AI/IC Merger... - Airliners-India

the_380 · Member

AI/IC Merger...

the_380 · Member

my predictions are here...

The govt will eventually merge both the airlines and ruin them further or should i say ruin IC. AI is already at a lower standard than IC... the merger will degrade IC to a standard like AI...

AI will definately be further ruined. Eventually the govt will take up money from the stock markets and then let everything go on as it is.

With time passing they will start newer media articles like "more aircrafts" or even "privatisation" etc.

Comments/Suggestions/Opinions please flow in.

Nimish · Member

I think left to the current management of both AI and IC, nothing will move forward in terms of efficiencies after the merger. The management of both airlines don't seem interested in doing what the owner of the companies wants them to do.

So hopefully privatization will follow soon after the merger, and then the management changes will bring in the required route and facilities synchronization.

In the ideal world here are the first few things that should happen after the merger:

1. Set up a proper hub/spoke model at BOM and DEL. Don't use wide bodies on domestic routes, let IC handle those routes via 320/ATR type flights.
2. Expedite merger with *A, and then get into extensive code shares with *A members on all routes that IC/AI fly. That will definitely help in additional feed and increase the loads.
3. Move to a proper GDS and IT system - something that is compatible with the systems used by *A. IC has already made some progress by linking their system to global GDS systems, but I don't know how effective/reliable that is.
4. Route rationalization - don't have AI/IC compete with each other - rather club flights that are close by and save on the a/c and fuel
5. Fleet sharing, MX sharing, facilities/office sharing, common tenders for all purchases etc.

these are just some initial thoughts.

tayara mechanici · Member

Nimish wrote:

2. Expedite merger with *A, and then get into extensive code shares with *A members on all routes that IC/AI fly. That will definitely help in additional feed and increase the loads.

Whats the value addition in joining a *A at the outset. AI/IA should prove their combined muscle, one of the positive attributes of the merger as per PP, before they solicit alliances. It makes sense to prove their mettle and then negotiate from a position of strength. And India has far more to offer to any of the alliances and their individual members than the whole collective lot, without sounding blindly patriotic, Bob Ayling has been on record in DXB (1998/9) saying ''Indians (people of Indian origin) are the world largest travellers'' and to prove this he offered to pull out any flight manifest from BA to show that there would be a person of Indian origin. When we have done it in ITES, AUTOMOBILES, PETROLEUM, STEEL & Now in RETAIL, why can't Indians create a a truly global airline with a worldwide reach. All of these industries are managed by Indians, and i am sure the same can be created in Aviation. Bear in mind most of these alliance members have a lead of over 20yrs operating in a deregulated enviournment, its been less than 5yrs of quasi deregulation here. Besides 2 of the worlds most talked airlines EK & SQ depend on India for nearly 25% of their revenue.

As rightly pointed out by you the management in AI/IA are not capable. Probably the merger should follow with Tendering out the management control of AI/IA for 10yrs i.e. Airlanka, to start with only NRIs (LNM)and Co of Indian Origin (TATA) should be allowed. On visible signs of improvement the GOI can start diluting its stake in the merged entity, through listing or FIs.

karatecatman · Member

Leaving aside the special tax concessions, book keeping procedures, which will be of a real advantage, what will disable this entity are the huge HR issues.

This has to be sorted out first. Also, when you can't "get rid of" a single employee, for obvious political reasons, there won't be the benefits of a lean and mean organisation. (The only reason why the Left is supporting the merger. If the Govt's long temr plan is to getthe two together and then privatise, hell might break loose!!!)

Perhaps the best thing would have been to let IA, the fitter and smarter of the two organisations, to left to look after itself. Essentially has a strong fleet with more reinforcements coming in. AI could have followed the Emirates-Sri Lankan model. Get it a strategic partner.

-- Edited by karatecatman at 12:36, 2006-12-07

the_380 · Member

Nimish wrote:

5. Fleet sharing, MX sharing, facilities/office sharing, common tenders for all purchases etc.

Only head offices might be shared... there's no way abt mx sharing except commercial officers...

