PMO against IC AI merger. - Airliners-India

himmat01 · Member

PMO against IC AI merger.

karatecatman · Member

Himmat,

Please correct me if wrong.

Shouldn't it be PMO objects to this proposal --- to have a holding company? PMO, especially the PM, was for an outright merger. In fact when Praful and the two MDs, Thulasidass and Trivedi, went to meet him to make a 4-hour presentation, Manmohan Singh was reported to have kept insisting that it was not to be a holding company, but full merger. And PP has since been going around parroting this line, especially on the sidelins of various international aviation seminars.

Anyway, going by the statements of the two airline MDs, especially Trivedi's, and their respective fleet plans, it was clear that there didn;t seem to be any sort of full merger. Even basic things in an outright merger, in this case especially would have been the first signals --- like scrapping the new livery of IA. This hasn't happened.

So this report confirms it anyway that it seems to be to get a better rating for the IPO.

Interesting days ahead.

-- Edited by karatecatman at 14:16, 2006-09-19

-- Edited by karatecatman at 14:20, 2006-09-19

Nimish · Member

Sorry, but I seem to be missing the drift here.

Is the PMO objecting to the merger of these 2 carriers (with lines like the companies have different objectives in life), or is the PMO objecting to the nature of the merger (holding company vs. full merger)?

After reading the PMO comments, my initial reaction was that they are objecting to the merger on the whole!

karatecatman · Member

Exactly, Nimish.

Report is garbled and fails to give the background -- that Manmohan Singh was absoultely firm that it had to be one airline and one merger. PP immediately came out after that 5 hour meeting to say that the PM had said this and that there wouldn;t even be this plan of a holding company which was one of the ideas put forward.

-- Edited by karatecatman at 14:51, 2006-09-19

JumboJet · Member

Is it because of the merger whilst on international trips.....they would get to use IC at their disposal and not AI.....

Well Indians are famous for RED TAPISM so y not when it is for their own benefit.....

COUGAR · Member

Merger of the 2 airlines is a very messy business since the 2 airlines have very different pay structures and hierarchy. AI pilots and cabin crew are paid on a higher scale as compared to IC counterparts. How are you going to resolve these issues? Work culture is also very different. While Air India is still stuck in a rut, IC fellows are much more on the ball, relatively speaking. They are still sarkari yes, but 10 years of the puniishing competition against private carriers like Jet has made IC a different animal.

Now after having fought back, we are asking IC to give up its identity and instead merge into that unprofessional hellhole called AI?

AI and IC fulfill different roles as of now. I say let them continue as is.

What can be done however is to ensure more synergy of operations between the 2 state-owned carriers. They can code-share on each others flights to allow for seamless connections to places where the other doesnt operate. It has happened before: when domestic traffic boomed for the first time in the 1960's and their own fleet was insufficient, IC used to charter Super Constellations and later 707's from AI for routes like BOM-DEL and BOM-MAA. It worked the other way too: In the 80's IC's A300's often operated with AI flight nos for gulf routes from TVM (this was when IC had 14 of these monsters!).

How about AI operating flights with their 744, 310's and the rust buckets between domestic metro stations on which IC can codeshare? With a little tweaking of schedules these domestic runs can also double up as ferry flights for AI. This would help IC free up substantial A320/321 capacity which could be profitably deployed elsewhere! Also IC flights could feed traffic to AI flights ex BOM and DEL which could help remove the madcap BOM-DEL-LHR-NYC milk runs into more sensible routings which would result in more profitable utilisation of the widebodies as well.

Also on many Gulf routes, the A320/321's are a better fit and AI/IC could jointly operate to these destinations, something similar on the lines of what MAS and SIA did.

Merger is NOT a feasible option because the 2 airlines are VERRY different. Synergy of operations is what the Govt should be aiming for. And I think the "Good Doctor" is correct in raising objections to the merger proposal.

