Document Text Contents
Page 1
IJRIME Volume2, Issue5 (May-2012) ISSN: 2249-1619
International Journal of Research in IT, Management and Engineering
www.gjmr.org 139
THE FALCON THAT DID NOT TOOK THE FLIGHT; A CONCEPTUAL
RESEARCH PAPER ABOUT THE FALLOUT OF THE AIR INDIA AND
INDIAN AIRLINES MERGER FROM THE HR PERSPECTIVE.
Dr. Mrs. Naaz Ovais*
Ms. Durdana Sohail**
ABSTRACT
At the time when most of its competitors are performing low, new customers are flowing in, and
the recent kingfisher saga it’s the time when a strategy could be worked out to fully integrate the
two entities, Air India and Indian Airlines and capitalize upon the opportunity. The merger
aimed at forming a big corporation by merging the two companies. It would not be wrong to say
that the two companies or two big birds came together to form one bigger organization or a
falcon. But unfortunately this falcon reared to fly high in the skies could not take its flight. It is
usually seen that during the M&A the main focus is on getting the deal done, but the issues that
ensure that the deal works are quite often neglected. Without the wholehearted support of the
employee no merger or acquisition can be successful. The focus on the integration aspect is still
missing somehow. The financial and operational parts were well looked into but the deeper
issues of human resource were not handled properly. This research paper is an effort to bring
into light the HR issues concerned with the merger of the two airlines, Air India and Indian
Airlines.
Key Words: Air India, Indian Airlines, Merger, HR Issues.
*P.G Department of Economics, Safia Arts and Commerce College, Bhopal, MP
**Assistant professor, Allana Institute of Management Sciences, Pune, Maharashtra
Page 2
IJRIME Volume2, Issue5 (May-2012) ISSN: 2249-1619
International Journal of Research in IT, Management and Engineering
www.gjmr.org 140
INTRODUCTION
In these fast changing times the companies have found out a new way to grow inorganically
through Mergers and Acquisitions. With the growing competitive pressure organizations are
finding it difficult to solely grow from internal development and wait for the long gestation
period involved thereby. In such a scenario, the best option left with, is Mergers and Acquisitions
(M&A). But at times, the corporate rationale is unable to look at the critical success factor
behind these M&A. These are the factors that should be put in the forefront of consideration, for
the successful completion of the M&A story. These issues do not mainly relate to the financial or
the economic aspect of the new organization, but deal with the very basic issues of low morale,
insecurity, a sense of invasion, the general chaos, etc which ultimately results in disorientation
due to frustration, which in turn results in poor performance and low productivity. In short the
HR aspect is neglected. The executives involved in the M&A process often tend to overlook the
human aspect involved. This research paper deals with the human side of the merger of Air India
and Indian Airlines, which started in 2007 and was finally completed in 2011. And the issues
resulting in the fallout of the merger.
With the recent news on the CNN- IBN of the Civil Aviation minister calling it as a big mistake,
it becomes all the more important to look into the reason of its fallout.
Before the merger the two companies were big players in the air, one in the domestic sector and
another in the Indian international sector. The merger aimed at forming a big corporation by
merging the two companies. It would not be wrong to say that the two companies or two big
birds came together to form one bigger organization or a falcon. But unfortunately this falcon
reared to fly high in the skies could not take its flight. It is usually seen that during the M&A the
main focus is on getting the deal done, but the issues that ensure that the deal works are quite
often neglected. Without the wholehearted support of the employee no merger or acquisition can
be successful. The focus on the integration aspect is still missing somehow. The financial and
operational parts were well looked into but the deeper issues of human resource were not
handled properly.
