With the euphoria of Air India (AI) returning to the Tata fold after 69 years, it’s time for the new owners to take stock of the challenges they face and how to address them, before taking the Maharaja back to the heights and glory it enjoyed under JRD Tata.
These challenges will emerge from many fronts – from an ageing fleet to managing its human resources and everything else in between.
Gustav Baldauf, former Chief Operating Officer, AI, maintains that the biggest challenge is in forming a new ‘Vision, Mission and Strategy’ for the group, which will define a new airline system with different models, cutting doubling routes, services and markets, and handling different groups of employees.
At the moment, there are four airlines with the Tatas--- Air India, Air India Express, Vistara and AirAsia India. AirAsia India will soon get subsumed into Air India Express.
Four airline brands to be managed
“Additionally, only a new company-wide quality system, controlling new targets and goals, will help to keep different airlines on track for the vision and mission. The Tatas know that business models should never be mixed, but have to be kept in place to cover a broad range of services -- from charter flights to a low-cost carrier to a full-service one and cargo services, both domestic and international,” Baldauf says.
Satyendra Pandey, Managing Partner of aviation advisory firm AT-TV, adds that with the handover, the Tata group now effectively manages four airline brands -- each with a distinct profile, culture and cost base.
“Guiding the airline towards profitability is a monumental task and will require deliberate and decisive actions,” he adds.
Payment in PSUs vs private carriers
Another former management level official of AI adds that manpower integration is going to be a big challenge in all the Tata group’s airlines and may take a long time. “Productivity parameters may be more performance- oriented in private carriers, vis-a-vis a PSU. For instance, AI pilots get guaranteed payment for 70 hours, even if they fly for 40 hours. This may not be the case with Vistara or Air Asia,” he says.
“Rate per flying hour may be different in the three airlines as per seniority and may have to be harmonised,” he says.
Schedules have to be synchronised, else the airlines will have to compete with each other, he says. “Manpower may be excess in certain areas, leading to disguised unemployment and surplus staff,” he points out.
‘Market share may not translate into successful outcomes’
Adds Baldauf: “It is not a matter of handling three airlines, it is the creation and management of a new, big and diverse airline conglomeration, following a common vision and creating a new strong competitor in the Asian region.”
Pandey further cautions that while the group’s airlines will command about 27 percent market share, this does not automatically translate into successful outcomes.
“Consumer demand, choices and actions need to be monitored, evaluated and targeted – continuously, iteratively and contextually,” he says.
While the Tata group has no challenges in accessing capital at competitive rates, “at some point the returns have to justify investments,” he says.
Motivating employees another challenge
Former Air India employees maintain that the airlines business is in the service industry and the Tatas have not much experience in this industry. Says a retired AI employee: “You are not counting that production has to be eight units in the morning and eight in the evening in eight-hour shifts. It is essential that the Tatas remember this because they are not in the service industry, apart from hotels. They need to motivate people and gain their confidence. There are problems here -- firstly, you have the integration of Indian Airlines and AI, which is like chalk and cheese, oil and water. The first thing to do is to stop the infighting between the two.”
Another retired official agrees. He says this is not going to happen in one day, one week or one month. “It will take a couple of months to cover the entire system, which is spread in the metros as well as smaller cities in India and abroad. Depending on the country, different tactics are required. This will require a minimum of two to three months. You are perfectly poised as you have February and March before the start of the new financial year,” he says.
“If you do a quick job, you can, maybe, have a different set of people who have at least been sensitised by the start of the new financial year 2022-23,” he says.
In this context, Baldauf points out that quite a few things will change, especially in Air India, and a lot of goodies will be cut. This may find some resistance to the new plans. “These HR issues have to be proactively managed and should be part of the new vision and strategy and have to be communicated in an early and positive manner,” he says.Former employees are unanimous in saying that what needs to be explained to existing employees is that this is not a hostile takeover. It needs to be explained to them that Tata Sons came on the scene because the government advertised that it wanted to sell AI. The Tatas need to explain to the employees that they are here because AI was put up for sale, and they felt that whatever the cost, they will come in because AI was theirs and it was taken away and that the Tata group wants employees help to make the airline great again.