Nimish · Member

COUGAR wrote:

Merger is NOT a feasible option because the 2 airlines are VERRY different. Synergy of operations is what the Govt should be aiming for. And I think the "Good Doctor" is correct in raising objections to the merger proposal.

Cougar - Synergy of operations should have been in place many many years ago, but nothing has happened on that front due to the lack of business acumen on both airlines (maybe more on AI than IC).

Hence the urgent need to merge the 2 airlines, so they stop thinking about "us" and "them" as separate organizations, and instead are forced to work together to create a powerhouse.

Though everyone knows how important synergy is - it's clear neither organization wants it.

I think the PM is going backwards 2 steps by questioning the whole merger, though my hope is that he was only questioning the "holding company" option, rather than going in for a full merger.

Without being merged, neither AI nor IC have a clear roadmap. And you're saying they're doomed with the merger. So it's clearly "Between the devil and the deep sea" as far as AI IC are concerned - not surprising given the mess they've driven themselves into!

Besides by stating the "airlines are verrry different" - are you suggesting they're fine exactly as they are and don't need to change

karatecatman · Member

This has to be repeated again.

Manmohan Singh made it clear to the mangements of both the airlines and PP that it has to be a full merger. Guess its time to look for that report.

The news report that has appeared recently has a very misleading heading.

PMO has only questioned the idea of a holding company, as it was the one that wanted a full merger in the first place.

Both Thulasidass and Trivedi each made 90-minute presentations. Sushma Chawla too was there as this was just after she had to hand over charge to Trivedi.

In fact PP came out of North or South Block, with Thulasidass and Trived behind him and told the waiting media that Manmohan wasn't in favour of the idea of a holding company as this was one of thse ideas that came up during the presentation by Thulasidas.

Of course, things do change.

***

The Left, Yechury and Karat and Nilotpal Basu, reacted the next day to say that the Left supported the idea only on condition that there are no job losses.

***

Reports after the merger panel was appointed say that nearly 2,000 jobs will be shed after the merger. These employees will join the MROs being set up by Boeing and Airbus with AI and IA participation.

At the same time nearly 5,000 new jobs are to be created once the new fleet of 111 aircraft arrive. But this will be mainly in operations department.

(These two are from what the MoCA has said recently).

And, about Alliance Air, IA has said that AA will be merged with Air India Express.

***

The confusion starts with:

PP now saying they are waiting for Accenture's report.

PP talking of complete merger in 2008 and then issuing a series of confusing statements on the sidelines of 2 aviation seminars to say that it will be before that.

PP saying that Indian's IPO will be the first to be issued/floated.

Indian going about its international flight plans and mysteriously talking about replacements for Alliance's 11 737s!! Bombardier is in consideration. (What happens to the A319s?)

-- Edited by karatecatman at 18:10, 2006-09-22

Nimish · Member

karatecatman wrote:

Manmohan Singh made it clear to the mangements of both the airlines and PP that it has to be a full merger. PMO has only questioned the idea of a holding company, as it was the one that wanted a full merger in the first place.

Phew - that's a huge relief! I'm glad the PM is doing the right thing - and not holding India back due to some preconceived notions that "Merger is NOT a feasible option because the 2 airlines are VERRY different".

tayara mechanici · Member

COUGAR wrote:

Merger is NOT a feasible option because the 2 airlines are VERRY different. Synergy of operations is what the Govt should be aiming for. And I think the "Good Doctor" is correct in raising objections to the merger proposal.

Its a simple no brainer the merger, synergies have existed as mentioned by you. In engg, AI use to overhaul the IA A300B2/4 engines at their overhaul shops. And i am sure IA will be doing the same with the CFM56 on the B738 op by AIX.

The salary structure can be brought in line with approvals, IA crew can migrate to AI on basis of promotion etc. Once the Intl ops is thrown open to all pvt players the same competition that helped IA employees onto the ball will motivate AI. The merger will solve the problem of crew shortage too.