People are important, in fact they are the most critical assets and more so in the service sector
where they can become the core competency for any organization. In such a scenario how can an
organization keep its HR issues at bay and think it can still make profit. A news paper recently
Page 11
IJRIME
REVIE
Fou
Ba
Pri
Co
Em
Tot
Na
Kin
Jet
Air
Ind
Spi
GoA
Par
MD
S
E
Interna
EW OF PE
unded in the
sed in
imary Focus
ompany sloga
mployees
tal Fleet
me of the pl
ngfisher Airl
Airways and
r India and In
diGo
iceJet
Air
ramount Airw
DLR Airline
Source Aviat
Volu
ational Journ
ERFORMA
Co
e year
an
layers
lines and Kin
d Jet Lite (pr
ndian (previ
ways
s
tion Industry
ume2, Issu
al of Resear
www.g
ANCE
omparison o
July 193
Dom
inte
Your
ngfisher Red
reviously Ai
ously Indian
y of India20
ue5 (May-2
rch in IT, Ma
gjmr.org
Table 2
of the two c
Air India
32 as Tata Ai
Mumbai
mestic as we
ernational ro
Palace in th
28,500
89
Table 3
d (previously
ir Sahara)
n Airlines)
12 http://bus
2012)
anagement a
companies
irlines
1
ell as
utes
he Sky
H
y Air Deccan
siness.mapso
ISS
and Engineer
Indian A
1953
New D
Domestic
Have you tri
Air In
19,30
72
Mar
n)
0
ofindia.com/
SN: 2249-1
ring
Airlines
Delhi
c Routes
ied the new
ndia?
00
2
rket Share
28%
25%
16%
14%
12%
3%
2%
0.004%
/aviation/
1619
149
Page 12
IJRIME Volume2, Issue5 (May-2012) ISSN: 2249-1619
International Journal of Research in IT, Management and Engineering
www.gjmr.org 150
Figure 2
Centre for Asia Pacific Aviation report 2009
Figure 3
Centre for Asia Pacific Aviation report 2009
Page 21
IJRIME Volume2, Issue5 (May-2012) ISSN: 2249-1619
International Journal of Research in IT, Management and Engineering
www.gjmr.org 159
7. Church, J., Ware, R., (2000), Industrial Organization – A Strategic Approach,
McGraw-Hill, Boston et al.
8. Doganis, R. (2006): The Airline Business, 2nd Ed., New York.
9. Directors Report 2008– Annual Year 30th March 2007 to 31st March 2008
http://www.airindia.in/SBCMS/downloads/Directors_report_0708.pdf
10. Goel, A. (2003), .Strategic Alliances in the Airline Industry, Working Paper, Indian
Institute of Management, Vastrapur, Ahmedabad,
http://www.iimahd.ernet.in/publications/data/2003-01-02AbhishekGoel.pdf.
11. Gulati , Ranjay(1998) :Alliances and networks: Strategic Management Journal, Vol.
19, 293–317 (1998).
12. Hanlon, P. (1999), .Global Airlines- Competition in a transnational Industry., 2nd Ed.,
Butterworth- Heinemann, Oxford, et al.'
13. Holtz, M 2007, Airline Alliances and Mergers in Europe: An Analysis with special
focus on the merger of Air France and KLM
14. Indian Airlines, Make my trip .com
http://www.makemytrip.com/flights/indian_airlines.html)
15. IANS 2012 India Private Limited. Indo Asian News Service | – Thu 10 May, 2012
Pilots urge Ajit Singh to start negotiations, http://in.news.yahoo.com/pilots-urge-ajit-
singh-start-negotiations-050643542--finance.html
16. IBN Live.com 2012. Air India-Indian Airlines merger was a mistake: Ajit Singh, Thu,
May 10, 2012 http://www.moneycontrol.com/news/business/air-india-indian-airlines-
merger-wasmistake-ajit-singh-_702530.html
17. Kewes, T. (2007), Griff nach den Sternen, Handelsblatt, 14 Mai 2007, p.12.
18. Kleymann, B., Seristö, H. (2004), .Managing Strategic Airline Alliances, Ashgate,
Burlington.
19. Knorr, A. (2001), .Thematische Einführung, in: Knorr, A. (Ed.), Europäischer
Luftverkehr - Wem nützen strategische Allianzen, Frankfurt, p. 3- 6
20. Massimilian, D. (2001, January-February).Notes from the M & Atrenchs. Journal of
Business Strategy,20-23.
21. Meyer, R. (2004), .Airline- Kooperationsprozesse aus interaktionsökonomischer
Perspektive., St. Gallen.
Page 22
IJRIME Volume2, Issue5 (May-2012) ISSN: 2249-1619
International Journal of Research in IT, Management and Engineering
www.gjmr.org 160
22. Mitra Kushan 2012 , Maharaja in chains Merger of Air India, Indian Airlines
behind airline's money troubles. http://businesstoday.intoday.in/story/air-indiaindian-
airlines-merger-behind- troubles/1/15519.html
23. Namrata February 11 2011, Case Study-Indian Airlines HR Problems
http://hr4hr.in/case-study-indian-airlines-hr-problems/
24. Oum, T. H., Park, J.- H., Zhang, A. (2000), .Globalization and Strategic Alliances:
The case of the Airline Industry., Pergamon, New York.
