Aviation Life

HRD

The human factor

The merger of Indian and Air India and the acquisition of Air Sahara by Jet Airways has shifted the spotlight to crucial human resources. Viveat Susan Pinto finds out how these companies are dealing with their manpower issues

At a recent press conference called by Jet Airways in the wake of its Rs 1,450-crore acquisition of Air Sahara, chairman Naresh Goyal had an interesting point to make: "When a woman gets married, she leaves behind her father's home to make way for her husband's instead." The allusion was clear. The proverbial 'bridegroom' had finally got his 'bride'. It was a homecoming of sorts. But the question is how would two very different entities deal with the marriage post the honeymoon?

Mergers & acquisitions may signify the triumph of one company over another or the meeting of two minds, but once the deal is consummated, the focus shifts to the nitty-gritty, like, integrating the human resources, for instance. That's the single biggest challenge, and also the toughest. For players in the Indian aviation sector, the task is almost herculean, since no precedent has been set. M&A is something that the sector is seeing only now, and, in a way, how the current lot integrates, be it Jet-Sahara or Indian-Air India, will set the tone for the future.

Jet has already said that Sahara, to be rebranded as JetLite in a few weeks from now, will be positioned between a low cost carrier and a full service airline, and will be an independent entity, though a 100 per cent subsidiary of the company. While this has, in a way, ensured that there will be no mass resignations at Sahara, witnessed last year, when more than half of the airline's pilots put in their papers following Jet's Rs 2,250-crore bid for it then, some heartburn could still be expected.

Pick and choose

That is because Jet will 'pick and choose' the staff it wants. As Rajesh Chaturvedi, chartered accountant & partner, Chaturvedi & Shah, who, as part of the Jet team, was involved in the current round of negotiations for Air Sahara, says, "Jet will select the staff it wants. That's clear." This point, in fact, is validated by Alok Sharma, president, Air Sahara, who says, "Whoever is required by Jet to run the operations of the airline will go there and the ones left behind will be absorbed into the Sahara India Pariwar."

Not surprisingly, the first to be absorbed by Jet will be the technically skilled workforce including pilots, engineers, cabin crew etc. According to Sharma, this lot makes up about one-third of Air Sahara's payroll staff of 3,700. The second rung of employees comprising basically general staff such as frontline and support personnel would be the next in line, but picking them up would be the prerogative of Jet, reasons Sharma. "Some of them could be absorbed, but it really depends on the requirements of Jet." Jet has already said that it would have a common pool of resources for the two airlines to bring down unit costs and improve profitability. Its strategy of integration, incidentally, was put in place last year, when it first approached Sahara. But the attempt was subsequently aborted when the deal fell through. Jet, say observers, is likely to draw from its experience last year, when dealing with the staff of the ailing airline this year.

Its attempt at picking and choosing staff is no different from the trend abroad where aviation M&As are common. For instance, when Air France acquired and then subsequently merged Dutch airline KLM in 2004, the result was a rationalisation of staff, especially, on the KLM end. Of the 30,000-strong workforce of KLM, some 4,500 people were axed. This was followed by a second wave to bring down the workforce even further. At the moment, the merged Air France-KLM is the largest airline in Europe in terms of passenger-kilometres, with revenues of about US$ 31,085.7 million. It is also one of the most profitable airlines in the region, doing consistently well over the last few years. Obviously, the merger of the two flag carriers has worked, and worked well, at a time when low cost carriers such as Ryanair and EasyJet have been eating into the share of full service carriers in Europe. That was the key reason for the two airlines coming together - to improve market share - which is also what is driving the merger of Air India and Indian in this part of the world. As Subranshu Sekhar Das, principal consultant, aerospace & defence, Frost & Sullivan, says, "At the end of the day, much depends on what respective managements want."

Managing change

The challenge of integration is also greater at Air India-Indian, since both of them are PSUs. Hence the pressure to accommodate employees in the merged airline is huge. At the moment, Air India has a work force of 15,000, while Indian's strength is about 18,000. The integration, according to executives of Air India and Indian, will begin at the top, primarily, at the level of executive director, general manager and deputy general manager. Some 150 people are likely to be selected, who, will, in turn, drive the merger lower down the order. Currently, some three to four working groups have been formed in the ministry of civil aviation, comprising representatives of both the companies, to kickstart the process. The integration of senior employees, say executives, will take about three to four months, while the balance workforce will be covered in about a year's time. What Air India and Indian are not doing, of course, is retrenching staff. VRS is also an option being ruled out. "That's not what our consultants are advising us," says an Air India spokesperson. That leaves natural attrition, basically, retirement of senior staff, which works out to about five per cent of the total workforce of 33,000, say executives from the two airlines. That is hardly anything. But nothing else can be expected from PSUs either. Already, issues concerning integration of senior management have begun creeping up. Even as the two carriers grapple with all this, analysts maintain that there could be a tussle between the two for imposition of a certain work culture in the merged entity. "Air India is the leaner of the two; offering better packages to its employees. It's to be seen how Air India's workforce gels with Indian's," says a Mumbai-based aviation analyst.

That's a challenge dogging Jet-Sahara too. Jet, regarded as the more professional of the two airlines, has a slightly upmarket image. How the Jet management marries these diverse cultures will be critical for the long-term survival of the new entity it has acquired. According to Das of Frost & Sullivan, managing change is the most crucial part of the exercise, and also the toughest. "In aviation, managing change is not easy because it is governed by stringent rules."

In the US, for instance, it is this very inability to manage change, which has led to some carriers going bankrupt. Managing the merger of Trans World Airlines (TWA) with itself was difficult for American Airlines in 2001, which also had to contend with a drastic fall in air travel following 9/11. The combined effect of the two events saw American Airlines bleed profusely and at one point it seemed the airline would file for bankruptcy. However, it did recover in July 2005, and is today the second-largest airline in the world in terms of total operating revenues.