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Name : Gaurangi H. SamantClass : SYMMS

Roll No. : 40Batch : 206-17

Indian Airlines : HR Problems

About the case study

FLYING LOW

o Frequent Strikeso Lack of proper manpower planning and

underutilization of existing manpowero IA’s employees unions were infamouso During 1990s, the government took various steps

to turn around IA

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Background Noteo Formed in May 1953 with the nationalization of the

airlines industry through the Air Corporations Acto 9 existing airlines were transferred to Indian

Airlines Corporation & Air India International (the two entities)

o In 1990, Vayudoot, a low-capacity and short-haul domestic airline merged with IA

o IA’s Network,75 Destinations-59 in India &16 Abroad.

o IA & Alliance Air carried 75 million passengers annually

o In 1999, IA’s fleet strength - 55 Aircrafts, 11Airbus A300s, 30 Airbus A320s, 11Boeing B737s & 3 Dorniers D0228.

o In 1994, the Air Corporation Act was repealed and there was entry of private players

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Background Note (continued….)

o It increased the competition and IA launched new image building advertisement campaign

o Indian Airlines (IA) improved services : strict adhere to flight schedules, providing better in-flight & ground services

o Following improvement was rewarded in the form of 17% increase in passenger revenues during the year 1994

o IA could not sustain these improvements.o Competitors of IA : Sahara and Jet Airways (Jet)

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Private Players (Competitors)

East West Airlines

NEPC Airlines

Damania Airlines

JET AIRWAYS

The only Competitor who

sustained

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o Due to non-sustainability IA incurred losses due to inefficiency & excess expenditure

o There was increase in staff cost during 1994-98o Few years later private players like East West, NEPC

& Damania was closed downo IA’s market share continued to drop

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Problems

o Unnecessary interference by Ministry of Civil Aviation

o Major technical decisions were taken by the Ministry without having expertise in that field

o There was increase in subsidized fares to fulfil social objectives

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Fighter Pilots

o Strikes, go-slow agitation and wage negotiation was common

o Each strike had different reason, but every strike it was about pressurizing IA for more money

STRIKESo Strike in 1996, many pilots reporting sick at the

same timeo Strike in January 1997, this time asking for

increased foreign allowances, fixed flying hours, free meals and wage parity with Alliance Air

o April 2000, go-slow agitation by IA’s aircraft engineers who were demanding pay revision and a change in the career progression pattern

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o Russy Mody (Mody) joined as IA chairman in November 1994

o Propositions by Modya) proposed to bring their salaries on parb) proposed to increase the age of retirement from 58

to 60 to control the exodus of pilotso Government rejected Mody’s proposalso After Mody, Probir Sen (Sen) took over as Chairman

& Managing Directoro Sen averted a crisis by creating Alliance Air, a

subsidiary airline companyo The re-employed people from Airlines were then

employed in Alliance Air

Probir Sen

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Productive Linked Scheme (PLI)o In 1990s, IA introduced PLIo The idea was to persuade pilots to fly more & to

increase aircraft utilizationo Gross misuse of PLI scheme by engineering

department by made 28 Airbus A320s available for service every day

o Pilots also misuse PLI scheme : 75 hours a month, while they flew only 63 hours

o Over Time Allowance (OTA) increased by 109%o OTA always exceeded the budget provisionso Between 1991-92, increase in pay & allowances :a) Executive Pilots was 842%b) Non-executive Pilots was 134%o Lowest paid was 8000-10000 p.m

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o IA incurred losses during 1995-96, marginal profit during 1997-99

o A net loss of rs. 641.8 mn was registeredo Arrears to be paid to the employees on account of

PLI touched rs.7 bn by 1999

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Question & Answers

Analyze the developments in the Indian civil aviation industry after the sector was opened up for the private players. Evaluate IA’s performance. Why do you think IA failed to retain its market share against competitors like Jet Airways?

IA’s human resource problems can largely be attributed to its poor human resource management policies. Do you agree? Give reasons to support your stand.

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