The steel-to-software conglomerate would do well to take lessons from complex but eventually successful airline mergers across the world as well as how it overcame niggles after its own biggest purchases of Corus and Jaguar Land Rover in 2007 and 2008 respectively, they added.
Vistara has temporarily trimmed by a tenth its daily 350-flight schedule after many pilots repeatedly called in sick. The airline had to cancel a total of nearly 150 flights since April 1.
While the current issues facing both airlines may be short lived, they are unlikely to be the last in Vistara’s integration with Air India, which has been riddled with employee problems for the majority of its existence.
On Monday, technicians from the erstwhile state-run airline’s erstwhile unit Air India Engineering Services said they will strike work on April 23, over “grievances” on salary, promotions and service agreements. Air India was acquired by the Tata group in January 2022 for Rs 18,000 crore. The engineering unit still provides services to the airline.
“We can never underestimate the cultural and human aspects of any merger between two companies,” said John Strickland, a London-based independent aviation analyst, and founder and director of JLS Consulting.“It’s never just about spreadsheets, calculations and so-called synergies, because human beings are not as neat and tidy as spreadsheets can be. And we’re talking about culture clashes, expectations, style of management, and all of those things pose problems,” he added.One of the earliest of global airline mergers–British Overseas Airways Corporation (BOAC) and British European Airways (BEA) that formed British Airways in 1974–was problematic too.
“BOAC was the global long-haul airline, and BEA was a European airline. It was a real clash of cultures actually reflecting British social strata. BOAC was seen as the airline of the public school boys, and BEA was seen as that of grammar school, state education employees. And there was absolute mistrust between the two breeds,” said Strickland.
One of the most contentious mergers in the world was between Air France and Dutch carrier KLM in 2004. The integration process was fraught for years with bitterness between the airlines, manifesting itself in regular industrial actions by employees, mostly of Air France.
“KLM was a very dynamic airline, if we think about the small scale of the Dutch market and KLM punching way above its weight in terms of its global network and passengers making connections. It was fused with the relatively inefficient, regularly strike-prone Air France,” he added.
KLM, smaller of the two, contributed several multiples of its partner to group profits. Interestingly, the man steering KLM in its most trying and formidable years was Pieter Elbers, currently the chief executive of India’s biggest airline IndiGo.
Across the Atlantic, the Delta-Northwest merger was a roaring success and built the world’s most frequently profitable airline entity. But a merger between American Airlines and US Airways was fraught with difficulties on staff integration especially in terms of pilots.
“The pilot workforce is a particularly sensitive and complicated one to integrate in, in any situation of a merger because pilots have some of the strongest voices when it comes to bargaining power and union representation in airlines. That means their union representatives will negotiate the best possible deals not only in terms of pay, but in terms of seniority of pilots getting benefits for length of service,” said Strickland.
Vistara pilots’ ire stems from pay and seniority, both of which appear limited under the new contract, pilots alleged.
In Vistara’s case, it is a smaller airline getting merged with a larger entity. A similar instance can be seen in Ryanair’s acquisition of UK-based low-cost airline, an erstwhile KLM group entity, called Buzz. Ryanair moved quickly to eliminate the entire workforce of the airline, terminate the brand and fuse it with itself.
In Vistara’s case, once the merger is finalised, the airline will be absorbed into Air India and it will cease to exist as a separate brand.
Delay in consummating the Vistara-Air India merger due to pending regulatory approvals is stirring employee uncertainty, said industry experts.
Ryanair’s rival Easyjet’s acquisition of British low-cost airline Go also took considerable time to integrate.
But the Tata group can derive lessons of difficult integration processes from its own history: its $12.1 billion purchase of Corus and the $2.3 billion buyout of JLR.
