At Vistara, some employees are caught in merger turbulence

File photo of a Vistara aircraft. The airline, a joint venture between Tata Sons and Singapore Airlines, commenced operations in 2015.  (Reuters)
File photo of a Vistara aircraft. The airline, a joint venture between Tata Sons and Singapore Airlines, commenced operations in 2015. (Reuters)

Summary

  • Vistara is merging with Air India. The integration has many complexities. For instance, not all Vistara employees are happy with the roles or pay they would receive in the merged entity. Will this discontent impact Air India’s operations?

New Delhi: Around 2017, two years after Tata SIA Airlines Ltd, which operates the airline Vistara, began operations, a board member brought up an unusual matter. In a meeting at the airline’s headquarters in Gurugram, he pointed out that the airline’s cabin crew members weren’t comfortable enough in the shoes they wear during flights.

In the aviation industry, the issue of uncomfortable crew shoes is not a Vistara-specific problem. All airlines face it but dress code requirements prevent most airlines from looking for alternatives. Vistara, whose female cabin crew members wear aubergine-and-gold trouser suits designed by fashion house Abraham & Thakore, too, couldn’t make changes because it would have compromised the design and colour scheme of the uniform, the executive recalled.

“Normally, such issues are not raised at the board level. However, any employee issue was taken up very seriously back then with an intent to address it," said a former Vistara executive who didn’t want to be identified. The airline did not comment on Mint’s query regarding this board meeting.

Cut to 2024. There is a sea-change in how employee concerns are now being handled, several people Mint spoke to alleged. Some employees, particularly pilots, have been offered a ‘take it or leave it’ deal as Vistara merges with Air India, the airline the Tata Group took over in January 2022. What we found was significant discontent and anxiety about the future among a section of the staff.

 

Under the new structure, already followed at Air India, the pilots of Vistara will get a fixed salary for 40 hours a month, instead of 70 hours they received earlier.

 

The issue came to the fore earlier this month after Vistara had to cancel nearly 30-50 flights per day—pilots started to report sick, in protest against a new pay policy first announced in February this year.

The Tata Group is seeking to implement a uniform pay structure, which effectively reduces the salaries of Vistara pilots by bringing them at par with Air India. Under the new structure, already followed at Air India, the pilots of Vistara will get a fixed salary for 40 hours a month, instead of 70 hours they received earlier. In addition, pilots will receive payment in lieu of extra flying hours and rewards based on the years of service. The new structure would result in a monthly pay reduction between 80,000 and 1.4 lakh for first officers or junior pilots, they estimated. Some unhappy pilots negotiated with the management but an ultimatum came in mid-March to agree to the new structure.

“The problem is not so much with senior pilots or commanders. It is mainly with junior pilots like us. Also, there is no clarity on our career progression, or upgrading to flying long-haul on bigger aircraft," said a first officer who did not want to be identified.

There is no clarity on our career progression, or upgrading to flying long-haul on bigger aircraft. —A Vistara pilot

 

Senior pilots are more in demand because there is a shortage in the industry. They can easily do more flying hours unlike first officers, where currently there is no shortage. India produces about 500 pilots a year, according to industry estimates. After training, they all join as junior pilots.

“Many of us have concerns about joining Air India since we feel that the new system may not be fair to Vistara employees," the pilot quoted above added.

“The way we are being treated now has led to a lot of anxiety. Many of us are already looking for a job," an employee who is not a pilot said. This employee, too, didn’t want to be identified. Vistara, in a statement issued on 6 April, said that 98% of the pilots have agreed to the new pay structure. So, only a minority are still resisting.

Vistara currently has over 6,000 employees, including more than 1,000 pilots. Nonetheless, the question is if this discontent and anxiety will impact Air India’s operations, going ahead. Will it add to a host of other integration challenges the Tata Group faces? Any integration has finance, legal and cultural threads that need to be connected.

