Indian Airlines' HR Problems There could scarcely be a more undisciplined bunch of workers than IA's 22,000employees.

" Business India, January 25, 1999. Flying Low Indian Airlines (IA) the name of India's national carrier conjured up an image of amonopoly gone berserk with the absolute power it had over the market. Continual lossesover the years, frequent human resource problems and gross mismanagement were justsome of the few problems plagued the company. Widespread media coverage regardingthe frequent strikes by IA pilots not only reflected the adamant attitude of the pilots, butalso resulted in increased public resentment towards the airline.IA's recurring human resource problems were attributed to its lack of proper manpower planning and underutilisation of existing manpower. The recruitment and creation of postsin IA was done without proper scientific analysis of the manpower requirements of theorganization. IA's employee unions were rather infamous for resorting to industrial actionon the slightest pretext and their arm-twisting tactics to get their demands accepted by themanagement.During the 1990s, the Government took various steps to turn around IA and initiated talksfor its disinvestment. Amidst strong opposition by the employees, the disinvestment plansdragged on endlessly well into mid 2001. The IA story shows how poor management,especially in the human resources area, could spell doom even for a Rs 40 bn monopoly. Background Note IA was formed in May 1953 with the nationalization of the airlines industry through theAir Corporations Act. Indian Airlines Corporation and Air India International wereestablished and the assets of the then existing nine airline companies were transferred tothese two entities. While Air India provided international air services, IA and itssubsidiary, Alliance Air, provided domestic air services. In 1990, Vayudoot, a low-capacity and short-haul domestic airline with huge long-term liabilities, was merged with

IA. IA's network ranged from Kuwait in the west to Singapore in the east, covering 75destinations (59 within India, 16 abroad).Its international network covered Kuwait, Oman, UAE, Qatar and Bahrain in West Asia;Thailand, Singapore and Malaysia in South East Asia; and Pakistan, Nepal, Bangladesh,Myanmar, Sri Lanka and Maldives in the South Asian subcontinent. Between themselves,IA and Alliance Air carried over 7.5 million passengers annually. In 1999, the companyhad a fleet strength of 55 aircraft - 11 Airbus A300s, 30 Airbus A320s, 11 Boeing B737sand 3 Dorniers D0228.In 1994, the Air Corporation Act was repealed and air transport was thrown open to private players. Many big corporate houses entered the fray and IA saw a mass exodus of its pilots to private airlines. To counter increasing competition IA launched a new image building advertisement campaign. It also improved its services by strictly adhering toflight schedules and providing better in-flight and ground services. It also launched severalother new aircraft, with a new, younger, and more dynamic in flight crew. Theseinitiatives were soon rewarded in form of 17% increase in passenger revenues during theyear 1994.However, IA could not sustain these improvements. Competitors like Sahara and JetAirways (Jet) provided better services and network. Unable to match the performance of these airlines IA faced severe

