The recent Air India & Vistara obloquy must have come as an embarrassment to the house of Tatas and its much acclaimed ‘Management Style’. Air India was acquired with much fanfare and it was supposed to have a dream run under the Tatas. While Vistara is already a full-service airline and is touted as one of the best in India.
It was a big-nosed marriage made in heaven. But customers of both are now paying through their nose. The recent developments in the two companies have clearly brought out that lineage, legacy and private enterprise are not magic pills for running a successful airline. News Channels have pointed out that the recent spate of cancellations and delays in Vistara Airlines is essentially the result of pilots deserting and not reporting for duty.
They seem to be miffed over the merger of Air India and Vistara. The merger is apparently facing severe headwinds. Well, the highly praised Tata touch seems to be awol. It’s true M&A often leaves both companies scarred. Such wounds do not heal by putting band-aids, rather there is a need to use a deep salve which heals from within. The most essential thing of such amalgamations is the intent of the new owner(s). Traditionally, it has been seen in M&A, private companies go for the kill straight away. Sheer profits and bottom lines seem to be prime movers rather than long-term value creation.
Waiting for a mandatory cooling period or giving the wedding sufficient time to actually bloom is required to make it work. Vistara seems to be facing a severe pilot shortage. The latest is that Air India would be lending Pilots to Vistara, there would be a 10% cut in flights and the costs of tickets are expected to go up substantially. Mind you, the holiday season is to start in full swing shortly. During this period the Aviation services see a peak demand coupled with high ticket prices .
The Indian aviation sector may be now faced with unprecedented ticket prices as most other Airlines are bound to follow suit. The soaring prices of Air Tickets in India during holidays are now an annual affair with the Ministry of Aviation and DGCA usually unable to do much. This is bound to happen when a country is left with practically no checks and balances against monopoly by private enterprises. The call for a level playing field by the
private players is only till they seize business and make is a sellers market. Thereafter, the consumers are left to the mercy of a few powerful private suppliers who fulfil needs at a price dictated by them and not the market per se. Many countries in the world have faced adverse consequences of large-scale privatization. Social Justice and Equity seem to be the worst affected. The current crisis is an object lesson to all those experts and soothsayers who swear by total and complete extermination of government-corporate enterprise.
Many armchair business experts are blaming the HR function at Tatas/Air India for the imbroglio. Imagine what will happen when the all other PSEs get privatized. To exemplify lets us look at the energy sector, especially Oil & Gas in India. The Indian Oil Marketing Companies in the Public Sector have been a cushion against volatility, a foil against private monopoly and have ensured energy security. It is a sterling example of how Public & Private companies must coexist for the general welfare of consumers and citizens of the nation. The private oil companies have profiteered from the Russia – Ukraine conflict so much that windfall taxes were imposed by the Indian government. It is well known that Private Oil & Gas companies primarily do not sell products in India as they find it more profitable to export. Contrast this to the Government PSEs which have maintained, even lowered POL prices, while the Brent crude today has climbed up to $90.88 per barrel. This is how the common Indian consumer gets shielded by the PSEs from extreme volatility.
Certainly, it would not have been possible if the PSEs were to be totally eliminated in India. Most common citizens are not even aware that the price they pay for Petrol, Diesel, LPG etc. is not actually market-linked but is controlled by the government through policy directions to the PSEs. The Indian PSEs often take the hit and bear business losses to ensure that the common man is not burdened. Therefore, those who advocate private business efficacy over the so-called PSEs style of functioning, hide the actual truth from people.
Students of management styles are well aware that HRM in most private companies believes in Hire & Fire. For them, HR is to be used, as any other resource and find not much use in wasting money over nurturing it. To them, the relationship of management with its Human Resources is that of a sheer economic contract. For them, HR is like any other commodity to be purchased from the labour market or trafficked from rival organizations.
They find the costly and time-consuming path of developing HR a burden. Readers, remember the Covid times? In its early days, your truly had anticipated mass layoffs and suggested in an article that it was a time for maintaining the HR in their jobs. Companies needed to retain its HR maybe even with lowered salaries. It was emphasized that continuity would be important post-Covid. It may be difficult to get back those who get terminated during Covid back again once the situation normalized. However, most organizations went ahead with mass mass-scale removal of employees. The result is for all to see. Post-COVID, Lufthansa, British Airways and many other aviation giants were unable to service customers due to lack of manpower.
The IT Sector is even today faced with a big challenge of getting their employees to attend office. One has to understand that employees can see through the scheming nature of management. In contrast, none of the PSEs had dismissed employees due to Covid. The private sector DNA does not allow it to see beyond balance sheets.
Coming to the issue of a merger, most readers may recall that two companies, Assam Oil Company and IBP had merged with Indian Oil Corporation Ltd. in 1981 and 2002 respectively. These were fairly big companies and IndianOil was a profitable Fortune 500 PSE. IBP had a turnover of Rs 8,000 crore in 2001 while IndianOil had recorded a profit of Rs 21,346 crores in 2017–18. Assam Oil Company had a long and chequered history. Assam Railways and Trading Company Limited (AR&T Co. Ltd.), registered at London, dug an oil well in Digboi, Assam in 1889-90 and started the Oil journey in India. Later AR&T established Assam Oil Company (AOC) in 1899 with a capital of £310,000 to take over the petroleum interests of AR&T. Such were the diverse backgrounds of the companies which merged with IndianOil. And these mergers were certainly not easy. Valuations, nature of holding, technology etc. were certainly important issues but the biggest concern was an amalgamation of the HR and diverse culture of the companies. Integration, Org Structure, Salary Formulae, Seniorities, Career Progression, Lateral Movements, Conduct Rules, Discipline Admn. etc. were carefully analyzed, debated and discussed at the policy and stakeholders level. A road map with timelines was made. Due to the easing in of the HR of the merging company with the parent company much could be achieved. There was obviously quite a bit of give and take in the process. Needless to mention, there was resistance and agitation by interest groups but these were sorted out effectively. Today the entities are doing well in the fold of IndianOil. They stand integrated as a whole and not a melange which is often the case in private enterprises. Interestingly all through the process of the M&A exercise of this PSE the customer never faced any kind of difficulty much less of any increased prices due to the M&A.
Corporate historians will bear out that IBP was offered to private companies as well. 13 companies had reportedly shown interest. Readers may be interested to note that one such private company which was poised to take over went about doing its due diligence in its own customary way. They may have theoretically learnt from somewhere that once the intent of M&A is made known they should immediately cut off the existing employees. In one location of IBP, employees were told to stop carrying out their daily assignments. They were asked to assemble in a hall daily rather than go to work stations.
Their attendance was taken three times a day, in the hall. No work was allocated to them. This carried on for a while and obviously, it sent extremely negative vibes to the already wary employees. Later when the private sector takeover fell through the employees were a much relieved lot. This goes to show how normally M&A is seen in the Private Sector vis a vis PSEs. Still, the management of PSEs are usually at the receiving end of brickbats for their perceived lack of skills.
Coming to the Air India Vistara imbroglio one sees that its taking a toll more on the customers than maybe the company management themselves. One can only hope that the policymakers and those who call the shots, help the customers in a situation which is certainly not of their making. Tall claims, Rebranding, and Designer Uniforms, which are now said to be fading, are all very good but it’s the meat of the issue which matters. A robust, committed and sincere effort with a principle of give & take and not mere tittle-tattle will work. It’s also good to remember that air turbulence is sometimes less at higher altitudes. Maybe Tatas have to ascend towards greater heights.(- By Sidhartha Mukherjee)
