AIR INDIA: CRISIS AND PROBLEM SINCE MERGER INTRDUCTION: AIR INDIAAir India was founded by J.R.

D Tata in July 1932 as Tata Airlines. It was one of the first airlines in India. Tata Airlines was a private limited company until 1946. On 29th July, 1946 Tata Airlines became a public limited company under the name Air India. In 1948, 49% of the airline was acquired by the government of India with a want of 2% more. In return, the airline was granted the permission to fly international under the name Air India International. On 25th August 1953, the government of India exercised its option to purchase a majority stake in the carrier and Air India International Limited came into being as one of the fruits of the Air Corporations Act that nationalized the air transportation industry. INDIAN AIRLINESIndia Airlines was set up under the AIR COOPERATION ACT, 1953 and started operation on 1st August, 1953. It was a state owned airline and was administered by the Ministry Of Civil Aviation. Thus, it was a public owned airline since the beginning. It was one of the two flag carriers of India, the other being Air India. When in 1953 Air India became a public limited company, in the same year all domestic services were transferred to Indian Airlines. When and why the merger took place? In 2007, the merger between Air India and Indian Airlines took place as announced by Government of India. As a part of the merger process, a new company called THE NATIONAL AVIATION COMPANY OF INDIA LIMITED (NACIL) was established, into which both Air India and Indian Airlines was merged. On 27th February 2011, Air India and Indian airlines merged along with their subsidiaries to form AIR INDIA LIMITED. The merger was seen as a profitable plan at that point of time (2007). It was done to make it one of the largest airlines in the world by fleet size and manpower. Was the merger of Air India and Indian Airlines successful? The merger of the two airlines- Air India and Indian Airlines which was announced in 2007 did not happen immediately. It was only in 2011 that the actual merger took place. However, it was just a regulation which had to be followed. The merger never happened in real sense. There are still disparities between the workers of erstwhile Air India and Indian Airlines on many issues. The merger was not successful. The plan never worked out. The first year post merger in 2008, Air India had a loss of Rs.2226 crores. In second year (2009) the losses went up to Rs.7189 crores. The third year after the merger in 2010 they recorded the loss of Rs.5550 crores. In 2011 and 2012 their balance sheet showed a loss of Rs.6865 crores and Rs.10000 crores respectively. Air India has a debt of Rs.46000 crores, accumulated losses of Rs.32000 crores, working capital loan of Rs.20000 crores and other debts such as wages dues of oil companies, airport dues, catering etc of another Rs.10000 crores. On the other hand, the employees of the two airlines and their union have several inequalities among them. The merger was not done systematically and hence caused many problems. Why was the merger not successful? The merger was not successful because of various problems such ast did not fulfilled its promise of equal pay-they have different pay structure, training schedule, working hours, career progression and leaves lved for five years after the merger of two airlines of the former Air India and Indian Airlines function separately till date(2012) -merger era Rohit Nandan(chairman and managing director go issues between the two airlines remains The pilots are on strike since May 7th 2012. This is the sixth strike in Air India since 2009 and the fourth by pilots.

What are the demands of the pilots of Air India? Air India pilots want sole right on the Dreamliners 787 or for that matter on any other aircraft which they are flying like the 777s or the 747s. salary of the captain. will fly to the west only and the destination to the west should be exclusively of the erstwhile Air India pilots. Indian Airlines pilot should only fly eastern destination and not look west. co-pilots to be promoted to captains in 6years, instead of 10. What is the main reason of crisis in Air India Limited? Air India is ventilating on government support. The main reason for the crisis was the order given by the government for 100 new aircrafts after the merger. Some of the aircraft flew on unprofitable or uneconomic routes. The political leadership has never allowed the airline to function on a commercially sound basis. The ongoing strike of the pilots of Air India under their union IPG (Indian Pilot Guild) is creating losses and discomfort for the airlines and the passengers. ICPA (Indian Commercial Pilots Association), a union of Indian Airlines is not on strike but have problems within, relating to salary and flying Boeings. Air India is in a mess and the government is constantly pumping in money to save its national carrier. airline flying. und 2000 crores requirements immediately Ever since the merger the airline is making loss even after the continuous bailout given by the government at different point of time. What is the DHARMADHIKARI REPORT? The Justice Dharmadhikari Committee, under the chairmanship of former supreme Court judge D.M. Dharmadhikari was set up on May 11, 2011 to address various industrial relations (IR) issues arising out of the merger of Air India and the erstwhile Indian Airlines. It submitted its report to the Minister of Civil Aviation on January 31, 2012. The terms of reference of the committee were1. To examine the principles of the integration across various cadres and determination of level and seniority

2. To examine the principles of pay/wage rationalization and restructuring between all the employees of airline 3. To examine and suggest harmonized working of various categories of employees of airlines depending upon the requirements 4. To examine the above (1), (2), (3) in the light of cost neutrality principle 5. To examine the principles governing the structure of the pensioner schemes, death cum retirement gratuities and other terminal benefits having financial implication 6. To examine and make recommendations with respect to the general principle parameters of the different productivity linked incentive schemes and brings them in line with airline practices.

