Air India pilots call off two-month strike

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NEW DELHI (Reuters) - A section of pilots at national carrier Air India , who were on a 58-day strike demanding exclusive rights to fly Boeing Dreamliners, called off their agitation late on Tuesday bowing to pressure from the government and a Delhi court intervention. About 500 Air India pilots who fly international routes have been demanding their colleagues from former state-owned partner Indian Airlines should not be trained to fly Dreamliners, as it may hurt the career prospects of the original Air India staff. The strike has forced Air India to cut back on its international schedule and combine flights, which further strengthened market leader Jet Airways' hold on international routes.

Air India has sacked more than 100 of the striking pilots. Indian aviation minister Ajit Singh has said the strike is illegal and the government will not get into any discussion with the pilots until they report back to work. The Delhi High Court on Tuesday also ordered the pilots to join back work immediately, and asked Air India's management to look into their demands. Air India had previously said they would consider taking back the sacked staff on a case-by-case basis once the protesting pilots unconditionally report back to work. Air India and Indian Airlines were merged in 2007 but there have been problems with integration, mostly in human resource-related issues. Air India's purchase of Dreamliners was also criticized by a federal auditor last year for "imposing an undue long-term financial burden". (Reporting by Anurag Kotoky; Editing by Prateek Chatterjee)

The government's resolve to implement the Justice Dharmadhikari Committee's report on human resource (HR) integration in Air India is fuelling unrest in the carrier's unions. Pilots affiliated to the Indian Pilots Guild (IPG-Air India) who are on strike for 30 days are unhappy as the report allegedly favours Indian Commercial Pilots Association (ICPA-Indian Airlines) in pay and career progression. The ground staff are also peeved that their allowances would be drastically cut. ALSO READ: Is it time for Air India to shut shop? Employees of Air India get productivity-linked incentives (PLI), which constitute a major portion of the pay package. PLI will now be scrapped as no lossmaking public sector undertaking allows such incentives. This issue is going to snowball into a big crisis and aviation consultancy firm Centre for Asia Pacific Aviation (Capa) has predicted that the Maharaja could face a temporary shutdown due to massive HR issues. Since 2009, AI employees have organised six strikes-three by pilots and the rest by disgruntled ground staff demanding salary payment. According to experts, now that a partial lockout is apprehended due to the chain of strikes, the government should immediately start an aggressive plan to offer voluntary retirement scheme (VRS) to reduce the workforce and contain the unrest by offering an attractive package. "The government's decision on the VRS will be a laudable step if the motive is to ensure that Air India does not expand or maintain its present level of operation. The government needs to trim the non-operational workforce and not in operations areas where there is manpower shortage," said Jitender Bharghava, former executive director, AI. The much delayed demerger proposal of strategic business units-engineering and ground handling-if immediately implemented, will reduce the number of employees to 16,000 from 27,000. While 7,000 employees will be moved to the engineering subsidiary called Air India Engineering Services Ltd, the balance will migrate to the ground handling arm called Air India Transport Services Ltd. This would bring down AI's employee strength to 10,000 and with 122 aircraft in its fleet, the employee per aircraft ratio will come down to 82 from 221. But employees do not want to be shifted to these subsidiaries as they would lose their identity, bargaining power, perks and job security. AI's turnaround plan has become a casualty. "There is nobody taking ownership of the turnaround of AI. For the last two years, Capa has advocated that AI should be placed under

special administration similar to that adopted for Satyam if any meaningful progress is to be achieved," said Kapil Kaul, chief executive, South Asia, Capa. Courtesy: Mail Today

AIR INDIA STRIKE IS 2ND LARGEST STRIKE IN AVIATION INDUSTRY

New Delhi: The strike by a section of Air India pilots will Monday enter the 57th day, to attain the notorious distinction of becoming the second longest strike in the country's aviation history. The Indian Pilots Guild (IPG), the union of Air India pilots, had also struck work in 1974 against cost cutting measures when fuel prices shot up alarmingly. The 1974 strike lasted for well over 90 days. In 1993-94, a strike by Air India flight engineers lasted for 56 days. Before the 1993-94 strike, the distinction of the second longest strike was held by AI's sister organisation Indian Airlines, whose pilots went on a five-week stir in 1991-92 demanding more wages. The current strike started May 8 when pilot members of IPG went on mass sick leave, protesting the move to provide Boeing-787 Dreamliner training to pilots from the erstwhile Indian Airlines. After putting forth an original list of 14 demands, the aviators are now asking for reinstatement of their 101 sacked colleagues. The airline has maintained that pilots must first end their strike and the sacked pilots will be reinstated on a case-by-case basis. Civil Aviation Minister Ajit Singh said earlier: "Sacked pilots will be taken back on a case-by-case basis. But for this to happen, they must end the illegal strike." The airline has suffered estimated revenue losses of more than Rs.610 crore. Grounded fleet of Boeing 777s, unused manpower and absence from key routes have hit the airlines' chances of a financial turnaround. The strike has crippled Air India's international operations, stranding thousands set to fly to East Asia and the Middle East. The striking pilots have started an indefinite hunger strike since June 24. Nearly five of 11 fasting pilots have been hospitalised. Officials at Airlines House, Air India's New Delhi-based headquarters, are confident of resolving the situation by hiring new pilots. The current strike is the longest since Air India and Indian Airlines merged in 2007.