Fleet sharing practically impossible

Nimish · Member

the_380 wrote:

Only head offices might be shared... there's no way abt mx sharing except commercial officers...

Fleet sharing practically impossible

Can't agree with you on this - there's no reason for the ticket offices not to be shared, after all once they're merged it should be possible to buy a BOM-JFK ticket from the IC office in the corner of the street as well. And to buy an BOM-NAG ticket sitting in JFK.

Fleet sharing impossible?? I think you've missed the point of the merger my friend. The point is that the combined entity can use the right a/c on the right routes. So if they need to launch new SH intl routes, they should be able to use IC's 320s (and maybe take them off some of the domestic routes). That will allow the intl operations to grow, as the 310 class a/c can be used for longer haul ops.

Of course now back to reality, this being AI + IC, I don't see them doing anything sensible. But hopefully accenture will guide them down the right path!

Nimish · Member

tayara mechanici wrote:

Whats the value addition in joining a *A at the outset. AI/IA should prove their combined muscle, one of the positive attributes of the merger as per PP, before they solicit alliances. It makes sense to prove their mettle and then negotiate from a position of strength.

Tayara - I think you've got caught up in the jingoistic stuff there (India is great and all that).

The bottom line is that *A brings in a huge amount of traffic to the country, and that traffic needs to take domestic flights as well. Currently most of those pax fly on 9W or IT or something else. Once AI/IC is a member of *A, suddenly we'll see a lot more of those pax choosing AI or IC flights, which they currently don't do. Plus current AI/IC regulars will have the benefits/status when flying *A internationally. That's a huge plus!

the_380 · Member

Nimish wrote:

Fleet sharing impossible?? I think you've missed the point of the merger my friend. The point is that the combined entity can use the right a/c on the right routes. So if they need to launch new SH intl routes, they should be able to use IC's 320s (and maybe take them off some of the domestic routes). That will allow the intl operations to grow, as the 310 class a/c can be used for longer haul ops.

Thats the problem Nimish... If you can remember i had pointed out this issue earlier also... nevertheless i'll type it over again...

I'll take my point considering only the pilots and Mx staff...

An AI engg/pilot who flies regularly on routes like to USA or Europe won't ever agree to operate sectors like Nagpur or Raipur etc etc.

Same with the aircrafts- an engg or pilot flying/certifying the 747, 777 and the 787 to come will never agree to start flying the or operating the 319/320 or 321.

Reason simply because these staff wouldn't like to operate such routes and be paid less--- AI engg/pilots get paid more because of the long-haul routes (forget south-east and south asia and middle-east)

Then comes IC's consideration... IC Mx or pilots will not start signing even AIX aircrafts unless GoI agrees that AI staff will share their burden on the domestic routes.

So this rules out people working for the other airline.

Next comes the most important issue... the expenses on training. Even if somehow the GoI manages to patau the employees the expenses are the largest hurdle in the way of staff sharing. An average training in an engg to be certified for more aircrafts means atleast 3 weeks of that employee off from duty. Besides this the company cannot stop his salary nor can force him to work along with classes (this is a typical sarkari company). And not to foeget the money to be paid to the teaching staff that will come to India for training the Mx people.

The type that you are trying to mention Nimish is abt sharing another A320 from IC to operate into the Gulf and AI to concentrate more on long haul routes... just think over it, If IC had enough aircrafts that they could lend a few to AI then would there ever be any delays in IC flights???

Also to add to this with the 43 Airbus' coming... ICs leased aircrafts are going back and if you are talking about leasing more A320s then PP will wring Trivedi's neck and hang him to death

rgds

the_380

HAWK21M · Member

the_380 wrote:

An average training in an engg to be certified for more aircrafts means atleast 3 weeks of that employee off from duty. Besides this the company cannot stop his salary nor can force him to work along with classes (this is a typical sarkari company).

