HR CRISIS IN

Presented by :1) Viral Nandu (26)2) Tripti Sawant (38)3) Narendra Shere (40)4) Kumod Shirkande (47)5) Amit Thakkar (55)

Subject:Human Resource ManagementProfessor:Shailija

OBJECTIVE We shall address the difficulties faced by the employees amidst

Adverse Human Resource conditions and financial trouble in the Air India Ltd. (here after referred as AI).

Employee survey (Qualitative research; personal interviews) conducted by ‘Dharmadhikari Committee’ to understand their situation & its findings.

To analyze perspective of Human Resource Issues in this case.

Indian Airlines and Air India Merger Issues brought forward by ‘Dharmadhikari Committee’

Main Recommendations put by ‘Dharmadhikari Committee’

Survey Details along with Recommendations & Conclusions

Source: Dharmadhikari Committee Report

BACKGROUND OF ORGANIZATION

Air India was founded by J. R. D. Tata in July 1932 as Tata Airlines, a division of Tata Sons Ltd.

Tata Airlines became a public limited company on 29 July 1946 under the name Air India.

In 2007, Air India merged with Indian Airlines to form National Aviation Company of India Limited (NACIL).

October 26, 2010 Air India and Indian Airlines merged along with their subsidiaries to form Air India Limited (w.e.f 27 February 2011).

Ranked 28th among the top 50 service brands, ahead of leading banks, insurance companies, food-chains and airlines.

Air India operates across 113 destinations including 15 international ones across the USA, Europe, Canada, the Far-East and south-east Asia and the Gulf.

Source: Wikipedia

BRAND EQUITYAccording to Economic Times Brand Equity Survey’10

National air-carrier, Air India, has been ranked as the 'Most Trusted Brand' in the aviation sector in the country by the Economic Times Brand Equity Survey 2010.

Reader’s Digest Trusted Brand Gold Award in September 2010. This is the fifth consecutive time that the country's flag-carrier

has bagged the honor. Unfortunately the complacent management has turned the

goodwill of trust into a rusty feeling, in addition to this existence of rampant corruption and mismanagement.

Truly forgetting years for the beleaguered Air India with net losses of Rs.2226cr in fiscal 2007-08; and Rs 7189cr and Rs.5551cr for fiscal 2008-09 and 2009-10 respectively.

Source: ET Brand Equity Survey’10 & Reader’s Digest

PUNCHLINE FROM PREFACE

“We hope that the report will serve as a reference point and a convenient tool in resolving long pending issues relating to human resources arising out of integration of manpower of the erstwhile two airline companies.”

D.M. DHARMADHIKARI (FORMER JUDGE, SUPREME COURT OF

INDIA) CHAIRMAN OF THE COMMITTEE.

New Delhi, January 31, 2012.

MAJOR TIMELINES

1912: Indian State Air service

and Imperial Airways, UK

collaborate to ply on first domestic route, between

Delhi and Karachi.

1932: Tata Aviations

established. It goes to Colombo

in 1938.

1953: Indian Airlines

Corporation formed through Air Corporation

Act, 1953, by nationalizing Air India and Indian

National Airways.

2003 Entry of low cost carriers. Air Deccan, Spice Jet, Go Air,

Indigo.

ADVERSE FINANCIAL SITUATIONS Air India Limited (AI), is running into huge losses, according to report. It

has accumulated losses over Rs. 7000 cr; working capital loan of Rs 16000 cr, Annual infusion of Rs 5000 cr to keep paying the oil and airport charges and wages.

Currently the employees are not being paid for almost 4 consecutive months and are facing uninformed transfers as well as change of reporting structure.

The financial ill-health of Air India is attributed by a civil aviation expert to a “systematic failure of the political and bureaucratic masters who have run the airline like their own principalities for years now. And the merger of Air India and erstwhile Indian Airlines in March 2007 under Praful Patel’s directives has led to an unmitigated disaster”

Foreign Direct Investment : Up To 49% Of Foreign Equity & 100% Of NRI investment is allowed Pertaining to the Domestic Air Transport Services

While the passenger traffic growth has been steady (averaging 14% in 2010-12), intense competition has impacted yields and forced AI back into losses in an inflated cost base scenario.

Presently it contributes 0.5 % of GDP and it is expected that by 2030 it will contribute 5 % of GDP.

Source: The Financial Express & The Economic Times

DEFINING THE EMPLOYEE PROBLEMS Employees not paid salaries. Salary is as per productivity and 6th Pay

commission is not applicable. Issues related to structure mapping and level mapping w.r.t to rank

and basic pay. Hierarchy issues. Reporting issues due to no non level mapping. Consolidation of work force through out-sourcing of activities mainly

at lower level (Cleaning, Maintenance etc) Since 1990- Young cabin crew employees are hired on contractual

basis Different HR policies for AIR INDIA and INDIAN AIRLINES post

merger also which further exaggerate the current situation. Staff integration and training issues. DHARMA ADHIKARI committee was made to resolve employees

issues but without having capacity to impose the recommendations The actual merger and integration of services of the employees of

two erstwhile companies has not taken place till this date resulting in frustration and demoralization of the employees of the merged entity.