R. Gopalakrishnan, former director at Tata Sons.
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R. Gopalakrishnan, former director at Tata Sons. (Mint)

“In any integration, whether it is steel, aviation, motor, chemicals, there are cultural issues. When I was in service 15 years ago, when we were doing a lot of international acquisitions, there was financial due diligence, legal due diligence and we also prepared a kit for cultural due diligence," R. Gopalakrishnan, a former director at Tata Sons and the current non-executive chairman of Castrol India, said.

“Cultural issues come out of people, financial issues out of transactions and legal issues out of structures. Structures, people, and transactions are what constitute the three cables that need to be connected," he added. We will circle back to the culture clash at Vistara-Air India a bit later. First, a quick peek at people leading the integration.

A tough task

Air India was acquired by the Tata Group under a government-led strategic disinvestment programme in January 2022. Later that year, the Tata group announced a merger between Air India and Vistara.

Vistara is currently a 51:49 joint venture of Tata Sons and Singapore Airlines and commenced operations in 2015. Post the merger, Singapore Airlines will hold a 25.1% stake in the merged entity.

A transformation team, set up by Air India, is facilitating the merger. The team has three executives each from Vistara and Air India, besides consultants from the Boston Consulting Group, an American management consulting firm. It is headed by Vistara CEO Vinod Kannan, who has also been designated as the chief integration officer. Other members from Vistara include the airline’s heads of flight operations and human resources (HR). Representatives from Air India include its HR head. Several department-specific sub-teams report to the transformation team.

Together, they have the difficult task of finding suitable placements for Vistara employees in the new Air India. The transformation team is also facing the brunt of employee angst.

Size matters

To be fair, the Tata Group did try to calm the nerves. In early 2023, Bhaskar Bhat, Vistara’s former chairman, held a town hall for employees. He said that employees need not worry about their future in the merged entity since they have a proven track record of establishing an airline that is admired by many.

“This town hall addressed most of the concerns and employees were hopeful that all of us would be absorbed in the merged entity," said an employee, who did not want to be identified. Nonetheless, some employees couldn’t find roles that match their current designation.

Bhaskar Bhat, former chairman of Vistara.
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Bhaskar Bhat, former chairman of Vistara. (Mint)

Recently, an executive from Vistara met the transformation team and requested that a deputy general manager (DGM), one of the better performers, be given a similar designation and role in the merged entity. “He was told that a DGM in Vistara can’t be compared with a similar ranking officer in Air India. That the same designation won’t happen," said an employee in the know who didn’t want to be identified either.

The roles aren’t comparable because Air India is a far bigger airline. While Vistara currently has a fleet of 70 aircraft, Air India has double the number at 142, as per aircraft tracking website Flightradar24. While Vistara generated revenue of 11,784 crore in 2022-23, Air India is nearly three times bigger—it generated 31,377 crore during the year, regulatory filings show.

Some executives from departments such as ground services, revenue and corporate communications have already quit, pointing to the lack of desired roles or role overlaps in the merged entity. Like we mentioned earlier, pilots started resisting the uniform pay structure since February.

The view from AI

Campbell Wilson, the chief executive officer and managing director of Air India.
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Campbell Wilson, the chief executive officer and managing director of Air India. (Reuters)

What does Air India think of employees joining them from Vistara?

Air India has embarked on a five-year transformation plan titled ‘Vihaan.AI’. It is centred around five key pillars—customer experience, robust operations, talent development, industry leadership and commercial efficiency. Clearly, the airline needs talent who can execute plans around these pillars. A year ago, in March 2023, Mint quoted Campbell Wilson, the CEO and MD of Air India, in a report: “We are looking at what we do differently moving forward. One, we need to attract and retain talent to support our growth and improve our capability. We need to adopt a more performance-oriented culture with clear objectives, and consequences for under-performance." A senior Air India executive, who did not want to be identified, reiterated this view. “Attempts will be made to bring everyone on board but the offer being made (to Vistara employees) will be completely based on merit," he said.

While Vistara employees feel that they naturally merit a space in the merged entity because they launched a full-service airline and grew the business in a fiercely competitive market, Air India’s executives do not quite agree. “Vistara and its employees have done a great job of starting an airline from scratch and establishing it but the requirements at Air India are different," the executive quoted above said.