There have been five major strikes since the merger. The longest was by ICPA which lasted 10 days (April 27 to May 6, 2011) to demand pay parity. Though there is no exact figure on how much the airline has lost since 2007 due to strikes, a blame game is on between Air India and Indian Airlines cadres. "Estimated revenue losses depend upon the nature of strike, as factors like ticket cancellations, loss of routes and unused contractual obligations have to be factored in," an Air India official said. According to him, a stir by cabin crew may not be as potent as that of pilots. Besides revenue and reputation loss, strikes also provide opportunities to other employee unions to add pressure to get their demands fulfilled, he added. "Each strike inspires other industrial actions. A stir by one union will prompt the members of other unions to force their leadership to get them a sweet deal as well," he said. IANS

Air India's last shot at survival: Will the government be able to save the Maharaja?
Binoy Prabhakar, ET Bureau May 20, 2012, 03.53AM IST

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Jitendra Avhad, the leader of AWOL Air India pilots, appears to be a man who chooses his words carefully. Members of the Indian Pilots' Guild, who have called in sick since May 8, are not on strike but agitating, the Maharashtra legislator has told reporters and in television interviews. Agitate could mean making (someone) troubled or nervous. Agitate could also refer to a campaign to arouse public concern about an issue in the hope of prompting action. If Avhad & Co's intention was to trouble the government, it has not worked.

Far from troubled, the government is actually defiant. Civil aviation minister Ajit Singh has said the government was giving the national airline, which has been surviving on taxpayers' money, one last chance to perform to qualify for a Rs 30,000-crore bailout. That brings us to the campaign part. Assuming arousing public concern and prompting action are the reasons the pilots are striking, well, agitating, the public and the government will have to overlook a few things. Pampered Lot? First would be Singh's statement on Wednesday that the management is investigating cases of theft, fraud and abuse of perks in Air India.

Second would be the validity of the IPG demand that its counterparts from the Indian Commercial Pilots' Association be barred from training in the 787 Boeing Dreamliners the carrier is buying. IPG members belong to the erstwhile Air India and ICPA represents the Indian Airlines pilots before the two airlines were merged in 2007.

The IPG is harking back to an agreement in 2006 that said the first 12 Dreamliners be manned by Air India pilots in order of seniority. The merger obviously matters little to IPG. Third would be the salaries of pilots. The Air India agitation is not a struggle by lowly paid employees demanding better wages and fighting inhuman work conditions. Air India commanders (pilots with eight years of experience who are responsible for operation and safety during flights) receive around Rs 8-10 lakh a month (see Different Pay Scales). That makes them among the highest-paid pilots in the world, according to Ravinder H Dholakia, a member of the Justice DM Dharmadhikari Committee, appointed by the government to resolve HR issues between employees of the two airlines. Say, if these pilots fail to become commanders by a quirk of fate or by virtue of being bad pilots, they will be compensated 'notionally' with the same pay and allowances as commanders, according to a government official. Due to these reasons, the fight for unpaid salaries - the only demand of the pilots that makes the 'genuine' list - threatens to be unheard. Rohit Nandan, chairman and managing director of Air India, says there is no justification for the strike especially when the Dharmadhikari Committee report is with the government, which has said it will soon implement its recommendations. Experts and independent observers have criticised the strike for the same reason. Dholakia says the strike is untimely and premature. "The pilots should have waited for the implementation of the report." Saikat Chaudhuri, assistant professor of management at the Wharton School, University of Pennsylvania, says the strike is most unfortunate because things were beginning to look up for the airline. He says last month, a debt restructuring plan (Air India has a total debt of around Rs 44,000 crore) was pushed through and the bailout package approved, but more importantly, the carrier's year-on-year revenue and load factor (measure of occupancy) performance had markedly improved. "The Dreamliners are also finally poised to join the fleet, which will help reduce operational costs and optimise capacity on routes. And finally, Air India could have benefited even more from Kingfisher's [Airlines] current woes." Good Work Undone At Air India's Delhi office, Nandan affects a look that says as much. "The strike is a huge setback to all my efforts to revive the airline," he says. More than the monetary losses (see At a Loss), he says it's the further loss of confidence among consumers and time to recover market share that worries him.