Staff Attending Mx training can only attend that & not work too.Its common in all Airlines.After one attends training for 8hrs & need to study 700 pages in the next 12 hrs & rest for 4 hrs before attending an exam the next day,its Impossible to work simultaneously.

I remember during our B752SF training I had to study 750 pgs average a day,& with the time available I used to have only 3 hrs to sleep,Other struggled much worse.Approved trainings are tough.This continued for 40days.Thanks to Redbull I succeeded.But I still hate the taste.

regds

MEL

Nimish · Member

An AI engg/pilot who flies regularly on routes like to USA or Europe won't ever agree to operate sectors like Nagpur or Raipur etc etc.

But that's the whole point of the merger, they won't be AI or IC pilots any more. They'll be pilots of the combined company.

Reason simply because these staff wouldn't like to operate such routes and be paid less--- AI engg/pilots get paid more because of the long-haul routes (forget south-east and south asia and middle-east)

Of course it goes without saying that the salaries need to be merged, and it's always towards the higher scales. This is standard with any M&A activity.

Then comes IC's consideration... IC Mx or pilots will not start signing even AIX aircrafts unless GoI agrees that AI staff will share their burden on the domestic routes. So this rules out people working for the other airline.

Once again - they are no longer IC or AI staff, they are 320 or 737 certified, and will continue to work on the a/c they are certified on.

Next comes the most important issue... the expenses on training.

No - this is not such a big issue, after all the 737s have MX today and the 320s have MX today. Those will continue - no one is being fired remember?

The type that you are trying to mention Nimish is abt sharing another A320 from IC to operate into the Gulf and AI to concentrate more on long haul routes... just think over it, If IC had enough aircrafts that they could lend a few to AI then would there ever be any delays in IC flights???

This will all come down to profits. If gulf flights (or intl flights) are more profitable, then definitely some of the domestic routes can be shuffled around to move the a/c to intl. Besides a lot of IC a/c probably sit idle at night, and can be redeployed on short haul intl flights.

Also to add to this with the 43 Airbus' coming... ICs leased aircrafts are going back and if you are talking about leasing more A320s then PP will wring Trivedi's neck and hang him to death

I'm glad the IC leased a/c will go back, after all they have a lot of MX issues. Much better reliability with the new a/c.

So in summary, one of us is totally off the mark when it comes to the post merger scenario. If you're right - then I don't see the point of the merger. I hope for the country's sake, that your information in incorrect!

tayara mechanici · Member

Nimish wrote:

The bottom line is that *A brings in a huge amount of traffic to the country,

Surely does because there is a huge under served market which is growing phenomenally, and due to the abscence of the collective Indian airlines being denied the right to fly unhindered Intl and the rights being ltd to AI / IC.

Once AI/IC is a member of *A, suddenly we'll see a lot more of those pax choosing AI or IC flights, which they currently don't do

And they choose 9W & IT as you mention in your same statement, So atleast these dom airlines have some source of additional revenue by means of this code share, having been denied the right to fly Intl unhindered. As a member of the *A from the outset of being a merged entity, AI/IA will end up being juniour partners without the freedom to launch their own routes into *A member countries and at the same time feeding into the existing schedule of these airlines, knowing how incompetent these 2 airlines are it works fantastically well to the benefit of the alliance. It is obvious these allied airlines will collectively mount various barriers on Indian airlines trying to operate into their territory. And roping a Indian airline as a member gives them the advantage of the domiciled carriers without diluting their share infact they increase their revenue due to better feed from the airlines in India. As the foreign alliance airline will be operating the longer leg of the route, they end up raking in the higher volume of the revenue.

And then what happens within India AI / IA deploy excess eqpt onto the domestic trunk routes as well as the regional short haul Intl routes further pushing the pvt airlines into the red.

current AI/IC regulars will have the benefits/status when flying *A internationally.