What was the effect of dharmadhikari report on the Air India pilots? The pilots under IPG, who are on strike said - the report highlights the prejudice and bias of the management. Indian Airlines pilots are promoted to the higher grade in six years, whereas the same promotion for Air India pilots takes up to 10 years. Therefore, an Indian Airlines pilot with less years of service will become senior to an Air India pilot with more years of service, the stat ement said. The agitating pilots said that if the report recommended common pay scale, then why the management raised the salary of Indian Airlines in November 2011. The airlines did not agree to the dharmadhikari report. However, the government has given 45 days (since 1st June) to the striking pilots to come back to work. This is the last chance for the pilots to come back to work with the terms and condition set by the dharmadhikari report. Is privatization of Air India Ltd. a better option? In 2001, the government of India put forward plans on privatizing Air India. One of the bids was by Tata Group- Singapore Airlines. However, the re-privatization plans were shelved after Singapore Airlines pulled out and the global economy slumped. In 2003, the NDA government did think about re-privatization but the plan was put on the backburner following the global economic slowdown. In 2012, the question of re-privatizing Air India hit yet again. The government this time does not want to surrender its national carrier in private hands. But save it on its own stake. How has the crisis of Air India affected the market? grounded and flights on many routes are cancelled because of the strike. All this has led towards the rise of ticket price

in the first six months of the current fiscal year (1ST April 2011 to 31st March 2012), the firm has lost Rs.3451 crore and it owes Rs.600 crore to the Airports Authority of India (AAI). earning of Rs.36 crore a day. tax dues of Air India is Rs.454 crore (with 15% interest rate) slapped a compensation claim of $850 million on Boeing for late delivery- AI had placed an order for 27 B-787 Dreamliners. The first such aircraft was to be delivered in September 2008. None has been delivered so far. The latest news (on 3rd June, 2012) is that the first aircraft would be delivered end of this year. How can Air India Ltd. Come out of the mess? In December 2010, AI had hired consulting firm Deloitte Consulting India Private Limited to assess the debt recast plan prepared by the State Bank of India- Capital Markets Limited (SBI Caps) before it was submitted to RBI. Though the report has not been made public, it recommendedof its employees for the next 3 years to make a turnaround en carrier needs to expand by adding 113 aircrafts to its fleet of 135 to 248 by 2015 urnaround is possible if flight occupancy increase from 68% to at least 7580% for low fare division Air India Express and market share rises from 17.6% to 21% However, it is very difficult to implement these plans. The above suggestion is too touchy a subject on which employees have gone on strike. This is the third turnaround plan in last few years. The government too has given bailout package to AI. These are like drops in ocean as AI need a lot more money. Finally, Air India (AI) needs a green

signal from the government to reduce the number of employees to bring the employee- airplane ratio to competition. We interviewed former aviation minister SHRI RAJIV PRATAP RUDY, to know his views on the ongoing strike and the proposed plan of the government regarding this issue. Here is what he saidAre AI pilots being greedy or are their demands justified? Rudy: The demands of the pilots are irrational. This is the only airline were the employee is deciding the terms and condition of employment for their employee (colleagues). AI pilots do this because they have a monopoly and the monopoly will break if the IA pilots fly the Dreamliner. How will the DHARMADHIKARI REPORT affect the pilots? Rudy: Once the report comes the pilot will again go on strike because the report will rationalize the airline as per the market share and not as per the standards of AI. On one hand government is trying to bailout AI and on the other side it is sacking pilots? Rudy: But this time government has no sympathy (sounds a bit rude) for pilots. By striking, pilots have lost all the government support. The government has already sacked 101 pilots. They have started recruiting fresh pilots. But this will require more investment.. The airline is already making losses, while operating also they were making loss, pilots are still on strike and bailout plan will work only if they fly. So, instead of pumping in more money without a plan, it is better to start from the scratch using the same money. NDTV MI .