 

Air India’s challenges are going to be very different and all Vistara employees may not fit the bill. —An Air India executive

He explained that Air India is already an established airline and now, the company needs expertise so that it can compete with the best airlines in the world. For instance, Air India wants to aggressively expand operations internationally. Vistara’s employees don’t have much experience in international operations. Second, because it was government owned, Air India has legacy headaches to deal with, and many operational issues to resolve. As a government entity, cost of operations wasn’t much of a bother for Air India but under the Tatas, streamlining expenses—which may include renegotiating supplier contracts—is a priority.

Vistara, being a startup, may not have executives with experience in handling such complexity, he said.

“Air India’s challenges and path to growth are going to be very different and all Vistara employees may not fit the bill at the levels they are at today," he added.

Air India wants to aggressively expand operations internationally. Vistara employees don’t have much experience in international operations.

 

“We have mentioned earlier as well that the integration of Air India-Vistara is a merger for growth and presents immense future prospects for the workforce of the merged airline. As we proceed with the process, we are committed to offering fair and equitable opportunities to all employees of both airlines and ensuring that employees of Vistara find meaningful and relevant roles in the integrated entity," a spokesperson from Vistara said in response to queries from Mint. “Although the transition may involve adjustments, our priority remains the professional development and well-being of our employees. Our commitment to our staff remains unwavering as we move ahead in this transformative phase, offering ongoing support and guidance to ensure a seamless transition for all," the spokesperson added.

Culture clashes

Vistara had a market share 6.9% in Feb 2021, which inched up to 9.9% in Feb 2024.
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Vistara had a market share 6.9% in Feb 2021, which inched up to 9.9% in Feb 2024. (PTI)

One of the executives quoted above hinted at two different cultures. The culture clash is between a new company and an old corporation (Air India was founded by J.R.D. Tata as Tata Airlines in 1932 and the government of India bought a majority stake in 1953); between employees who want to delight customers and employees who for decades may not have cared about market share growth.

“Vistara created a stronger brand with strong customer loyalty. They don’t want to play second-fiddle at Air India," said an industry executive who has previously headed airline operations. He didn’t want to be quoted. Air India, the executive added, cannot implement the Vistara style of working without clearing out some factions, and learning about people who genuinely create value versus those who manage bosses well.

“The Vistara style came from focusing on the basics, and finding ways to delight customers. Today’s Air India is not J.R.D. Tata’s Air India. Vistara came closest to inheriting and following the great man’s legacy," the executive further added. Basics, he explained, include things like keeping the plane tidy, making sure the seats and that seat belt straps are not tainted.

 

Air India and Indian Airlines merged in 2007. Until then, Air India mostly operated on international long-haul routes.

 

Not everyone agrees with that view.

“Air India is a behemoth that has seen off incompetent government management and ridden over the difficulties of the Indian Airlines merger. Vistara, on the other hand, is an airline that never lived up to expectations," said Vir Sanghvi, television presenter and columnist who writes regularly on food and travel. Air India and Indian Airlines merged in 2007. Until then, Air India mostly operated on international long-haul routes while Indian Airlines operated on domestic and international short-haul routes.

“With Singapore Airlines, one of the world’s best airlines, and the Tatas behind it, there was every expectation that it would be one of Asia’s great airlines. Instead, it has been curiously underwhelming, not even as good as Jet Airways was at its peak; and it has none of the excuses available to Air India to explain its shortcomings," he added. Going by market share gains, Vistara’s performance does seem underwhelming. According to data from the Directorate General of Civil Aviation, Vistara had a share 6.9% in February 2021. The share inched up to 9.9% in February 2024. In comparison, IndiGo, the current market leader of Indian skies, has gained more in the same period—from 54.2% in February 2021 to 60.1% in February this year.

While employee discontent and protests can result in short-term disruption, things will eventually settle down for the merged entity, experts said.

mihir.mishra@livemint.com

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