Already, Air India's market share has fallen to 17.6% in April, according to government data. Only GoAir and Kingfisher Airlines have a smaller market share. Air India also had the highest flight cancellations among all Indian airlines, which will rise after this month's strike. Thanks to the strike, the attention has shifted from the airline's other vexing problems such as accumulated losses of around Rs 20,000 crore and its less-than satisfactory operations to the genesis of the strike - the merger of Air India and Indian Airlines to form National Aviation Co of India Ltd, which was eventually renamed Air India Ltd.

Nandan supports the merger, however. "In 2007, it appeared logical to come together." Fuel was being bought separately and tickets for the same destinations were sold at different counters, according to him.

The potential for benefits, from bulk discounts to an end to customer confusion to insurance savings, was huge, he says. Chaudhuri, who studies and teaches mergers, acquisitions and innovation management, backs this argument. A well-implemented merger would catalyse growth efforts as well as provide revenue and cost synergies, he wrote in The Economic Times in 2007.

"These include the ability to optimise networks and reduce overcapacity, expand geographic coverage, capitalise on economies of scale and scope in fleet utilisation and ground facilities, remove duplications in back-end operations, and increase bargaining power in purchasing activities as well as airport slot negotiation." Indeed, there are many who see the bright side of a marriage between airlines for these very factors. When US-based United Airlines and Continental announced a merger in late 2010, it was estimated that the carriers together would generate up to $1.2 billion in net annual synergies and around $300 million in cost savings by 2013. In Air India's case, the merger, advised by consulting company Accenture's Indian offshoot, was expected to result in savings up to Rs 1,200 crore from 2010. It is another matter that the carrier is neck deep in debt and losses. Accenture declined to comment for this story. If the merger hasn't spawned the promised benefits, it is only because it has long remained on paper, according to Air India officials and experts. The success of the deal will hinge on the effectiveness of the integration of the organisations, Chaudhuri wrote in 2007. "... the integration promises to be particularly complex... the areas that require particular attention and care are the fusion of different sets of capabilities and disparate cultures, rooted in functional processes as well as people." Half-Baked Merger Chaudhuri could not have been more prescient. The merger was due to be completed by 2009, but remained half-baked even in early 2010. A galling example was the poor backend reservation system on the airline's website. Today, a large part of the technical, operation and IT integration is complete, according to Nandan. The notable exception happens to be HR. HR issues remain unresolved five years after melding the two airlines. Pilots and other employees of the former Air India and Indian Airlines function separately. They have different wage structures, training schedules, working hours, career progression and leaves. This disparity has caused great heartburn among employees - the pilot strike is a telling example of their animosity. Craig Jenks, President of Airline/Aircraft Projects Inc, a New York-based air transport consultancy, says pilots are acting as if they are each other's mortal enemy

Nandan says much work on HR integration was done until 2009, including division of responsibilities among personnel. But between 2009 and 2011, the entire process came to a standstill, according to him. "It was probably because no one wanted to rock the boat." The result was that the differences in culture, facilities and pay remained. Nandan says the strike is an expression of all the prejudices against the merger. Previous attempts to rationalise wages were resisted, according to a study commissioned by the government that was reviewed by ET on Sunday (Burning Rs 57 crore a Day, May 8, 2011) because salaries in a "large number of categories are over and above the market structure". The aviation ministry appointed the Dharmadhikari panel in February 2011 soon after the study.

But the committee came in too late, according to Nandan. "No doubt, there was soft-pedalling on the issue," he says. Jenks says what is going on in India right now is not completely without analogy elsewhere airline mergers have always been difficult though there are also smooth mergers such as Delta's acquisition of Northwest in the US and British Airways' acquisition of BMI in the UK. "It is also true that integration of pilot 'seniority' lists is often the single most difficult thing in an airline merger," he says. But a merger where pilot issues are sabotaging operations five years on has not happened elsewhere, he says. "What you have here is a monopoly, 'franchise' way of making demands, by staff at two ex-monopolies." What is surprising to an outsider, says Jenks, is the determination of key parties to ignore the global way of operations. "This is as if Emirates, Qatar Airlines, and Singapore Airlines did not exist. Not to speak of Indian low-cost carriers. Their actions lack a concept of a competitive environment." Nandan agrees that the pre-merger monopoly mindset exists within Air India, but says after many years of co-existence of two companies, this was inevitable. "They were leaders. That attitude is being threatened from within and outside." Air India has to live with a changing market place, he says. "One cannot wish away competition."