25. Performance Audit Report on Civil Aviation in India
http://saiindia.gov.in/english/home/Our_Products/Audit_Report/Government_Wise/unio
n_audit/recent_reports/union_performance/2011_2012/Civil_%20Performance_Audits/
Report_18/chap4.pdf
26. Porter, M. (1990), The Competitive Advantage of Nations, New York The Free Press.
27. PTI 2012 Press Trust of India / New Delhi Jan 19, 2012, Govt panel grills top AI
execs on merger fallout http://www.business-standard.com/india/news/govt-panel-
grills-top-ai-execsmerger-fallout/155766/&tp=on
28. PTI 2012 Press Trust of India / New Delhi May 5, 2012, Threat of another pilots’ stir
in Air India looms large, http://sevensisterspost.com/?p=9943#
29. Schäfer. I. S. (2003), Strategische Allianzen und Wettbewerb im Luftverkehr. Berlin:
Mensch & Buch Verlag
30. Schuler, R., & Jackson, S. (2001).HR issues and activities in mergers and acquisitions.
European Management Journal, 19(3), 239-253.
31. Schweiger, D. M., & Denisi, A. S.(1991). communication with employees following a
merger :a longitudinal field experiment. Academy of Management Journal,34(1),110-
135.
32. Swaminathan S. Anklesaria Aiyar, 2009, July 19, Let Air India fade away like HMT
and IDPL http://swaminomics.org/?p=87
33. Tayagi ,E.. 2011 Mergers and acquisition in Aviation Sector. 29 August 2011
http://legalservicesindia.com/article/article/mergers-&-acquisitions-in-aviation- sector-
805-1.html
34. Vasudevan Thulasidas 2012 Complete merger of Air India & Indian Airlines to give
the carrier its best chance of recovery April 14 2012
http://articles.economictimes.indiatimes.com/2012-04-14/news/31342092_1_lccs-low-
fares-indian-carriers
IJRIME Volume2, Issue5 (May-2012) ISSN: 2249-1619
International Journal of Research in IT, Management and Engineering
www.gjmr.org 139
THE FALCON THAT DID NOT TOOK THE FLIGHT; A CONCEPTUAL
RESEARCH PAPER ABOUT THE FALLOUT OF THE AIR INDIA AND
INDIAN AIRLINES MERGER FROM THE HR PERSPECTIVE.
Dr. Mrs. Naaz Ovais*
Ms. Durdana Sohail**
ABSTRACT
At the time when most of its competitors are performing low, new customers are flowing in, and
the recent kingfisher saga it’s the time when a strategy could be worked out to fully integrate the
two entities, Air India and Indian Airlines and capitalize upon the opportunity. The merger
aimed at forming a big corporation by merging the two companies. It would not be wrong to say
that the two companies or two big birds came together to form one bigger organization or a
falcon. But unfortunately this falcon reared to fly high in the skies could not take its flight. It is
usually seen that during the M&A the main focus is on getting the deal done, but the issues that
ensure that the deal works are quite often neglected. Without the wholehearted support of the
employee no merger or acquisition can be successful. The focus on the integration aspect is still
missing somehow. The financial and operational parts were well looked into but the deeper
issues of human resource were not handled properly. This research paper is an effort to bring
into light the HR issues concerned with the merger of the two airlines, Air India and Indian
Airlines.
Key Words: Air India, Indian Airlines, Merger, HR Issues.
*P.G Department of Economics, Safia Arts and Commerce College, Bhopal, MP
**Assistant professor, Allana Institute of Management Sciences, Pune, Maharashtra
Page 2
IJRIME Volume2, Issue5 (May-2012) ISSN: 2249-1619
International Journal of Research in IT, Management and Engineering
www.gjmr.org 140
INTRODUCTION
In these fast changing times the companies have found out a new way to grow inorganically
through Mergers and Acquisitions. With the growing competitive pressure organizations are
finding it difficult to solely grow from internal development and wait for the long gestation
period involved thereby. In such a scenario, the best option left with, is Mergers and Acquisitions
(M&A). But at times, the corporate rationale is unable to look at the critical success factor
behind these M&A. These are the factors that should be put in the forefront of consideration, for
the successful completion of the M&A story. These issues do not mainly relate to the financial or
the economic aspect of the new organization, but deal with the very basic issues of low morale,
insecurity, a sense of invasion, the general chaos, etc which ultimately results in disorientation
due to frustration, which in turn results in poor performance and low productivity. In short the
HR aspect is neglected. The executives involved in the M&A process often tend to overlook the
human aspect involved. This research paper deals with the human side of the merger of Air India
and Indian Airlines, which started in 2007 and was finally completed in 2011. And the issues
resulting in the fallout of the merger.