By offloading the Engg and Ops Training into stand alone MRO and Profit centre based Training, AI/IA can get rid of the excess manpower as mentioned in the reports.

The challenge lies in convincing existing staff the gains in bifurcating the businesses. As long as engg staff can maintain their travel benefits i am sure they can be convinced about the gains of working for a profit based MRO where their growth is guaranteed in a booming aviation market.

COUGAR · Member

AI has been a colossal failure as an airline and in its role as a "flag carrier". Infact it isnt clear exactly what role it is playing. As it stands it is surviving on handouts from Govt both directly and indirectly and in the form of the Haj subsidy which in reality is a subsidy for our national shame. It has been forever loss-making.

It can be argued that as a state-owned carrier it doesnt have the same freedom of action as pvt carriers. However the other state-owned carrier IC has been doing pretty well for itself despite punishing competition from pvt carriers. Infact, it is the ONLY airline in India, pvt or otherwise, to have declared a profit this year! All thanks to some brilliant planning and truly stunning yield management. Branding has also been very successful: more successful than even AI or 9W! IC actually beat Nirma and Coca Cola in the list of most recognised brands and was even voted most reliable airline by the Business Travellers Association last year!! And the ontime performance figures filed with the DGCA have IC on top of the heap. IC! not 9W and definitely not AI!

In terms of service, IC has upgraded itself completely. I travelled J-class last month and came out truly shocked!! They have REALLY improved!! And now with PTV's, laptop points, and personal massagers (tell me this is true?) it is getting better!! As things stand, IC commands a higher market value than the shit-hole called AI.

Now what is being proposed here in the name of a merger? IC is being penalised and made to lose its unique branding and merged with a lousy third rate airline like Air India with executive control being handed over to fools like that Thulasidasan and his cronies. Pardon me for being racist but management within AI has never really come out of the RC-Parsi-Madrassi mould. The Govt will be truly mad to merge a performing airline with a underperforming loss making airline like AI.

If a merger is to be considered, then AI as a company should be merged into Indian Airlines (IC), with AI's existing network and assets being managed as a fully-owned subsidiary (something like what was done with Alliance). AI's existing network can be flown as a separate "line" within IC. This shouldnt be new to IC: there was a time when IC used to operate 9 separate "lines".

Merge the engg infrastructure of the 2 cos into a separate autonomous body that can also provide engg infrastructure to other players: thus becoming a profit making body in itself. Do the same with the 3 training facilities: 1 each in bom, del and Hyd. Merge them into a single autonomous and fully owned subsidiary of the airline, that can also provide training services to others for a fee.

just my 2 cents.

Nimish · Member

Cougar - I do agree with your latest arguments - where IC definitely comes out looking the winner, while AI continues to suffer in silence.

Hopefully anderson et. al. will recommend that IC management take over the combined entity - that would help put the international network back in place. Ultimately the goal is to strengthen the combined entity - not weaken it further.

However - a merger is a must, since both have made a complete sham of any synergies. It's a miracle they have a common FFP program, but that's about all they have in common on most days!

the_380 · Member

Nimish wrote:

However - a merger is a must, since both have made a complete sham of any synergies. It's a miracle they have a common FFP program, but that's about all they have in common on most days!

Nimish lemme point out one fact that is clear and all of us know and should know...

merging two airlines in a public sector is as good as shutting both of them and starting a new and fresh airline.... this merger talks were also alive 15 years ago although true that this time the music is louder than the previous times.

My knowledge is though limited but i have also seen the faces of IC and AI in my dad's eyes he has been the gen sec of IC ame engg for 2 years. Also the difference between AI and IC's standards on the same routes are known take middle east or SIN, KUL etc.