To complicate matters for Air India, the impending arrival of Dreamliners has set off a new tug of war between pilots. A new aircraft type is often seen as the highlight of a pilot's career. The hype surrounding 787s has added an extra dimension of rivalry among pilots. Besides loss of pay opportunities, ego issues have taken over, according to Nandan. The Air India management has decided to divide the flying rights equally between the two sections of pilots unlike United, which chose an auction-style system, selecting the initial batch of pilots based largely on their length of service. Nandan says if the seniority of all the pilots were to be accounted for, it will take another 20 years for the merger to consummate.

But opinion is divided over the decision to split flying rights. A former senior executive of Air India criticised the 50:50 division, saying the airline should have selected candidates on merit. "The division implies that the interest of the employees is what matters, not that of the airline." Mohan Ranganathan, a former pilot and air safety consultant, says the Civil Aviation Safety Advisory Council had recommended that pilots with at least 5,000 hours of flying must fly the 787s. But the Air India management is allowing people with only 2,500-3,000 hours to fly the planes.

At around 500, Indian Airlines pilots have recorded five times the number of landings than Air India counterparts because they fly shorter domestic routes, he says. "And landings matter for commanders." Ranganathan says everybody is talking about the years needed to become a commander, overlooking the experience part. "No one really seems to be giving attention to the safety issues involved." But given the circumstances, the 50:50 split is the best solution, he says. The Future Despite the strike, Nandan remains sanguine about Air India's future. In the next five years, 7,000 people will retire, he says. Air India is an ageing airline - the average age of an Air India employee is 50 - because no major recruitment has taken place since 1989, according to him.

The mass retirement will help usher in radical changes in recruitment, he says, adding that 'reservations' in jobs will end and selection will be based on merit. Nandan says many of Air India's problems will be resolved after the Dharmadhikari committee recommendations are implemented. He also remains optimistic about the strike by pilots. Ending the strike could be the most important step in solving the merger issues, according to him. Chaudhuri agrees. "The sense of urgency that has now taken hold at the airline and all its stakeholders and the aggressive actions being taken to rationalise costs, integrate the two carriers, and change the incentive model for employees should bode well for Air India's turnaround," he says. For now, the government appears to be sticking to its guns. Anyone who has followed the Air India crisis would know that the government's stand is quite unusual. Perhaps the government can learn from the experience of Japan Airline Ltd. The airline was allowed to go bust, and then restructured, says Jenks, adding that it is now performing much better. Jenks says survival is not a right, in airlines or anywhere else. "It is earned by performance against competitors in the marketplace, and that requires collaboration by all key stakeholders." An end to the agitation might be a good beginning. 'We have ensured nobody is unduly dissatisfied'

The government has accepted all the recommendations of the Justice DR Dharmadhikari Committee, barring a few 'harsh' ones, according to Ravinder H Dholakia of IIM Ahmedabad, a member of the committee set up by the government to streamline the wages of warring Air India and Indian Airlines employees. The harsh recommendations include a proposal to cap the current benefits enjoyed by some employees such as unlimited free flights even after retirement, he says. Instead, the committee said these benefits must be linked to the leave travel concession system prevalent in other PSUs. The four-member committee also proposed that employees must properly 'define' family because these benefits were being availed even by 'extended' family members, according to him. Dholakia says the committee has tried to unify the different working hours, culture and work environment of the two airlines by taking everyone on board. "We have ensured that nobody is unduly dissatisfied." He says the contentious issues of seniority levels and career progress too were addressed based on the years and terms of service of executives. Through the entire exercise, the committee adhered to the government's demand that its recommendations should not result in an additional wage burden. Regarding commanders and co-pilots, the committee has proposed that their seniority should be maintained within each type of aircraft - wide-body and narrow-body planes. But if pilots wished to switch to another type of aircraft, they should be allowed after training using an auction system. The committee has left to the management to decide on which section of pilots will fly the Dreamliners, says Prof Dholakia. The committee has not proposed job cuts, according to him. In any case, there are efforts to reduce manpower by hiving off the company into maintenance, repair and operations units and ground handling units. Many employees were also found to be on the verge of retirement. The committee did find rampant cases of duplicity of jobs and said the management should rationalise the number of posts. On the latest pilot strike, Prof Dholakia says the government is unnecessarily taking time to implement the report. - Binoy Prabhakar