With the recent news on the CNN- IBN of the Civil Aviation minister calling it as a big mistake,
it becomes all the more important to look into the reason of its fallout.
Before the merger the two companies were big players in the air, one in the domestic sector and
another in the Indian international sector. The merger aimed at forming a big corporation by
merging the two companies. It would not be wrong to say that the two companies or two big
birds came together to form one bigger organization or a falcon. But unfortunately this falcon
reared to fly high in the skies could not take its flight. It is usually seen that during the M&A the
main focus is on getting the deal done, but the issues that ensure that the deal works are quite
often neglected. Without the wholehearted support of the employee no merger or acquisition can
be successful. The focus on the integration aspect is still missing somehow. The financial and
operational parts were well looked into but the deeper issues of human resource were not
handled properly.
People are important, in fact they are the most critical assets and more so in the service sector
where they can become the core competency for any organization. In such a scenario how can an
organization keep its HR issues at bay and think it can still make profit. A news paper recently
Page 11
IJRIME
REVIE
Fou
Ba
Pri
Co
Em
Tot
Na
Kin
Jet
Air
Ind
Spi
GoA
Par
MD
S
E
Interna
EW OF PE
unded in the
sed in
imary Focus
ompany sloga
mployees
tal Fleet
me of the pl
ngfisher Airl
Airways and
r India and In
diGo
iceJet
Air
ramount Airw
DLR Airline
Source Aviat
Volu
ational Journ
ERFORMA
Co
e year
an
layers
lines and Kin
d Jet Lite (pr
ndian (previ
ways
s
tion Industry
ume2, Issu
al of Resear
www.g
ANCE
omparison o
July 193
Dom
inte
Your
ngfisher Red
reviously Ai
ously Indian
y of India20
ue5 (May-2
rch in IT, Ma
gjmr.org
Table 2
of the two c
Air India
32 as Tata Ai
Mumbai
mestic as we
ernational ro
Palace in th
28,500
89
Table 3
d (previously
ir Sahara)
n Airlines)
12 http://bus
2012)
anagement a
companies
irlines
1
ell as
utes
he Sky
H
y Air Deccan
siness.mapso
ISS
and Engineer
Indian A
1953
New D
Domestic
Have you tri
Air In
19,30
72
Mar
n)
0
ofindia.com/
SN: 2249-1
ring
Airlines
Delhi
c Routes
ied the new
ndia?
00
2
rket Share
28%
25%
16%
14%
12%
3%
2%
0.004%
/aviation/
1619
149
Page 12
IJRIME Volume2, Issue5 (May-2012) ISSN: 2249-1619
International Journal of Research in IT, Management and Engineering
www.gjmr.org 150
Figure 2
Centre for Asia Pacific Aviation report 2009
Figure 3
Centre for Asia Pacific Aviation report 2009
Page 21
IJRIME Volume2, Issue5 (May-2012) ISSN: 2249-1619
International Journal of Research in IT, Management and Engineering
www.gjmr.org 159
7. Church, J., Ware, R., (2000), Industrial Organization – A Strategic Approach,
McGraw-Hill, Boston et al.
8. Doganis, R. (2006): The Airline Business, 2nd Ed., New York.
9. Directors Report 2008– Annual Year 30th March 2007 to 31st March 2008
http://www.airindia.in/SBCMS/downloads/Directors_report_0708.pdf
10. Goel, A. (2003), .Strategic Alliances in the Airline Industry, Working Paper, Indian
Institute of Management, Vastrapur, Ahmedabad,
http://www.iimahd.ernet.in/publications/data/2003-01-02AbhishekGoel.pdf.
11. Gulati , Ranjay(1998) :Alliances and networks: Strategic Management Journal, Vol.
19, 293–317 (1998).
