The Tata's may have been the genesis of aviation and Air India but they stand cultures apart. The tie up with AirAsia seems to be crumbling primarily due to the marked difference in the ideology of the two groups. AirAsia is a high risk and profit driven ruthless organisation on the other hand the Tata culture is more benevolent and investment in the employees. Research has shown that 30% of mergers fails due to work culture issues.
Over the years since Air India was taken over by the government and converted to a public sector undertaking, the service to the public stopped and motivated interests took over the agenda of running the airlines. Each chief executive that takes over the reigns, is remotely controlled by the aviation ministry. Al. important appointments have the approval of the ministry and so much so that even daily working is dictated by them. The government doesn't walk the talk when giving the slogan "the government should not be running airports or airlines" since all top positions in the aviation sector are occupied by bureaucrats. The questions which comes up logically is " who is running the airports and airlines?".
Cultures in aviation are like in any other organisation. A strong organisational culture as displayed by IndiGo leads to meteoric rise, profits and a motivated work force.The merger of Air India and Indian Airlines was an eye opener of how dissimilar work cultures can lead to failure of the merger process.
In 2007, the merged company had more than 30,000 employees ie 256 employees per plane. This figure was twice the global standard. The merged company was spending almost one fifth of its revenue on employee pay and benefits where as other airlines spend almost half of this cost. The employee-to-aircraft ratio stood at one to 120 in 2015, which is still more than the global average of 100 employees per plane. There were differences between the two companies in terms of work culture, areas of operation, compensation, working conditions, entitlements etc. The merger resulted in massive discontent and frustration amongst the employees. There had been wide difference in the pay and the benefits of the employees of 'Indian Airlines' and 'Air India'. These factors caused low employee morals’ in the organization. In addition to the above the existing organizational culture which was built upon HR culture, the HR Philosophy, the Leadership style and the Union management style had been the root causes for the organization’s debacle, resulting a failed merger.
The debt ridden Air India has been in the ICU for many years now. There have been umpteen efforts to improve the work culture and weed out the red tape but unfortunately the employees did not change the way they would function. Such is the work culture that even under the threat of a closure, each employee is looking at the other one to change rather than a collective effort. In such a scenario, there is going to be a large scale resentment from the employees when the new management takes over and tries to implement new processes and enforces a brand new culture. The culture shock is what will take the toll on the functioning of the airlines.
The Harvard Business Review suggests for mergers"In addition to negotiating price and other financial terms, organizations discussing a merger need to negotiate culture. Leaders should start by conducting a cultural assessment to understand how people, practices, and management reflect tightness or looseness in both companies. They should determine the pros and cons of their current levels of tight-loose, as well as the opportunities and threats posed by merging cultures. How might sacrificing some discretion for structure, or vice versa, enhance or harm each organization? Above all, they should identify areas for compromise: Tighter organizations need to identify domains where they can embrace greater looseness, and looser organizations need to think about how they can welcome some tight features. We call these flexible tightness and structured looseness, respectively."
A great amount of resources need to be invested in communicating with the employees, training them and setting a new work culture. A prolonged merger or takeover will succeed instead of a rushed one where the balance sheets are merged and the work culture is not paid much attention.
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