No public enterprise in recent memory epitomises the adage "the government should not

be in the business of running a business" as much as Air India.

From being a market leader on domestic routes in 2001 - the operation was called Indian
Airlines then, before it merged into Air India - to becoming an also-ran today, the airline
makes for a case study on how not to merge two entities. Many insist the 2007 merger was
doomed long before the latest strike.
Geetanjali Shukla lists the factors that have dragged the airline down and possible fixes
based on conversations with experts:
1. LEADERSHIP
Praful Patel, the aviation minister who led the Air India-Indian Airlines merger in 2007, has
been keeping a low profile since a pilot strike stalled the airline's cashmaking international
operations.
Current Aviation Minister Ajit Singh pulls his punches when he talks of coalition colleague
Patel: "In retrospect, it is easy for people to say things. At the time of the merger it must
have seemed the right thing to do."
But others point out Air India has had four chairmen in the last six years with no one biting
the bullet on tough decisions.
"How can you think of achieving success with such instability at the top," asks Kapil Kaul,
CEO-South Asia, Centre for Asia Pacific Aviation.
For full interview, go to www.businesstoday.in/ajitsingh
SOLUTION:
Appoint a professional CEO backed by a strong board of directors and give him a free hand
(Accenture, the consultant at the time of the merger, had recommended a minimum five
year tenure). In effect, the government will have to cede control of day-to-day running of
operations and appoint independent directors (an experiment attempted earlier).

2. BLOATED HEADCOUNT
The merger brought together two disparate entities and created a behemoth with 30,517
employees - 214 per plane. Singapore Airlines has 161 while British Airways has 178.
Air India's high employee-aircraft ratio is expected to come down to 110 per aircraft once
19,000 employees are transferred to two new proposed units - one for ground handling and
the other for maintenance, repair and overhaul (MRO) operations. But, even here, workers
want to be deputed rather than transferred.
SOLUTION:

Carry out the planned spin-off of the ground handling and maintenance, repair and overhaul
operations. Offer a voluntary retirement scheme if still necessary.

3. HR INTEGRATION
If the jumbo-sized staff was not enough of a headache, the way the management went
about integrating the workforce made for a perfect storm.
No attempts were made to standardise hiring policies for the rank and file. Air India has a
five-day week; Indian Airlines has a six-day week. Indian Airlines pilots were promoted
unconditionally once in six years while Air India pilots complained they got their turn after 10
years - if there was a vacancy. The ground handling teams of the two airlines continue to
operate separately...
"Before the merger, due diligence on HR issues was very poor," says CAPA'S Kaul. Some
of the gaps are being addressed but the process has been painfully slow. Five years after
the two airlines merged, staffers below the level of deputy general manager have still not
been integrated.
FULL COVERAGE: Air India crisis
Even before the report by the Dharmadhikari Committee, set up to look into Air India's HR
issues, was released, Air India CMD Rohit Nandan told BT: "It will not be an easy report to
deal with." The panel has suggested uniform working hours and pay scales, among other
things. But that, at best, is a beginning.
SOLUTION:
Air India will have to cut layers of management, align staff by role, bring in lateral hires,
overhaul customerfacing functions, and implement a massive training exercise. And, rein in
pilots and engineers, even if it means a partial lockout. Minister Singh's answer was a
noncommittal "I hope not", when asked about such a possibility.

4. AIRCRAFT, TICKETING
Look at any modern airline operation and you notice the obsessive attention to pare costs.
And, one way airlines have success full yworked at eliminating expenses without hurting the
service experience is to have a fleet with a single aircraft type.
After the merger, Air India continues with both Boeing and Airbus-made planes: the
international operations are run mostly by wide-body Boeing 777 jets, while domestic routes
mostly use A320S. The result: high operations, maintenance, and manpower costs.
Air India was also hurt by the delay in integrating the two airline reservation systems. A
single system allows it to sell tickets under one airline code, join alliances and ink codeshare agreements. It took until February 2011 for a common reservation system to come
up.
SOLUTION:
There are airlines that run successfully with two or more aircraft types. But India is a pricesensitive market, and a model built around a single aircraft-type makes compelling sense.
IndiGo, India's only profitable airline, uses 56 Airbusmade jets to fly to places as diverse as
Bangalore and Bangkok. Airline mergers the world over have had abysmal success rates.
Even the Delta Air Lines and Northwest Airlines merger in the US, considered successful,
took more than two years to start operating as a single carrier.

5. LEAKY FINANCIALS
No business enterprise, not even one backed by the sovereign, can survive years of
losses with no turnaround visible. The airline's total debt, as of financial year 2011, was
Rs 44,000 crore. About half of that is from long-term loans for aircraft purchase.
A CAG report termed the purchases a "recipe for disaster" . While acquiring some 110
new planes may have made strategic sense for the national carrier in the mid-2000s, Air
India did not have the financial health to sustain a spend of Rs 40,000 crore.
SOLUTION:
Turning Air India around will be a long haul. The government and the airline should be clear
that the odds of its survival are slim. But together with incentives, a charismatic leader and
conditional support from the government, Air India could fly again.
The flag carrier did so well in the 1960s and 1970s that a certain fledgling airline from
Singapore came visiting to learn from it and grew into the feted Singapore Airlines of today.