Indian Airlines' HR Problems

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The strategies adopted by IA to overcome these problems were severely criticized by analysts over the years. Analysts noted that the people heading the airline were more interested in making peace with the unions than looking at the company's long-term benefits. Russy Mody (Mody), who joined IA as chairman in November 1994, made efforts to appease the unions by proposing to bring their salaries on par with those of Air India employees. This was strongly opposed by the board of directors, in view of the mounting losses. Mody also proposed to increase the age of retirement from 58 to 60 to control the exodus of pilots. However, government rejected Mody’s plans.2 When Probir Sen (Sen) took over as chairman and managing director, he bought the pilot emoluments on par with emoluments other airlines, thereby successfully controlling the exodus. In 1994, the IA unions opposed the re-employment of pilots who had left IA to join private carriers and the employment of superannuated fliers on contract. Sen averted a crisis by creating Alliance Air, a subsidiary airline company where the re-employed people were utilized. He was also instrumental in effecting substantial wage hikes for the employees. The extra financial burden on the airline caused by these measures was met by resorting to a 10% hike in fares. (Refer Table I)

Table I
Impact of Staff Cost Hike in Fare Increase (%)

Initially, Sen's efforts seemed to have positive effects with an improvement in aircraft utilization figures. IA also managed to cut losses during 1996-97 and reported a Rs 140 mn profit in 1997-98. But recessionary trends in the economy and its mounting wage bill pushed IA back into losses by 1999. The government sacked Sen and the entire board of directors.

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2] The government claimed that Mody had failed to turn IA around. It appointed a seven-member committee under the chairmanship of Vijay Kelkar, the then petroleum secretary to make suggestions regarding turnaround. In its report submitted in November 1996, the committee declared that IA's losses were caused by factors that were beyond the control of IA. It recommended that the government provide substantial financial aid to the carrier and revamp its fleet. P.S.Brar, the joint Comptroller General of Accounts in the Department of Expenditure of the Finance Ministry, later evaluated this report. Brar severely criticized the Kelkar recommendations, saying that any money given to IA would 'go down the drain' and IA said that had to go for massive cost cutting and human resource management initiatives if it wanted to get back on the tracks. The hard-hitting Brar report received criticism from IA and Kelkar's supporters.

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