This merger WON'T make a single difference to the engg and pilots dont know abt cabin crews. An IC engineer who is signing A319s A320s A321s (in future) A300s and B732s wont get a training to sign 777s or 747s or 787s. This is mainly due to 2 reasons:

(i) IC engineers wont have problem to accept training for 777s 747s 787s as it will be better for them naturally.... But AI engg wont ever accept signing short haul domestic flights on 319s 320s and 321s. This will have an internal problem of agitations by AI and Directives being issued by them. So a unsolved problem arises.

(ii) Even if AI accepts IC engg to sign their long haul flights what about the training????????? A training costs quite a good sum to the airline... firstly an engg not on duty (this is a public sector) and secondly the expenses of the training.

So this means engg and also pilot dept doesnt get affected due to merger IC engg continue with dom while AI with intl. Also same refers to cabin crews, ground staff, etc

Now what remains is management and FFP programs.

As it is the management merger is what is suitable and proposed and as for FFP programs it wont make much difference as it is an IC or AI FFP member can exchange points for the sister carrier.

If only a merger at a management level takes place and at the most painting all aircrafts in a common scheme or giving a new name, what difference it makes?

Only 'display' difference i wud call it.

P.S. above is my interpretation please feel free to comment and correct

rgds

the_380

karatecatman · Member

Just to add to this:

A PSU union leader I spoke to, and based in Chennai, and who has managed "several and very succesful all -India bank strikes" (he takes great pride in this), challenges the merger concept. Says it will not work as:

Union problems in India's PSUs are too complex. (Union issues always come first and then the organisation.)

The GOI has NEVER merged two giant PSUs.

Says there will be the usual noises, but everyone knows that this will not happen. Will be to just boost the IPO.

Was very condescending when challenged that the merger might happen. Says the GOI is aware that the union issue is still be a major factor after a merger. Reminded me that it will still be a PSU and not a even an airline with private participation/strategic partner. As both airlines have a sort of mini-"Navaratna" status, and becasue the Common Minimum Programme says, there can be no disinvestment in the two airlines or a merged airline/ Also no staff can lose jobs. VRS has its limitations and only a section of employees may opt for it. Will not be significant.

Even if the GOI offloads about 20% or 22% or 23.5% of its stake in a "combined airline" to its employees and the public, in phases (as a sort of Maruti Udyog disinvestment formula), and offers this as a sop to tame the unions and other potential HRD issues, one giant airline can still be severely crippled/brought to the ground by a strike. Went on quoting the example of BA and its temperamental unions (the Gate Gourmet episode).

Says the GOI may have part of its way in the Mumbai and Delhi airports episode, but it can't try the same thing in this case. (When challenged on this too, became almost violently angry).

-- Edited by karatecatman at 22:33, 2006-09-22

the_380 · Member

Thats exaclty what i am trying to tell merging two PSUs is practically impossible even if its made possible you always face the opposition parties etc

Also as said by KCM Union issues are very strong.... in fact considereing both unions i find IC ame union more 'powerful' than AI union which has bent to management quite a lot of times on stupid issues like assigning title as (something) engineers to its technicians which hasnt worked out in IC for past so many years

tayara mechanici · Member

COUGAR wrote:

AI has been a colossal failure as an airline and in its role as a "flag carrier". Infact it isnt clear exactly what role it is playing. AI has never really come out of the RC-Parsi-Madrassi mould.

Merge the engg infrastructure of the 2 cos into a separate autonomous body that can also provide engg infrastructure to other players: thus becoming a profit making body in itself. Do the same with the 3 training facilities: 1 each in bom, del and Hyd. Merge them into a single autonomous and fully owned subsidiary of the airline, that can also provide training services to others for a fee.

just my 2 cents.

Just like many who Q the policies of Nehru in the last decade vis-a-vis the public sector and the IITs, they found their ans in todays IT sector and the LNMs (his team is all ex-Bhillai steel plant). The same has been the case with AI, i can give you first hand exp being a product of that org. I am working for a MRO in U.K. right now but deep within i wish (had it not been for the politics) i was in AI, its truly a fantastic organisation as far as employee development is concerned. Some of the blokes there are far too clued up and stand out among the best in the world. Do not forget that SQ was started usingAI as a consultant, i do know that is a old ex. Look at EK, most of the line managers in all depts are Indians and a whole load of them are ex-AI (not IA). Personally one of my relatives was a head of IT in AI, he went on to join EK and was instrumental in creating MERCATOR one of EKs most profitable ventures.