Arre bhai, atleast allow the pvt airlines to fly intl alongwith AI / IA unhindered for 2yrs, don't allow any of them to go for an alliance either in this period (possible thru the FIA). You'll find that most of the imp destination worlwide are covered by one or the other Indian airline. If you profile the Intl traveller from and to India you will notice that 90% of them fly to only 10% of the destinations served by these alliances. The Idea is to create the same competition prevalent in India among the Indian airlines to extend outside so that they can develop into a truly Intl brand. And if they manage prove themselves the country and the economy reaps the benefit. This has been done in many other Industries as i mentioned earlier why cannot this be duplicated in aviation. I am sure the likes of Kingfisher and Indigo will rip the competition apart. KF has excellent brand value with a steady reliability they will dent the business customer segment of most of the Intl airlines. Indigo is backed by a razor sharp management with a respected intl reputation, they wil be India's answer to LH.

Tayara - I think you've got caught up in the jingoistic stuff there (India is great and all that).

Raja been there seen it, read the book and now watching the movie unfold. I've seen the potential of Indian aviation unfold right in front of my eyes whilst working for EK. I've seen it grow on the back of the Indian market (and they were wise not get stiffled into an alliance), my interest in knowing the commercial side of aviation brought me to U.K. Here i decided to study aviation mngmt (right now the studies are suspended) in 2003, the course director asked me the reason for doing the course. When i told him it was to position myself for the Indian market, He made a comment much like yours, he said '' If your grandchildren manage to see the good times that you predict for Indian aviation, consider yourself fortunate''. This bloke does have a attitude problem but he made this statement on the strength of his working exp in Mumbai with AI as a revenue management consultant . And the subsequent years till this year i've never missed an oppurtunity to remind him of his words everytime a visiting BOEING or AIRBUS official mentioned India. Have a look at the last 3yrs forecast for India by these OEMs. It has increased by 100% YOY are you saying they are also shooting in the dark or reading out of palm leaves. These guys are cautious and need to back their claim through statistical analysis. If you extrapolate every forecast of the Indian economy and base it on present position of Indian executives, businessmen and entrepreneurs worldwide, compare it to the region around India and you will see where i am coming from.

During the period of my studies i was involved with a Indian engg giant in a business plan revolving around this co entering the aviation sector thru the MRO route. I had run forecasts on the pax market and the potential for MRO services and other upstream engg services related to commercial aviation. As most people they found my forecasts to be too fantastic in 2004. However with subsequent months as the traffic figures shot up the guys i was interacting with came around to accept the prediction and trust the business plan. I had based the whole business plan on the premise of being a early bird monoply and warned them that the barriers to entry would be insurmountable if any of the major players entered into this game, especially if they cornered AI / IA Engg. After BOEING announced in April their plan for MRO i withdrew from their team, the whole time was wasted trying to convince the CEO about the validity of the business, the waste of space lacked a vision.

There are plenty of threats to the Indian aviation story AI / IA being one, another threat looming in India's neighbourhood is the collapse of PIA and BIMAN. The alliances will enter into India thru this back door if the IFA don't keep an eye on the happening in these airlines.

I am fully aware of the frustrations of working in India, the above exp has really made me bitter and twisted but then i strongly believe i met te wrong set of guys. There are some brilliant and focused individuals in India, they are steering the country in the right direction.

-- Edited by tayara mechanici at 03:14, 2006-12-09

the_380 · Member

Who wouldn't want the airline to change?

But i have said this on the basis of fact that i have known. My knowledge is not that vast as im not in the field.

The merger issue has been raised mainly to generate funds fromthe stock market. An individual AI or IC cannot generate so much funds with their IPOs as a joint airline can. Both airlines are in heavy debts with their aircraft purchasing loans and losses to add to it. both of us know it.

Next comes the Mx issues. Now honestly ask yourself and reply that if tomorrow your company cancels most of your Europe and USA tours and asks you to go to local places instead and you get paid less also... Would you be a satyavadi and let your company do it with you and yet not protest even once?

