Home / Companies / News /  Efficiency, costs key focus in Air India-Vistara merger drill

NEW DELHI : An internal team of senior executives from Air India and Vistara, along with external consultants, are leading an extensive exercise in merging the two airlines, said people aware of the development. This includes consultations to rationalize operations, including salary structures, address cultural compatibility, and to identify leaders to drive the brand transformation and transition, the people said.

“The top management of both airlines and senior to mid-level executives will be interviewed by external consultants, followed by another round of talks with an expert internal team, with representatives from both airlines. Then the best fit will be retained for the post, and other candidates will be given a different role if available," said one of the people, seeking anonymity.

In January 2022, Air India had 12,085 employees, including 8,084 permanent staff, when it was handed over to the Tata Group as part of the government‘s divestment programme. Vistara has about 5,000 employees.

“Air India is also looking at bringing parity in the compensation structures since the non-flying crew of Vistara is paid more than those of Air India. There will be rounds of salary corrections in the non-flying crew of Air India", he added.

While the airline is looking at offering voluntary retirement to a section of employees close to retirement, cabin and flight crew are likely to be retained as Air India aims to increase its fleet size by threefold within five years.

“The airline is hiring fresh talent in various departments. In many cases, the roles are not clearly defined for the time being. But, the plan is to offer senior employees voluntary retirement before new hires are trusted with their roles. Even those who are not close to retirement will be judged on the basis of merit. There will be no free lunches," a second official aware of the development said. “While routes will be rationalized, major retrenchments are not expected for pilots as well as cabin crew because Air India has commissioned a new fleet of 777, and not many pilots are familiar with the aircraft. The demand for pilots and flying crew will remain high," he added.

In November, Mint reported Air India’s plans to introduce a second voluntary retirement scheme to reduce costs and pave the way for a younger workforce.

After taking over the airline in January, Tata group offered early retirement plans to 4,500 employees in June, which 1,500 employees accepted.

As per the divestment guideline, the successful bidder for Air India was required to retain all employees of the airline for one year. For retrenching employees after this period, the company will have to offer them a voluntary retirement scheme.

The government has also recently asked the Air India management to charge employees of the airline for overstaying in the airline’s residential colony of Delhi. The management has been asked to deduct the amount from their salary with respect to October. The residential colonies were not part of the disinvestment exercise, and the government has moved the properties under Air India Asset Holdings Limited along with other real estate properties.

On 29 November, Singapore Airlines and Tata Group announced a merger between Air India and Vistara, with Singapore Airlines holding 25.1% of the merged entity. The merger is expected to be completed by March 2024. Vistara is a 51:49 joint venture between Tata Group and Singapore Airlines.

The Air India management expects the Competition Commission of India (CCI) approval to come in by June-July, a senior executive aware of the development said. The airlines have started working on the blueprint for the Vistara merger into the Air India umbrella, he added.

In addition to CCI, the merger will also need approvals from the Directorate General of Civil Aviation, the Ministry of Civil Aviation, and the Reserve Bank of India, anti-trust and merger control clearances and approvals from the Competition and Consumer Commission of Singapore. Both parties will also have to comply with relevant provisions of India’s Companies Act and Indian foreign exchange regulations on the fair market value of the shares.

The parties will also need the sanction of the National Company Law Tribunal and redemption or conversion of certain outstanding liabilities owed by the Airports Authority of India to TATA Sons (and/or its affiliates) on or before the filing of the merger scheme.

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