, financially.
"The airline should have been sold yesterday to professionals who can run it, instead of flushing down thousands of crore of tax payers money," a senior analyst with a global consulting agency told Financial World on conditions of anonymity.
The CAG in its report also pointed out "In our opinion, this (the failure of merger) is largely due to the lack of adequate validation of the financial implications of the merger, as well as inadequate appreciation of the difficulties in harmonising human resources of the two airline."
"This (merger) is a critical issue, whose importance and associated difficulties were not fully appreciated pre-merger, more so in view of recent strikes and HR disputes. This needs to be handled swiftly, if the merger is to become a success, the CAG report said.
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