Obvious the answer is No. Unless your a soldier for the country. None of us are here. Everyone looks for their bread and butter.

None of AI staff will sacrifice their benefits for this. After all there is something called as the union too. This union has shaken the mgmt multiple no of times. of course IC Mx staff will agree to do the Europe and USA ops. They get paid more and definately a better option than doing a tiring 10.30AM BOM-RAI-BSR-BOM and continuing your shift till 9.30 PM!

Talk about the aircrafts lying vacant... After a tiring day don't you need some rest, some TV and some relaxation too? The aircrafts also need maintenance. Besides a short hop from BOM to DXB/SHJ takes about min 3 and half hours flying time and about 1 and half hour of halt at both the stations... excluding any sort of delays. Calculate the total time 5hrs... minimum. Not enough for those aircrafts to have their maintenance and operate another flight and be back for the next day.

Comments welcome please

rgds
the_380

Nimish · Member

TM Wrote:
And they choose 9W & IT as you mention in your same statement, So atleast these dom airlines have some source of additional revenue by means of this code share, having been denied the right to fly Intl unhindered. As a member of the *A from the outset of being a merged entity, AI/IA will end up being juniour partners without the freedom to launch their own routes into *A member countries and at the same time feeding into the existing schedule of these airlines, knowing how incompetent these 2 airlines are it works fantastically well to the benefit of the alliance. It is obvious these allied airlines will collectively mount various barriers on Indian airlines trying to operate into their territory. And roping a Indian airline as a member gives them the advantage of the domiciled carriers without diluting their share infact they increase their revenue due to better feed from the airlines in India. As the foreign alliance airline will be operating the longer leg of the route, they end up raking in the higher volume of the revenue.

And then what happens within India AI / IA deploy excess eqpt onto the domestic trunk routes as well as the regional short haul Intl routes further pushing the pvt airlines into the red.

I think you're confusing issues here. I'm talking about the benefits of a merged AI/IC joining *A immediately. You're talking about the problems Private domestic airlines are facing due to the governments stupid rules. I completely agree that the private airlines are subject to the whimsical ways of the govt, and I'm not commenting on that topic.

You say that the other members of *A will benefit more that AI/IC will - and you point out that's due to the stupid management of these airlines. Unfortunately if there' a stupid person dealing with a smart guy, it's always the case that the smart guy will win. Nothing I can do about that. But my statement is made with the assumption that the Indian side will have some sense about them.

TM Wrote:
Arre bhai, atleast allow the pvt airlines to fly intl alongwith AI / IA unhindered for 2yrs, don't allow any of them to go for an alliance either in this period (possible thru the FIA).

Once again - we're talking at cross purposes here. you're talking about the problems Indian private carriers face, something I completely agree with. I'm talking about how entry to *A will help AI/IC regulars.

380 Wrote:
The merger issue has been raised mainly to generate funds fromthe stock market. An individual AI or IC cannot generate so much funds with their IPOs as a joint airline can. Both airlines are in heavy debts with their aircraft purchasing loans and losses to add to it. both of us know it.

This is possible. I realize that the staff have a vested interest in sabotaging the merger. I hope the MoCA and the Govt of India do not give in, and shut down the airline/s if the staff try to arm-twist the management. The country has enough solid players in the private sector, and the country does not need it's govt to try and run 2 airlines and end up loosing the tax-payers money in the bargain. IC/AI staff should have no problem finding new jobs in this day and age.

the_380 · Member

Nimish wrote:

This is possible. I realize that the staff have a vested interest in sabotaging the merger. I hope the MoCA and the Govt of India do not give in, and shut down the airline/s if the staff try to arm-twist the management. The country has enough solid players in the private sector, and the country does not need it's govt to try and run 2 airlines and end up loosing the tax-payers money in the bargain. IC/AI staff should have no problem finding new jobs in this day and age.

Its not about closing down the airline... Airbus is eyeing IC employees (engg) many have recieved to recieve crash courses in English and become trainers (there's money in that)

But is it possible Nimish that private airlines will fly these mantris and netas at zero cost???
No way!