criticism for its inefficiency and excessive expenditurehuman resources. Staff cost increased by an alarming Rs 5.9 bn during 1994-98.These costs were responsible to a great extent for the company's frequent losses. By 1999the losses touched Rs 7.5 bn. In the next few years, private players such as East West, NEPC, and Damania had to close shop due to huge losses. Jet was the only player that wasable to sustain itself. IA's market share, however continued to drop. In 1999, while IA'smarket share was 47%, the share of private airlines reached 53%.Unnecessary interference by the Ministry of Civil Aviation was a major cause of concernfor IA. This interference ranged from deciding on the crew's quality to major technicaldecisions in which the Ministry did not even have the necessary expertise. IA had tooperate flights in the North-East at highly subsidized fares to fulfill its social objectives of connecting these regions with the rest of the country. These flights contributed to the IA'slosses over the years. As the carrier's balance sheet was heavily skewed towards debt withan equity base of Rs 1.05 bn in 1999 as against long term loans of Rs 28 bn, heavy interestoutflows of Rs 1.99 bn further increased the losses. IA could blame many of its problems on competitive pressures or political interference; but it could not deny responsibility for its human resource problems. A report by theComptroller and Auditor General of India stated, "Manpower planning in any organizationshould depend on the periodic and realistic assessment of the manpower needs, need-basedrecruitment, optimum utilization of the recruited personnel and abolition of surplus andredundant posts. Identification of the qualifications appropriate to all the posts is a basicrequirement of efficient human resource management. IA was found grossly deficient inall these aspects." Fighter' Pilots? IA's eight unions were notorious for their defiant attitude and their use of unscrupulousmethods to force the management to agree to all their demands. Strikes, go-slow agitationsand wage negotiations were common. For each strike there was a different reason, butevery strike it was about pressurizing IA for more money. From November 1989 to June1992, there were 13 agitations by different unions. During December 1992-January 1993,there was a 46-day strike by the pilots and yet another one in November 1994. Thecavalier attitude of the IA pilots was particularly evident in the agitation in April 1995.The pilots began the agitation demanding higher allowances for flying in internationalsectors. This demand was turned down. They then refused to fly with people re-employedon a contract basis. Thereafter they went on a strike, saying that the cabin crew earnedhigher wages than them and that they would not fly until this issue was addressed.Due to adamant behaviour of pilots many of the cabin crew and the airhostesses had to beoff-loaded at the last moment from aircrafts. In 1996, there was another agitation, withmany pilots reporting sick at the same time. Medical examiners, who were sent to check these pilots, found that most of these were false claims. Some of the pilots werecompletely fit; others somehow managed to produce medical certificates to corroboratetheir claims.In January 1997, there was another strike by the pilots, this time asking for increasedforeign allowances, fixed flying hours, free meals and wage parity with Alliance Air.Though the strike was called off within a week, it again raised questions regarding IA'svulnerability. April 2000 saw another go-slow agitation by IA's aircraft engineers whowere demanding pay revision and a change in the career progression pattern. 1 The 1 These engineers were already earning Rs 60,000 per month, excluding perks.

strategies adopted by IA to overcome these problems were severely criticized by analystsover the years. Analysts noted that the people heading the airline were more interested inmaking peace with the unions than looking at the company's long-term benefits.Russy Mody (Mody), who joined IA as chairman in November 1994, made efforts toappease the unions by proposing to bring their salaries on par with those of Air Indiaemployees. This was strongly opposed by the board of directors, in view of the mountinglosses. Mody also proposed to increase the age of retirement from 58 to 60 to control theexodus of pilots. However, government rejected Mody's plans. 2 When Probir Sen (Sen)took over as chairman and managing director, he bought the pilot emoluments on par withemoluments other airlines, thereby successfully controlling the exodus. In 1994, the IAunions opposed the re-employment of pilots who had left IA to join private carriers andthe employment of superannuated fliers on contract. Sen averted a crisis by creatingAlliance Air, a subsidiary airline company where the re-employed people were utilized.He was also instrumental in effecting substantial wage hikes for the employees. The extrafinancial burden on the airline caused by these measures was met by resorting to a 10%annual hike in fares. (Refer Table I) TABLE IIMPACT OF STAFF COST HIKE IN FARE INCREASE (%) Date of fareincrease Impact(%) 25/07/1994 16.2201/10/1995 25.0022/09/1996 36.0015/10/1997 13.4401/10/1998 8.80Source: IATA-World Air Transport Statistics 2 The government claimed that Mody had failed to turn IA around. It appointed a seven-member committee under the chairmanship of Vijay Kelkar, the then petroleum secretary to make suggest ions regarding turnaround. In its report submitted in November 1996, thecommittee declared that IA's losses were caused by factors that were beyond the control of IA. It recommended that the government provide substant ial financial aid to the carrier and revamp it s fleet. This report was later evaluated by P.S.Brar, the joint Comptroller General of Accounts in the Department of Expenditure of the Finance Ministry. Brar severely criticized the Kelkar recommendations,saying that any money given to IA would 'go down the drain' and IA said that had to go for massive cost-cutting and human resourcemanagement initiatives if it wanted to get back on the tracks. The hard-hitting Brar report received criticism from IA and Kelkar'ssupporters