Indian Airlines' HR Problems

Details

Themes: HR Problems
Period : 1994-2001
Organization :Indian Airlines
Pub Date : 2001
Countries : India
Industry : Aviation and Airlines

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Case Code : HROB006
Case Length : 07 Pages
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In 1994, the Air Corporation Act was repealed and air transport was thrown open to private players. Many big corporate houses entered the fray and IA saw a mass exodus of its pilots to private airlines. To counter increasing competition IA launched a new image building advertisement campaign. It also improved its services by strictly adhering to flight schedules and providing better in-flight and ground services. It also inducted several new aircraft, with a new, younger, and more dynamic in flight crew. These initiatives were soon rewarded in form of 17% increase in passenger revenues during the year 1994.

However, IA could not sustain these improvements. Competitors like Sahara and Jet Airways (Jet) provided better services. Unable to match the performance of these airlines IA faced severe criticism for its inefficiency and excessive expenditure on human resources. Staff costs increased to an alarming Rs 5.9 bn during 1994-98. These costs were responsible to a great extent for the company’s frequent losses. By 1999 the losses touched Rs 7.5 bn.

In the next few years, private players such as East West, NEPC, and Damania had to close shop due to huge losses. Jet was the only player that was able to sustain itself. IA's market share, however continued to drop. In 1999, while IA's market share was 47%, the share of private airlines reached 53%.

Unnecessary interference by the Ministry of Civil Aviation was a major cause of concern for IA. This interference ranged from deciding on the crew's quality to major technical decisions in which the Ministry did not even have the necessary expertise. IA had to operate flights in the Northeast at highly subsidized fares to fulfill its social objectives of connecting these regions with the rest of the country. These flights contributed to the IA's losses over the years. As the carrier's balance sheet was heavily skewed towards debt with an equity base of Rs 1.05 bn in 1999 as against long-term loans of Rs 28 bn, heavy interest outflows of Rs 1.99 bn further increased the losses.

IA could blame many of its problems on competitive pressures or political interference; but it could not deny responsibility for its human resource problems. A report by the Comptroller and Auditor General of India stated, "Manpower planning in any organization should depend on the periodic and realistic assessment of the manpower needs, need-based recruitment, optimum utilization of the recruited personnel and abolition of surplus and redundant posts. Identification of the qualifications appropriate to all the posts is a basic requirement of efficient human resource management. IA was found grossly deficient in all these aspects."

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