At the most Jet might give PP a Club Business ticket at LHR if he dumps his AI ticket. Not everytime every minister flies 9W for free. IC does that. Even AI does it for intl.

Where would this "free service" go? Besides the govt can't pay for 52 passages per minister per annum in Business class and babus won't agree for Economy (52 passages per year-yes its the correct figure!!!)

In the name of the airline so many people get to gulp sums from the govt. What would happen to them?

Public and social charity issues are very sensitive... you need to understand them

tayara mechanici · Member

http://economictimes.indiatimes.com/articleshow/815184.cms

Airline M&A policy to be ready soon

NEW DELHI: With consolidation in the airline segment looking imminent, the civil aviation ministry is finalising policy guidelines on airline mergers & acquisitions (M&As). As of now, there is no firm policy on the status of airport infrastructure and rights vested with an airline in case it is taken over.

Broad guidelines were discussed by the ministry when Jet Airways was in the process of taking over Air Sahara in a $500-million deal which ultimately failed. Now that the mega merger of Air-India and Indian is moving forward at brisk pace, the ministry wants to be ready with detailed guidelines on airline M&As.

tayara mechanici · Member

Nimish wrote:

Once again - we're talking at cross purposes here. you're talking about the problems Indian private carriers face, something I completely agree with. I'm talking about how entry to *A will help AI/IC regulars.

ah, how come i missed this post for 2 days.

The jest of both our statements is the same, if you look behind semantics. My point of view is that AI / IAs loss is *A gains. The reason LH and brothern look smarter is due to the skewed restrictive policies of GOI till date. These policies have resulted in not only these 2 being weak as compared to their Intl rivals but also the present day pvt airlines. We expect AI/IA to look for improvements from an alliance with their successful rivals however i strongly believe that the fundamentals are in favour of Indian aviation to go it alone. India is undoubtedly the most attractive aviation market in the world today and will be till the end of this decade atleast.

This conversation stemmed from my strong faith in SOME JINGOISTIC propaganda on the future of Indian aviation, the developments of last 6 days have proved that these so called jigoistic propaganda is more solid than what many critics would like to believe.

TATA, Texas Pacific, Morgan Stanley looking for stakes in India's Airlines.

Strong reports by all Major National dailies stating imminent changes in Indian Aviation policy with regards to pvt operators with 3yrs op exp to be allowed to fly Intl.

In a bearish market stocks of Deccan holding ground and infact appreciating better than the market avg later.

GOI changing the RBI rules to allow pvt airlines to hedge FUEL, and ATF cost likely to come down in India in line with Intl costs.

Yes its not always that i support my statements with direct references but the happenings of this week is there for all to see. Even the worst of critics will accept this as definate trend towards positive outlook for the desi aviation industry. Let us support this lot for the very reason i've been harping, better for the desi economy, better jobs and more Brand India recognition for the generation to come.

Digressing slightly, lets wait for the US aviation M&A activity to conclude we might see its fall out on the alliances itself, till then JAI BHARAT.

Nimish · Member

Yes indeed - Jai Bharat - that I agree with!

We're definitely talking at cross purposes though - here I quote what I'm trying to convey:

I'm talking about how entry to *A will help AI/IC regulars.

karatecatman · Member

Interesting development (Dec. 16.06)

Thulasi is to retire soon and the Government is to decied whether to extend his term or not.

PMO is to decide on this.

If he has to go, then Vishwapathi Trivedi, the current IA CMD, may hold joint charge of AI.

All this is to be discussed in the merger meeting soon.

May explain why Trivedi is going ahead announcing IA's new aggressive expansion plans and promoting the new IA identity internationally as well. IA is also shortlisting 12 advertising agencies to advt on TV and print. Some of these names include J.W. Thompson, Lintas and HTA.

karatecatman · Member

AI-Indian merger may cost Rs 300 cr