The RC-PARSI-MADRASI is the LEGACY of the TATAs, can't help it till the generation retires. But claiming IA to be a better known brand then AI not in a million years mate. No 'F'ing airline in the world can create a brand like the Maharaja and livery like AIs Rajasthani windows. We can debate on how well this brand has been positioned post 1977 but to even consider IA to be superior brand is a compliment to IA in the least and wishfull thinking mostly.

The challenge is to get the stakeholders to accept a amicable solution. IMO i would like to see the GOI do something out of the box like the Ukranian govt did with their steel mills. They had a televised auction, we can have LNM, MDA, HINDUJA and TATAs battle it out for the assets, minus engg, transport, grd support and training. Just the core.

karatecatman · Member

Tayara,

The "amazing turnaround" of IA, especially after liberalisation of the domestic airline market, is apparently a case study at Wharton. Is a chapter in a study of liberalisation in India (Got this from a student at IIMB, Hyderabad.)

tayara mechanici · Member

the_380 wrote:

An IC engineer who is signing A319s A320s A321s (in future) A300s and B732s wont get a training to sign 777s or 747s or 787s. This is mainly due to 2 reasons:

AI engg is to be merged with Boeing MRO and IA engg with Airbus MRO, these 2 entities will be signing 2 diff contracts with the single AI/IA entity. The contract will be for complete solutions i.e. Line, Major, spares and engg svcs. Boeing MRO and Airbus MRO will set up a seperate sub-division like a AI-Boeing Engg and a IA-Airbus engg to fulfill their contractual obligation.

So in short these engg staff will seize to be Airline employees and rather MRO employees servicing 2 diff aircraft types of 1 airline. They will have the prospects of rapid growth under the MROs while maintaining their airline perks (speculating).

So there is no Q of cross training, it might be avail once the OEMs exit the business which they will do at a later date if they don't see the value addition, as of now it is like having the cake and eating it too for the OEMs.

tayara mechanici · Member

karatecatman wrote:

The GOI has NEVER merged two giant PSUs.

Mate of mine is the GS of the AME union in AI. Talking to him last month he was mentioning about the issues related to the merger and the possible actions of the unions. This bloke is a smashing guy and comes from a well to do family, in the mumbai terms we call him Raja admi. Talking to him it sounded like the unions are playing hard ball to extract the max benefit, fair play to them.

tayara mechanici · Member

karatecatman wrote:

Tayara,

The "amazing turnaround" of IA, especially after liberalisation of the domestic airline market, is apparently a case study at Wharton. Is a chapter in a study of liberalisation in India (Got this from a student at IIMB, Hyderabad.)

So is the Railways of India and Lallu prased yadav in IIM-AMD. Cross your heart (or whatever it is for us hindus) and tell me if you truly believe lallu is to be credited with the turn around in the railways and not the Indian economy. The thing is Lallu makes good press better than Nandan Nillekeni or Nitish, the man to be righfully credited with the fortunes of Indian Railways.

KCM, The business schools need these case studies that the students from a large background can relate to. I have attended a school in UK on Air Transport and they love to study EK but never like to discuss the more diff Q on labour policies and human rights. Infact one of the management students from EK a V-P Engg has gone missing after graduating from the same school, but the school is not interested in knowing why.

I don't doubt the calibre of Wharton but IA against AI, no way in a million years. Been there, seen it, read the book and watched the movie. IA is a good airline staffed by caring and nice folks.

-- Edited by tayara mechanici at 23:11, 2006-09-22

-- Edited by tayara mechanici at 00:17, 2006-09-23