Source: Dharmadhikari Committee Report

DOWNFALL: FINANCIAL CRISIS AI was not prepared for competition it faced after the liberalization of

India economy in 1990. Hence AI domestic market share declined from 19.2% to 14%, primarily due to stiff competition from private Indian carriers.

Overstaffed: Highest Employee per Aircraft ratio in the world 200:1 where as desirable is 130-170:1.

The carrier sold three Airbus A300 and one Boeing 747-300M in March 2009 for $18.75 million to survive the financial crunch.

A culture of complete sloth in administration and faulty policies has brought Air India to this crisis level.

Complete lack of Ownership and responsibility for results and failures & deeply ingrained corruption in all levels.

Employee strikes further taking it out of business, and competitors taking advantage.

The airline has not posted a profit since merging with former duopoly partner Indian Airlines in 2007 and relies on handouts from New Delhi to survive.

A report by the Comptroller and Auditor General (CAG) blamed the decision to buy 111 new planes as one of the major causes of the debt troubles in Air India.

The root of the problem is with the untimely and misjudged merger of the two airlines that has been the primary reason for the never ending ordeal of Air India.

Sources: www.businessworld.in, The Wall Street Journal

DOWNFALL: HR ISSUES Pilots and crew used unsurplus methods.(Demands)

Strikes, go slow (Wages, Salary Negotiation)

Creating unnecessary strikes & Pressurizing Management (Shell out Money)

13 Agitations by 8 Different unions.

Higher Allowances for pilots who fly overseas flights.

Pilots Refused to fly people re-employed on contract.

Reporting sick at same time.

Issues in Ground handling team of IA & AI.

Asking for fixed flying hours, free meals, free stay.

IA Pilots promoted unconditionally, AI pilots should get Turn if there is immediate Vacancy.

AI was following a system under which the department head has the discretionary power to promote and the promotions are time-bound, while IA had a strict Human Resources (HR) code of interviews and written tests.

FEEDBACK – SUMMARIZED SURVEY When Pilot went for Strike in May 2011, instead of talking to them then

CMD Mr. Arvind Jadav decided to “teach the Pilots a lesson”. AI has suffered a loss of around Rs 600 crores due to the recent 58-day-

long strike by its pilots. Air India pilots represented by Indian Pilots Guild started reporting sick

from May 7, in protest against the management's decision to train pilots of erstwhile Indian Airlines to fly Boeing 787 Dream liner aircraft.

When Jet Airways pilots went on strike a few years ago, Mr. Naresh Goyal, the airlines chairman, talked to pilots and pleaded them to work. But Jadhav has decided that he will not even talk to the pilots. Even the Delhi High Court has noted this fact. “It appears that the management wants to make the pilots scapegoats for its successive failures”. It was looking for an alibi and feels that the pilots have provided it one.

There is a severe shortage of trained commanders across Indian carriers and this has been forcing airlines to hire expatriates - often those with less than the best skills. If Air India sacks the striking pilots they can easily get jobs in other airlines within three months. But the pilots want to work for Air India. They, however, also want their dues. In Parliament, we were told that Air India loses Rs 20 crore a day. It is surprising then the management is fighting over what is essentially a matter of a few crores.

EXPECTED OUTCOME – OUR RECOMMENDATION

AI should increase the equity base from Rs 145 Cr Focus on risk management practices.

AI should be given a autonomy in decision making, Earlier introduction of VRS scheme would have helped AI.

The Govt. should provide capital in the form of Convertible debts as an option to convert equity.

The lending decision should be made by the syndicate comprising the Govt. as the largest lender and consortium of commercial banks.

 Corporate governance issue is needed to be taken into consideration. Privatization – to make AI free from government interference. To clear

$9 billion debt as well as outstanding dues both to airport developers and state oil firms.

To tackle a bloated cost structure, a difficult task given a workforce that is heavily unionized to do some downsizing.

To cut unprofitable routes and create a new plan that would focus on a hub-and-spoke route model.

Require visionary leader, who could drive AI in better way.

CONCLUSIONThe important aspects observed in this case are:

Leadership: AI lacks extremely. Employee oriented HR policies emphasize interpersonal relations,

takes personal interest in the needs of employees, and accepts individual differences among members.

Leader-Member relationship which is the degree of confidence, trust, and respect, subordinates have in their leader.

Motivation – A very important factor. Self-Concordance: The degree to which peoples’ reasons for

pursuing goals are consistent with their interests and core values. Employee Involvement, Participative Management,

Representative Participation. In spite of these factors, employees are still rendering their

services to AI in anticipation for revival of the company, by way of Govt. assistance, change in management policies, debt clearance, transformation of HR policies and company’s perception building.

THANK YOU!