Lecture Notes

HR MANAGEMENT IN INTERNATIONAL AIRPORTS IN TRANSITION

Dr. Tayyab S. Shaikh*
Privatization and Disinvestment in Airports

A Govt. taskforce on infrastructure has recommended scrapping

of plans to privatize Delhi, Mumbai, Chennai, Bangalore and
Kolkata Airports and instead recommended offering all of these
Airports except Bangalore on lease to private investors for 30
years. This recommendation was to bypass the lengthy and
complex legal process of earlier privatization plans, and this was
to be put-up to the Cabinet for approval.

As regards Bangalore Airport, a fresh Memorandum of

Understanding has been signed between the Karnataka Govt.
and the Civil Aviation Ministry. The project is implemented by a
JVC with Airports Authority of India and Karnataka State Industrial
& Investment Development Corporation each holding 13% equity
and co-promoter the rest.

The countrys first Airport to be promoted as a JVC was

commissioned in Cochin in May 1999. The State Govt. and Public
Sector Undertakings jointly hold 51% of the equity and private
investor the remaining 49%.

Executive Director (Personnel & Administration), Airports Authority of India,

New Delhi
*

Operations, Maintenance & Development Agreement (OMDA)

Salient Features

With the Govt. decision, two Airports i.e. Indira Gandhi

International Airport and Chatrapati Shivaji International Airport
were handed over to Joint Venture Company at 00:00 hrs. of 3 rd
May, 2006. These Airports are now called as Delhi International
Airport Pvt. Ltd. and Mumbai International Airport Pvt. Ltd.

During the period of three years from the effective date,

Operations, Management and Development Agreement (OMDA)
has come into being in order to facilitate smooth transition from
the PSU Airports to JVC Airports. Salient features of the OMDA
are as under:

The first three months period from effective date will be called
as Transition Phase during which al the Airport personnel,
including Airport Director, will continue to work with JVC.
Upon expiry of the Transition Phase, none of the Senior
Management (employee above the level of Deputy General
Manager) shall remain at the Airport. JVC shall have the right to
appoint its Senior Management at the Airport. Consequently,
upon such appointment by JVC, AAI shall reduce the number of
its Senior Management located at these Airports.
Employees of the level of DGM and below will be called as
General Employees and they will be retained at the Airport to
perform such functions and undertake such duties as would be
required by the JVC for rest period.
During the Operational Support Period, JVC shall pay AAI
monthly Operation Support Cost as defined.
During the Operational Support Period, JVC may ask AAI to take
disciplinary action against the General Employees, if necessary,
as per the AAI Rules & Regulations.
RED (Western Region) for Mumbai and RED (Northern Region) for
Delhi Airport will act as Disciplinary Authority for Group C & D
employees, whereas for Group A & B, the concerned Member or
Chairman at Headquarters will be Disciplinary Authority as per
the AAI Regulations.
During the Operational Support Period, all General Employees
would be governed by the existing terms of employment of AAI.
At any time but three months prior to expiry of Operational
Support Period, JVC shall make offer of employment to General
Employees. Such offers shall not be inferior in terms of salary,
position, etc. than the current employment terms to be
determined on cost to company basis.
JVC shall be required to make offers to minimum 60% of the
General Employees.
The General Employees shall have the option of accepting or
declining the employment offer of the JVC within one month. In
case of accepting the offer and upon resigning from AAI, shall

cease to be AAI employee from the date of acceptance of the

offer or completion of Operational Support Period, as applicable.
In case of transfer of any employee during Operational Support
Period out of the Airport, JVC shall not be liable for making
payment of the monthly Operational Support Cost with respect
to the said General Employee.
General Employees opting to continue employment with AAI or
those not receiving offers from JVC shall continue their
employment with AAI and be deployed at establishments other
than these Airports.

HR Issues During Transition Period

HR issues could be perceived differently by the HR personnel of

AAI and JVC. Broadly, perceptions are as under:
General Perception

Adjusting with the unwilling workers for comparatively long

duration of three years.
Living with two divergent work cultures i.e. work culture of
public sector and private sector.
Challenge to establish that we are better employer and
better HR managers than the PSU.
The bridge not burnt syndrome.
Eventuality of mass exodus.
Preparation of second line of defense.
Attitudinal change.
Employee acceptance to changing work procedures and
methods.
Appeasing vs. Appeasing employees approach.
Dual loyalty and its consequences.
Disciplinary Authority outside the purview of JVC.

JVC Perception

Establishing identity.
Explaining rationale of takeover.
Conveying in broad terms philosophy and future plans to
make a difference.
Addressing concerns of employees.
Act more than talk and convey to all that company means
business.
Position the top management team to the culture of old
company.
Articulating behaviour required from employees for a new
culture.
Constantly be in touch with the employees.

Primary Objectives of Privatization / Disinvestment

Releasing the large amount of public resources locked up in nonstrategic PSE, for redeployment in areas that are much higher on
the social priority, such as, health, family welfare, primary
education and essential infrastructure.

Stemming further outflow of these scarce public resources for

sustaining the unviable non-strategic Public Sector Enterprises.

Reducing the public debt that is threatening to assume

unmanageable proportions.

Transferring the commercial risk, to which the taxpayers money

linked up in the public sector is exposed to the private sector
wherever the private sector is willing and able to step in the
money that is deployed in the private sector enterprises is really
public money and is exposed to an entirely avoidable and
needless risk in most cases.

Releasing other intangible resources, such as, large manpower

currently linked up in managing the private sector enterprises
and their time and energy, for redeployment in high priority
social sectors that are short of such resources.
Other Benefits

Disinvestment would expose the privatized companies to market

discipline, thereby forcing them to become more efficient and
survive or cease on their own financial and economic strength.
They would be able to respond to the market forces much faster
and cater to their business needs in a more professional manner.
It would also facilitate in freeing the private sector enterprises
from Govt. control and introduction of corporate governance in
the privatized companies.

Disinvestment would result in wider distribution of wealth

through offering of shares of privatized companies to small
investors and employees.

Disinvestment would have a beneficial effect on the capital

market. The increase in floating stock would give the market
more depth and liquidity, give investors easier exit options, help
in establishing more accurate benchmarks for valuation and
pricing, and facilitate raising of funds by the privatized
companies for their projects or expansion in future.

Opening up the public sector to appropriate private investment

would increase economic activity and have an overall beneficial
effect on the economy, employment and tax revenues in the
medium or long term.

In many areas like the telecom sector, the end of public sector
monopoly would bring relief to consumers by way of more
choices and cheaper and better quality of products and services,
as has already started happening.

Impediments to Privatization

Privatization is not easy even after the decision has been taken
or imposed, as has happened and continues to happen in many
countries and cases. In fact, the principal actors the state
owned enterprises and private sector would themselves be
barriers. Some of these barriers are:

The state itself.

The state owned enterprise itself.
The private enterprise itself.
Volatile and / or fluid political situation.
Opposition from interest groups.
Considerations of equity and justice.
Surplus labour and huge liabilities.
Weak capital markets.
Legal and other technical problems.
Inefficient regulatory mechanism.

PSU Shortcomings

Overstaffing.
Low work ethics.
Low capacity utilization.
Inability to innovate.
Inability to take quick and timely decisions.
Large interference in decision making process.
Over-centralization and decision making.
Excessive bureaucratization.
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