12. Hanlon, P. (1999), .Global Airlines- Competition in a transnational Industry., 2nd Ed.,
Butterworth- Heinemann, Oxford, et al.'
13. Holtz, M 2007, Airline Alliances and Mergers in Europe: An Analysis with special
focus on the merger of Air France and KLM
14. Indian Airlines, Make my trip .com
http://www.makemytrip.com/flights/indian_airlines.html)
15. IANS 2012 India Private Limited. Indo Asian News Service | – Thu 10 May, 2012
Pilots urge Ajit Singh to start negotiations, http://in.news.yahoo.com/pilots-urge-ajit-
singh-start-negotiations-050643542--finance.html
16. IBN Live.com 2012. Air India-Indian Airlines merger was a mistake: Ajit Singh, Thu,
May 10, 2012 http://www.moneycontrol.com/news/business/air-india-indian-airlines-
merger-wasmistake-ajit-singh-_702530.html
17. Kewes, T. (2007), Griff nach den Sternen, Handelsblatt, 14 Mai 2007, p.12.
18. Kleymann, B., Seristö, H. (2004), .Managing Strategic Airline Alliances, Ashgate,
Burlington.
19. Knorr, A. (2001), .Thematische Einführung, in: Knorr, A. (Ed.), Europäischer
Luftverkehr - Wem nützen strategische Allianzen, Frankfurt, p. 3- 6
20. Massimilian, D. (2001, January-February).Notes from the M & Atrenchs. Journal of
Business Strategy,20-23.
21. Meyer, R. (2004), .Airline- Kooperationsprozesse aus interaktionsökonomischer
Perspektive., St. Gallen.
Page 22
IJRIME Volume2, Issue5 (May-2012) ISSN: 2249-1619
International Journal of Research in IT, Management and Engineering
www.gjmr.org 160
22. Mitra Kushan 2012 , Maharaja in chains Merger of Air India, Indian Airlines
behind airline's money troubles. http://businesstoday.intoday.in/story/air-indiaindian-
airlines-merger-behind- troubles/1/15519.html
23. Namrata February 11 2011, Case Study-Indian Airlines HR Problems
http://hr4hr.in/case-study-indian-airlines-hr-problems/
24. Oum, T. H., Park, J.- H., Zhang, A. (2000), .Globalization and Strategic Alliances:
The case of the Airline Industry., Pergamon, New York.
25. Performance Audit Report on Civil Aviation in India
http://saiindia.gov.in/english/home/Our_Products/Audit_Report/Government_Wise/unio
n_audit/recent_reports/union_performance/2011_2012/Civil_%20Performance_Audits/
Report_18/chap4.pdf
26. Porter, M. (1990), The Competitive Advantage of Nations, New York The Free Press.
27. PTI 2012 Press Trust of India / New Delhi Jan 19, 2012, Govt panel grills top AI
execs on merger fallout http://www.business-standard.com/india/news/govt-panel-
grills-top-ai-execsmerger-fallout/155766/&tp=on
28. PTI 2012 Press Trust of India / New Delhi May 5, 2012, Threat of another pilots’ stir
in Air India looms large, http://sevensisterspost.com/?p=9943#
29. Schäfer. I. S. (2003), Strategische Allianzen und Wettbewerb im Luftverkehr. Berlin:
Mensch & Buch Verlag
30. Schuler, R., & Jackson, S. (2001).HR issues and activities in mergers and acquisitions.
European Management Journal, 19(3), 239-253.
31. Schweiger, D. M., & Denisi, A. S.(1991). communication with employees following a
merger :a longitudinal field experiment. Academy of Management Journal,34(1),110-
135.
32. Swaminathan S. Anklesaria Aiyar, 2009, July 19, Let Air India fade away like HMT
and IDPL http://swaminomics.org/?p=87
33. Tayagi ,E.. 2011 Mergers and acquisition in Aviation Sector. 29 August 2011
http://legalservicesindia.com/article/article/mergers-&-acquisitions-in-aviation- sector-
805-1.html
34. Vasudevan Thulasidas 2012 Complete merger of Air India & Indian Airlines to give
the carrier its best chance of recovery April 14 2012
http://articles.economictimes.indiatimes.com/2012-04-14/news/31342092_1_lccs-low-
fares-indian-carriers
